Cost-of-Service and Rate Studies

Our cost-of-service and rate studies deliver critical insights for effective cost recovery from ratepayers across electric, gas, wastewater, water, and telecommunications services.

Our cost-of-service and rate design studies recover the cost of service while using traditional and innovate rate designs:

We prepare cost-of-service and rate design studies for electric, gas, wastewater, water, and broadband providers.
Determining the cost of service is the “science” part of the rate development process. We use industry standards to assign costs to customer classes and determine the cost to serve. With the availability of real-time data, we can assign costs more directly and confidently to determine the actual cost to serve each customer class and individual large customers.
The cost-of-service models are tailored to your organization and included in the project deliverables.
Rate design is the “art” of the rate development process. We design rates for broadband, electric, gas, wastewater, and water services that will recover your costs.
The recommended rate structures are designed to maintain your organization’s financial health and meet your strategies.
As all utility businesses are constantly changing, we tailor innovative rates such as time-of-use rates for all customers, competitive broadband rates, water conservation rates, decoupling, marginal costs rates and rates for distributed generation and electric vehicles.
The cost-of-service models are tailored to your organization and included in the project deliverables.
The cost-of-service and rate design models are included in the project deliverables for you to use in-house for future analysis.
Long-range forecasting is an essential step in providing future reliable services. We work with your team to develop 5, 10, 15, and 20-year forecasts based on current industry trends. Forecasting will give your organization financial and operational options and leverage in negotiations.
We provide testimony and supporting economic analysis in your rate case before FERC, state commissions, arbitration, and in litigation matters.
If your regulation is local, we are skilled at presenting rate studies before your Board or City Council. We are adept at distilling technical reports for a non-technical audience.

Developing distributed energy rates is a crucial aspect of a cost of service study. This case highlights how we helped a utility align customer rates with their cost of service while integrating Distributed Energy Resources (DER) and electric vehicle (EV) charging.
Aligning Rates with Costs
The utility had not adjusted rates in five years, creating an opportunity to modernize the rate structure. Our goal was to reduce inter-class subsidies and better reflect service costs while promoting renewable energy adoption.
Innovative Rate Design
Through collaboration, we designed new rate structures, including:
• Time-of-use opt-out rates for residential customers
• DER rates with system connection charges
• Off-peak EV charging rates
• Subscription-based EV charging plans
Encouraging Customer Engagement
By offering flexible rate options, the utility incentivized customers to adjust usage and lower bills. The 5% premium on the opt-out time-of-use rate encouraged greater participation, aligning customer behavior with sustainable energy goals.
A Florida municipal utility sought a long-term rate plan for its electric, gas, wastewater, and water services. The goal was to develop equitable rates based on the cost of service, ensuring the financial health of the utility while minimizing customer impacts.
Cost of Service and Equitable Rate Design
We conducted a comprehensive cost of service analysis to align rates with the actual costs of providing service. This included evaluating revenue requirements, cost allocation methodologies, and rate structures for electric, gas, wastewater, and water services. Electric ratesaccounted for both retail and wholesale customers, while gas rates included allocations for gas transport customers.
Balancing Financial Stability and Customer Impact
A well-structured rate plan is crucial for maintaining utility infrastructure, funding future improvements, and ensuring reliable service. Our approach focused on gradual rate adjustments to prevent sharp increases, helping customers adapt. Additionally, we considered affordability programs for low-income households to mitigate financial strain.
Sustainable Utility Planning
By aligning rates with costs, the utility achieved a financially sustainable model that supports operational needs and fair pricing. The long-term rate plan positions the utility to maintain high service standards while ensuring fairness and affordability for all customers.
A California utility sought to update its water and wastewater rates while ensuring compliance with Proposition 218, which mandates transparency, public notification, and justification for rate adjustments. Given the legal complexities, the utility engaged UARS to ensure compliance with Proposition 218 in implementing customer rates.
The Challenge
Proposition 218 requires utilities to demonstrate that proposed rate increases are based on actual costs of service and that revenues collected do not exceed the funds required to provide services. Failure to comply can lead to legal challenges, ratepayer opposition, and delays in implementation.
Our Approach
We conducted a thorough review of the utility’s cost-of-service study, ensuring that rates were equitable, transparent, and aligned with Prop 218 requirements. UARS:
• Reviewed rate structures to confirm they reflected proportional cost recovery.
• Assisted in drafting public notices, ensuring clear communication with ratepayers.
• Prepared supporting documentation for public hearings and board approvals.
The Outcome
By proactively addressing compliance risks and enhancing public engagement, the utility successfully implemented new rates without legal challenges, ensuring financial sustainability while maintaining public trust in the process.
A Midwest utility aimed to reduce customer class rate subsidies and transition rates to better reflect the actual cost of service. The goal was to ensure fair pricing across customer classes while maintaining financial stability and minimizing customer impact.
Cost of Service and Rate Transition
We conducted a cost of service analysis to identify disparities in customer class contributions and designed a rate transition plan that gradually moved each class toward paying its true cost of service. This approach helped minimize cross-class subsidies, ensuring that no group unfairly shouldered the costs of another.
Customer Engagement and Messaging
Recognizing the importance of customer relations, we assisted the utility in communicating rate changes effectively. Our approach focused on clear messaging and education to help customers understand the rationale behind rate adjustments and how they would benefit long-term sustainability.
Achieving Fair and Sustainable Rates
Through strategic rate adjustments and customer engagement, the utility successfully reduced rate subsidies while ensuring affordability and fairness. The new rate structure supports financial stability, encourages cost-reflective pricing, and fosters customer trust in the utility’s long-term planning.
A municipality operating a broadband system faced a critical decision—should they keep, expand, or sell the system while it still had value? Their broadband service had grown to 10,000 customers, but competitors were offering superior speeds, requiring a costly system upgrade to remain competitive.
Evaluating the Options
We provided the city with four strategic options:
1. Maintain the existing system – A financial forecast was developed, revealing customer dissatisfaction with broadband speeds and increasing migration to competitors.
2. Upgrade to Fiber-to-the-Premises (FTTP) – This required significant construction and infrastructure investment but positioned the city for economic growth and enhanced public services.
3. Sell the system to a private provider – The city estimated a sales price based on various financial models, considering debt repayment, severance costs, and potential lost future revenues.
4. Develop broadband affordability programs – Regardless of ownership, programs would be implemented to ensure equitable broadband access.
The Decision
The municipality determined that owning and expanding broadband services was essential for economic development, smart city initiatives, and enhanced utility services. They approved the FTTP upgrade, leveraging low-interest tax-exempt revenue bonds to finance the expansion, incorporating debt repayment into customer rates. This decision positioned the city for future growth, improved service quality, and long-term competitiveness in the broadband market.
In some municipal utilities and electric co-ops, a large industrial customer dominates the electric load and plays a critical role as a major employer. Utilities often hesitate to increase rates for such customers, fearing economic repercussions. However, as cost-of-service-based rates become the industry standard, utilities are moving towards fair and equitable pricing.
The Challenge
A utility’s cost of service study revealed that its largest customer was undercharged by 10%, with other customer classes subsidizing its rates. The utility needed to transition the industrial customer to a cost-based rate while addressing concerns about the impact on its manufacturing costs.
The Solution
We collaborated with both the utility and the large customer, validating the cost of service study and reviewing an independent analysisprovided by the customer’s consultant. Through discussions, we developed a mutually agreeable rate strategy, including:
• A time-of-use rate, allowing the customer to shift load to off-peak hours.
• A three-year phase-in period, easing the transition to full cost-of-service rates.
The Outcome
Annual cost of service reviews helped adjust the phase-in plan as costs shifted, leading to rate reductions for other customer classes. This approach balanced financial sustainability for the utility while ensuring the industrial customer could adapt without major disruptions. Through collaboration, we achieved a fair rate structure while strengthening customer relations and business transparency.