# Cost-of-Service and Rate Study

URL: https://municorn.us/services/cost-of-service-and-rate-study/
Updated: 2026-09-03
Tags: services, rates, finance

The revenue requirement, the cost of serving each customer class, the rate structure that recovers it, and the bill at each usage level. Every figure tied to the record it came from. Flat fee, defined deliverable.

A rate is arrived at one of two ways: it is built from a study, or a percentage increase is adopted without one. Either way, the question that arrives at the hearing is the same. What does this recover, and where is that written down.

## What we do

We build the calculation from four documents: the audited financial statements, the adopted capital improvement plan, the billing and consumption records, and the bond ordinance or official statement.

From those we compute the revenue requirement for each year of the forecast, allocate it into cost pools, and distribute the pools to customer classes by a named method with the data behind it. Base cost by annual volume. Peaking capacity by maximum day and maximum hour factors read out of your production records. Customer cost by account count, meters and services by meter equivalents, public fire protection by hydrant count and required fire flow.

Then the rate structure. Fixed charge by meter size, volume charge by class, and where tiers are used, the cost calculation behind each differential rather than the conservation objective behind it. Finally the bill impact: what each usage level and each class actually pays, before and after.

## What you get

The written study. The spreadsheet model, which is yours to keep and to re-run without us. A file supporting every figure in the study, indexed to the document it came from. Slides for the council or board meeting, and us at that meeting.

The model is the part people underestimate. A study is a snapshot of one set of assumptions; the model is what lets your finance director answer the question the board asks at the meeting rather than at the next one.

## What we will not do

We will not produce a cost allocation your records do not support. Where a cost was never allocated in a way anyone wrote down, we write that down as a gap rather than selecting a method and presenting the result as though it had been measured. A basis we constructed is a basis you cannot defend, because we are not the ones who will be asked about it.

We will not advise you on issuing a bond. We calculate what your coverage and your covenant permit you to borrow. Structuring and selling an issue is a separate, regulated activity and it is not ours.

We are not lawyers. The memo explaining the cost basis is written to be handed to your attorney.

## Fit

Best fit: a retail water or sewer utility with audited enterprise fund statements, a capital plan the council has adopted, and billing data that can be exported by class and by usage. The work is the same shape at 2,000 connections and at 200,000; only the number of classes and the complexity of the debt schedule change.

Also a good fit as the financial section of an engineering firm's scope. The plant sizing and the capital cost are yours; the revenue requirement, the class rates, the bill impacts and the coverage forecast are the part that is frequently subcontracted.

Poor fit: if the billing system cannot produce consumption by account for a full year, the first project is getting that export working, and we will say so on the call rather than modelling around it.

## Why the price is fixed

Because an hourly engagement gives us a reason to take longer and gives you a reason to scope it down, and neither serves the study. The fee is set by the size of the system and by how much of the record is already published. The deliverable is the list above rather than a change order.

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