Methods: Revenue requirement explainer
ratepayer.revenue-requirement.explain · Version 0.1.0
Method
Revenue requirement = O&M + depreciation + taxes other than income + income tax + rate base × weighted cost of capital, where the weighted cost of capital is equity share × return on equity + debt share × cost of debt, and income tax on the equity return is that return × t ÷ (1 − t).
Assumptions
- Income tax is grossed up on the equity return only, at one combined rate; deferred taxes and tax credits are left out.
- The per-home figure spreads a change in proportion to the residential share of revenue; a rate case's cost allocation can differ.
Sources
- Regulatory Assistance Project, Electricity Regulation in the US: A Guide, Second edition, 2016, Chapter 9, the revenue requirement and its components
- FERC Form 1, through Catalyst Cooperative's PUDL (CC BY 4.0), PUDL v2026.10.0, report year 2025, Income statement (schedule 114) and PUDL's rate-base derivation; see docs/derivations/rate-base.md
Worked examples
| Example | Independent source | Tolerance | Last result |
|---|---|---|---|
| A $2 billion rate base at 10% equity return | ratepayer/revenue-requirement spec, scenarios "Return on rate base" and "ROE sensitivity" | ±0.0005, ±1, ±1, ±1, ±0.005 | Not yet run in CI |
Known differences from reference engines
None recorded.
Cite this tool
Revenue requirement explainer, version 0.1.0. gridprims. https://gridprims.com/tools/ratepayer/revenue-requirement/explain/