Financial Management & Rate Structures Flashcards
6 cards from real UMC practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Financial Management & Rate Structures flashcards as text
What is the purpose of a cost-of-service study in utility management?
Answer: To determine rate structures based on costs
A cost-of-service study ensures that rates are based on actual costs, promoting fairness and regulatory compliance.
Why is rate stabilization important for utility companies?
Answer: To ensure financial predictability and customer protection
Rate stabilization protects customers from sudden spikes in bills and ensures consistent revenue for utilities.
What is typically included in a utility capital improvement plan (CIP)?
Answer: Planned infrastructure projects and budgets
A CIP outlines planned infrastructure investments, timelines, and funding strategies for long-term utility development.
Which of the following is a fixed cost in utility budgeting?
Answer: Employee salaries
Fixed costs do not change with usage and include items like salaries and equipment leases.
How does a utility determine customer classes in rate structures?
Answer: By usage patterns and load characteristics
Customer classes are based on usage patterns and service requirements, helping to allocate costs fairly.
What is the role of depreciation in utility financial management?
Answer: To account for asset aging and replacement costs
Depreciation accounts for asset wear and tear, allowing utilities to plan for replacements and allocate costs.