COST DISTRIBUTION BY REGULATION.
The purpose of this article is to review some of the accounting principles effecting the equitable distribution and allocation of costs of a public utility corporation that furnishes electric, gas and steam services within the same general area. Its rate regulation comes under the jurisdiction of a State Public Service Commission, as all of its revenues and costs arise from within the borders of the state. In order to establish fair and reasonable rates for both utility and consumer alike, accounting principles pertaining to the distribution of costs must also be fair and reasonable. Total revenues in the long run must cover total costs. Costs must be matched against the revenues of the company for a particular period of time, usually on a monthly, quarterly or annual basis. The aim of the utility is to furnish service to its customers in the most efficient and economical manner possible and at the same time to earn a fair rate of return on its capital investment. Considerable judgment and care must be employed to choose the proper data and to select the best method of allocation in order to justify a cost distribution which will meet the standard of being fair and reasonable.
- DOI
- 10.2308/tar-7131427
- Volume
- 34 (2)
- Pages
- 250-256
- Language
- en
- Export
- BibTeX
- Sources
- openalex crossref