The purpose of this manual is to provide a comprehensive reference on electric utility cost allocation for a wide range of practitioners, including utilities, intervenors, utility regulators and other policymakers. Cost allocation is one of the major steps in the traditional regulatory process for setting utility rates. In this step, the regulators are primarily determining how to equitably divide a set amount of costs, typically referred to as the revenue requirement, among several broadly defined classes of ratepayers. The predominant impact of different cost allocation techniques is which group of customers pays for which costs. In many cases, this is the share of costs paid by residential customers, commercial customers and industrial customers.
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