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Section 3 <br />Cost-of-Service <br />A cost-of-service analysis was performed to determine the allocated cost to serve <br />exist, in part, because the cost to serve various kinds of customers varies. The <br />cost-of-servic <br />2019 financials, operations and sales. The results of the cost-of-service study give <br />an indication of the degree of revenue recovery warranted for each class of <br />customers. A comparison of the allocated cost to serve a group of customers and <br />the actual revenues received from those customers is taken into consideration <br />during rate design. <br />Functionalization of Costs <br />ERMUelectric revenue requirements have been divided into four <br />functional categories. These categories are described below. <br />Power Supplythe power supply function is related to the cost of ERMU <br />purchases of wholesale power through MMPA and costs related to local generating <br />units. <br />Distribution the distribution expenses are related to the ERMU system for <br />delivering power and energy to ERMU customers. They include substation and <br />distribution system costs. It also includes the fixed costs associated with the <br />service facilities utilized to deliver electric power and energy directly to customers. <br />Customer these include items such as meter reading, billing, collections and <br />dealing with customers by customer service representatives. <br />Revenue revenue related costs include certain non-operating revenues and <br />utility margin. <br />153 <br />