UMC Financial Management & Rate Structures

Question 1

What is the purpose of a cost-of-service study in utility management?

Accepted Answer

To determine rate structures based on costs

Answer

To estimate future customer demand

Answer

To identify profitable service areas

Answer

To set employee salaries

Question 2

Why is rate stabilization important for utility companies?

Accepted Answer

To ensure financial predictability and customer protection

Answer

To increase annual profits

Answer

To avoid customer complaints

Answer

To compete with private providers

Question 3

What is typically included in a utility capital improvement plan (CIP)?

Accepted Answer

Planned infrastructure projects and budgets

Answer

Customer rebate programs

Answer

Marketing strategies

Answer

Employee bonus structures

Question 4

Which of the following is a fixed cost in utility budgeting?

Accepted Answer

Employee salaries

Answer

Electricity usage for pumping

Answer

Chemicals for water treatment

Answer

Fuel for trucks

Question 5

How does a utility determine customer classes in rate structures?

Accepted Answer

By usage patterns and load characteristics

Answer

By geographic location

Answer

By income levels

Answer

By credit scores

Question 6

What is the role of depreciation in utility financial management?

Accepted Answer

To account for asset aging and replacement costs

Answer

To increase utility taxes

Answer

To delay rate hikes

Answer

To reduce customer demand