Identifying Rate Methodologies for a Burgeoning Area   

EPCOR provides the Edmonton area of Alberta with retail and wholesale water service as well as wastewater collection and treatment, and drainage services to Edmonton customers. For nearly a decade, Edmonton has been one of the nation’s fastest-growing major cities, with a population increase of 12.6% from 2019 to 2023. The combination of providing a wide variety of services and rapid growth can create challenges in maintaining proportional and cost-based rates that support a utility’s operating capital costs.  

Since 2008, we have partnered with EPCOR to meet this challenge, leading the development of cost-of-service methodologies for use in their Performance-Based Ratemaking process specific to each of its utilities and customer classes of service. For the water utility, this required a proportional distribution of costs between the wholesale and retail customers. For the wastewater collection and treatment, and drainage utilities, costs were proportionally distributed between the different retail customer classes of service, including residential, multifamily, and commercial.

To date, our successful partnership with EPCOR includes:

• 2008-2010: Establishing water cost-of-service methodologies
• 2013: Updating water rate and cost-of-service methodologies  
• 2019: Establishing wastewater collection and treatment, sanitary, and drainage rates cost-of-service methodologies
• 2024: Updating wastewater collection and treatment, sanitary, and drainage rates cost-of-service methodologies

Developing Defensible Recommendations

We based our analyses on industry-accepted principles and approaches, customized to meet each of the systems and its customer characteristics. This provided EPCOR with defensible recommended cost allocations and proportional rates.

American Water Works Association’s base-extra capacity methodology was the basis for the drinking water cost-of-service analysis. Additionally, we helped EPCOR staff identify the infrastructure necessary to provide wholesale service and the allocation of transmission and distribution costs between retail and wholesale customers.  

Water Environment Federation’s Manual of Practice 27 was the foundation for the wastewater collection and treatment, sanitary and drainage systems cost-of-service methodologies.  

The rates update for each system utilized the methodologies developed as part of the initial projects while incorporating updated costs and customer characteristics.