“Innie or Outie” How to Allocate Energy Utility Costs

1. “Innie or Outie”How to Allocate Energy Utility Costs Richard McCann, Partner M.Cubed Davis, California

2. Why does it matter? • If covered by the utility’s submeter discount, can’t be recovered through rent • If not covered, then can be recovered separately through rent Recent CPUC decision (D.04-04-043) set clear criteria based on line extension rules

3. What are the boundaries? • For electricity, from the master meter through the submeter, but excluding the pedestal and panel • For gas, from the master meter through the submeter • Both exclude portions usually owned by and costs borne by the customer

4. What’s clearly included? • O&M and administrative expenses • Uncollectibles and energy losses • Initial and replacement investment and cost recovery for segment within the discount • Taxes that utilities are usually responsible for

5. What’s recoverable in rents? • Common area services • Trenching for service “reinforcements” and service expansion • Substructures, and for electricity conduits, for reinforcements & expansions • Trenching, etc. for converting to underground electric • Pedestals and panels for electricity • O&M costs for these items