Behind the Customer Bill
Svetlana Atoyan and Josnelly Aponte are Managing Consultants; and Leading Utility Rate Design Experts at Atrium Economics.
Behind every utility bill is a set of judgment calls that few customers ever see. A utility can propose a rate increase not because of new infrastructure or rising fuel costs but simply because the math has changed.
A shift in how costs are allocated across customer groups can significantly affect who pays what, even when total costs stay the same. Every rate case centers on a fundamental and often contentious question: What is the cost to provide utility service to each group of customers and what should each group be charged for this service?
The Cost-of-Service Study
To answer this, utilities perform a Cost-of-Service Study (COSS) — a structured analysis to determine how much each customer group or class (like residential, small commercial, or industrial) should contribute to the utility’s total costs.
The principle behind it is straightforward: Allocate costs to each group of customers in proportion to the costs they cause the utility to incur.
Utility assets include those that are shared among all customers — electric transmission lines, substations or gas mains lines — and those that are directly serving a customer or small group of customers, like meters and services.