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<br /> ?K~ <br /> a. Allocate the test year cost- of services to the various cost of <br /> service components which constitute a functional classification of <br /> the different types of service the utility provides. For the water <br /> utility, functional cost components would include annual volume <br /> of water use, maximum day and maximum hour rates of water <br /> use, and customer costs. <br /> b. Review existing customer class designations to determine their <br /> -- appropriateness and equitability and recommend revised and/or <br /> I new customer class designations, as needed. <br /> c. Determine usage and billing characteristics of each customer <br /> class. Estimates of class characteristics will be based on bill <br /> tabulation data, system operating statistics, available special <br /> - - studies, and Program Manager's judgment and experience with <br /> other similar systems. For the water utility, customer <br /> characteristics include annual water use, peak day and hour rates <br /> of water use, and customer billing requirements. <br /> d. Distribute the costs by functional components to the various <br /> customer classifications on the basis of the relative responsibility <br /> of each classification for service provided, as determined from the <br /> customer classification characteristics. <br /> e. Compare revenue expected under existing rates from each <br /> customer class with their allocated cost of service to determine the <br /> adequacy of present revenue levels for each class, and the <br /> indicated adjustment in rates required to equitably distribute costs <br /> to the respective classes of customers. <br /> ! <br /> 5. Rate Design <br /> Water rates will be designed for the future test year to adequately <br /> recover projected revenue requirements and equitably recover allocated <br /> cost of service of each customer class while reflecting policies of the <br /> Owner. The rate design portion of the study will include the following <br /> elements: <br /> a. Design schedules of rates for the water utility which will equitably <br /> recover the total revenue requirements from respective customer <br /> classes in accordance with the cost of service analysis and along <br /> the lines of the Owner's existing rate structure. Proposed rate <br /> A-8 <br />