Cost of Service and Rate Design Issues Affecting Industrial Customers in Retail Rate Proceedings

There are generally three major areas of concern in a retail rate proceeding. They include: (1) the determination of revenue requirements for the utility, (2) the allocation of revenue requirements to individual customer classes, and (3) the allocation of revenue requirements to individual customers within a class. If energy costs are a significant element in the cost of doing business, then the industrial customer must be familiar with the activities involved in the ratemaking process, be aware of the issues that might be raised as a part of the process, know how the issues might affect energy costs, and be able to offer reasonable alternatives. The purpose of this paper is to describe the ratemaking issues as they relate to large industrial customers with particular emphasis given to cost of service and rate design considerations