The Erie City Water Authority contracted Keystone Alliance Consulting to develop a cost of service rate model for their water system. The rate model was developed using the base cost extra capacity method as described by the American Water Works Association, Manual M1.

Keystone performed the following tasks:

• Reviewed the current and projected operating expenses, current debt service, current usage, and growth projections.
• Developed usage tables to calculate revenues under current rates.
• Determined the annual revenue requirements for the study period.
• Allocated the annual revenue requirements into basic functional cost components.
• Used depreciation schedules of current assets to allocate debt service to basic functional cost components.
• Distributed functional costs to each of the defined customer classes.
• Calculated Cost of Service rates for each of the customer classes.

The Cost of Service Study performed by Keystone Alliance Consulting is required under the terms of the lease agreement with the City of Erie. Keystone Alliance Consulting has completed the required study for multiple five year study periods since 1999.