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Section 3 <br /> employed for allocating the power supply demand portion of the wholesale <br /> purchased power and production expenses. A 1 CP method was utilized for <br /> transmission expenses. Non-coincident peaks reflect a class maximum demand <br /> regardless of when it occurs. The non-coincident peak is an indication of the <br /> amount of fixed local system required to serve individual groups of customers. A <br /> 1 NCP method, an estimate of each class' maximum annual demand on the <br /> system, was utilized for allocating local system demand related costs. <br /> Energy Allocations <br /> Each class' share of energy requirements was used to allocate energy related <br /> costs. The predominant energy related costs are the energy portions of the <br /> purchased power expenses. These costs were allocated based on each classes' <br /> estimated share of wholesale energy purchases. Other local energy related costs <br /> were allocated based on retail energy sales. <br /> Customer Allocations <br /> Two separate customer allocators were utilized. The customer facilities allocator <br /> was used to allocate costs associated with the physical facilities required to serve <br /> individual customers such as service transformers, service drops and meters. The <br /> customer service allocator is for allocation of costs associated with customer <br /> service — meter reading, billing, collections and customer inquiries. For both the <br /> customer facilities and customer service allocators, a weighted customer allocation <br /> factor is developed. Weighting factors are developed to represent the difference <br /> in service configurations between customer classifications. For instance, a larger <br /> customer facility is required for a single large power customer than for a single <br /> residential customer, or a single large power customer requires more customer <br /> service than a single residential customer. <br /> - 4 - <br />