Steps 1-5 explore the steps necessary to evolve existing tariffs to become cost reflective, and to bring them in line with the principles of cost causation and economic efficiency. Steps 6-12 deal with additional considerations that policymakers and regulators may wish to assess as part of their tariff reform efforts (such as the role of incentives, the development of lifeline tariffs, among other issues).

01

Step 1: Determine the underlying cost structure

02

Step 2: Calculate the appropriate cost of capital

03

Step 3: Assess whether the existing tariff is cost reflective; if not, determine an approach to reach cost recovery

04

Step 4: Examine customer classes to determine whether tariffs reflect cost causation; redefine as needed

05

Step 5: Examine billing determinants and block design to assess whether economically efficient

06

Step 6: Determine role of incentives

07

Step 7: Explore whether tariff formula should include flow-through elements

08

Step 8: Develop lifeline tariff

09

Step 9: Assess collection issues

10

Step 10: Describe how tariffs are revised and investments approved

11

Step 11: Determine appropriate length of regulatory periods

12

Step 12: Develop formulas for rate adjustments within regulatory periods

Step 1: Determine the underlying cost structure

Step 2: Calculate the appropriate cost of capital

Step 3: Assess whether the existing tariff is cost reflective; if not, determine an approach to reach cost recovery

Step 4: Examine customer classes to determine whether tariffs reflect cost causation; redefine as needed

Step 5: Examine billing determinants and block design to assess whether economically efficient

Step 6: Determine role of incentives

Step 7: Explore whether tariff formula should include flow-through elements

Step 8: Develop lifeline tariff

Step 9: Assess collection issues

Step 10: Describe how tariffs are revised and investments approved

Step 11: Determine appropriate length of regulatory periods

Step 12: Develop formulas for rate adjustments within regulatory periods

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