{"operation":"document","citation":"4 CCR 723-4 Rule 4502","title":"Cost Assignment and Allocation Principles","source_type":"regulation","agency":"Colorado Public Utilities Commission","status":"current","official":true,"published_on":null,"effective_on":null,"summary":"In determining fully distributed cost, the utility shall apply the following principles (listed in descending order of required application in paragraphs 4502 (a), (b) and (c) below). (a) Tariff services provided to an activity will be charged to the activity at the tariff rates. (b) If only one act","machine_formats":{"json":"https://regulus.evalyn.ai/document/co-ccr-4-723-4-4502.json","markdown":"https://regulus.evalyn.ai/document/co-ccr-4-723-4-4502.md"},"app_url":"https://regulus.evalyn.ai/document/co-ccr-4-723-4-4502","source_url":"https://www.sos.state.co.us/CCR/DisplayRule.do?action=ruleinfo&ruleId=2260&deptID=18&agencyID=96&deptName=Department%20of%20Regulatory%20Agencies&agencyName=Public%20Utilities%20Commission&seriesNum=4%20CCR%20723-4","body":"In determining fully distributed cost, the utility shall apply the following principles (listed\nin descending order of required application in paragraphs 4502 (a), (b) and (c) below).\n(a) Tariff services provided to an activity will be charged to the activity at the tariff\nrates.\n(b) If only one activity or jurisdiction causes a cost to be incurred, that cost shall be\ndirectly assigned to that activity or jurisdiction.\n(c) Costs that cannot be directly assigned to either regulated or non-regulated\nactivities or jurisdictions will be described as common costs. Common costs shall\nbe grouped into homogeneous cost categories designed to facilitate the proper\nallocation of costs between regulated and non-regulated activities or jurisdictions.\nEach cost category shall be fairly and equitably allocated between regulated and\nnon-regulated activities or jurisdictions in accordance with the following\nprinciples.\n(I) Cost causation. All activities or jurisdictions that cause a cost to be\nincurred shall be allocated a portion of that cost. Direct assignment of a\ncost is preferred to the extent that the cost can easily be traced to the\nspecific activity or jurisdiction.\n(II) Variability. If the fully distributed cost study indicates a direct correlation\nexists between a change in the incurrence of a cost and cost causation,\nthat cost shall be allocated based upon that relationship.\n(III) Traceability. A cost may be allocated using a measure that has a logical or\nobservable correlation to all the activities or jurisdictions that cause the\ncost to be incurred.\n\n(IV) Benefit. All activities or jurisdictions that benefit from a cost shall be\nallocated a portion of that cost.\n(V) Residual. The residual of costs left after either direct or indirect\nassignment or allocation shall be allocated based upon an appropriate\ngeneral allocator to be defined in the utility’s CAAM.\n(d) For cost assignment and allocation purposes, the value of all transactions from\nthe Colorado utility to a non-regulated activity shall be determined as follows:\n(I) if the transaction involves a product or service provided by the utility\npursuant to tariff, the value of the transaction shall be at the tariff rate;\n(II) if the transaction involves a product or service that is not provided\npursuant to a tariff, the value of the transaction shall be the higher of the\nutility’s fully distributed cost or market price. Market price shall be either\nthe price charged by the utility, or if this condition cannot be met, the\nlowest price charged by another person for a comparable product or\nservice; or\n(III) if the transaction involves the sale of an asset, the value of the transaction\nshall be the higher of net-book cost or market price. If the transaction\ninvolves the use of an asset, the value of the transaction shall be the\nhigher of fully distributed cost or market price. Market price shall be either\nthe price charged by the utility or if this condition cannot be met, the\nlowest price charged by another person in the market for the sale or use of\na comparable asset, when such prices are publicly available.\n(e) For cost assignment and allocation purposes, the value of all transactions from a\nnon-regulated activity to the utility shall be determined as follows:\n\n(I) if the transaction involves a product or service that is not provided\npursuant to a tariff, the value of the transaction shall be the lower of the\nfully distributed cost or the market price except if the transaction results\nfrom a competitive solicitation process then the value of the transaction\nshall be the winning bid price. Fully distributed cost in this circumstance,\nshall be the cost that would be incurred by the utility to provide the service\ninternally. Market price shall be either the price charged by the supplying\nnon-regulated activity or if that condition is not met, the lowest price\ncharged by other persons in the market for a comparable product or\nservice, when such prices are publicly available; or\n(II) if the transaction involves the sale of an asset, the value of the transaction\nshall be the lower of net-book cost or market price. If the transaction\ninvolves the use of an asset, the value of the transaction shall be at the\nlower of fully distributed cost or market price. Market price shall be either\nthe price charged by the non-regulated activity or, if this condition cannot\nbe met, the lowest price charged by another person in the market for the\nsale or use of a comparable asset, where such prices are publicly\navailable.\n(f) If it is impracticable for the utility to establish a market price pursuant to\nparagraphs (d) or (e), the utility shall provide a statement to that effect, including\nits reasons in its’ fully distributed cost study as well as its proposed method and\namount for valuing the transaction. Parties in a Commission proceeding retain\nthe right to advocate alternative market prices pursuant to paragraphs (d) and\n(e).\n(g) A utility may classify non-jurisdictional services as regulated if the services are\nrate-regulated by another agency (i.e., another state utility commission or the\nFERC) and where there are agency-accepted principles or methods for the\ndevelopment of rates associated with such services. This rule may apply, for\nexample, to a provider's wholesale sales of electric power and energy. For such\nservices, the utility shall identify the services in its manual, and account for the\nrevenues, expenses, assets, liabilities, and rate base associated with these\nservices as if these services are regulated.\n(h) For cost assignment and allocation purposes, the value of all transactions\nbetween regulated divisions within a utility shall be determined as follows:\n(I) if the transaction involves a service provided by the utility pursuant to tariff,\nthe value of the transaction shall be at the tariff rate, or\n(II) if the transaction involves a service or function that is not provided\npursuant to a tariff, the value of the transaction shall be at cost.\n\n(i) If the utility offers a service that is a combination of regulated and non-regulated\nactivities (i.e., a bundled service), the utility shall assign and/or allocate costs to\nthe regulated and non-regulated activities separately.\n(j) A utility may classify incidental activities as regulated activities. If an incidental\nactivity is classified as a regulated activity, the utility shall clearly identify the\nactivity as an incidental activity, and account for the revenues, expenses, assets,\nliabilities and rate base items as if that activity were a regulated activity.\n(k) To the extent possible, all assigned and allocated costs between regulated and\nnon-regulated activities should have an audit trail which is traceable on the books\nand records of the applicable regulated utility to the applicable accounts pursuant\nto the Federal Energy Regulatory Commission Uniform System of Accounts.\n(l) In a rate proceeding involving the calculation of revenue requirements, a\ncomplaint proceeding where cost assignments or allocations are at issue, or a\nproceeding where CAAM approval is sought, the utility or any party may\nadvocate a cost allocation principle other than that already in use, if the\nCommission has already approved the principle for that cost. The party\nrequesting the alternative approach shall have the burden of proving the need for\nan alternative principle and why the particular principle is appropriate for the\nparticular cost.","truncated":false,"body_characters":7447}