Conventional Rate Case

FAQs: Conventional Rate Case Process

How do I file for a Conventional Rate Case (CRC)?

The process for conducting a conventional rate case begins when the utility visits the Public Service Commission’s web site and requests an application form.

A utility can request a conventional rate case application form at

Application to Increase Water and/or Sewer Rates

Once the rate application is requested, the case generally proceeds in the following eleven steps:

1. The utility receives an electronic version of application via e-mail. The application will be preloaded with historical data from the utility’s PSC Annual Reports.

2. Utility staff or a consultant hired by the utility completes the application and submits it to the PSC using the Electronic Records Filing System (ERF).

3. The PSC accepts the application and assigns a docket number.

4. PSC staff processes the rate increase request and develops a rate proposal.

5. PSC sends a rate proposal exhibit to the utility via e-mail.

6. The utility provides customer notification as required by Wis. Admin. Code § PSC 2.10.

7. The public hearing is held. Generally the hearing takes place over the telephone during normal business hours. More complicated cases may require pre-hearings and are often held in Madison or sometimes in the community.

8. The Commission reviews the hearing record and makes decisions on specific issues.

9. The PSC issues a rate order authorizing the new rates.

10. The utility notifies the PSC, electronically using ERF, of the effective date for implementation of new rates.

11. PSC prepares and e-mails new rate sheets for the utility’s records.

The effective date of a rate order is the date the utility begins applying the new rates. To avoid the need to prorate bills, the PSC recommends the utility choose the effective date coincident with the date it reads meters. Commission staff encourages the utility to solicit input from customers and municipal leaders early in the rate case process, at least before the public hearing.

What is a Cost of Service Study?

Once the appropriate level of revenues for the test year is determined, the next task is to provide a fair allocation of these dollars to ratepayers. The typical means of accomplishing this allocation is to conduct a Cost of Service Study (COSS). The principal reason for performing a COSS is the fact that the water system provides service to a number of different classes of customers who have different water use patterns and demands. Therefore, different customer classes have different conditions of service; an equitable rate structure must recognize these differences. PSC staff uses AWWA’s “Base-Extra Capacity” methodology to allocate costs. This method is described in detail in AWWA's M1 Principles of Water Rates, Fees, and Charges Manual


To view the Table of Contents from the most recent release of the M1 Manual, as well as read an overview of cost-based water utility rate-making, visit the AWWA website: M1 Manual: Look Inside

How are customer classes defined?

The PSC recognizes five primary customer classes for water service, including:

Residential customers includes single-family homes, duplexes, and individually-metered condominiums, apartment buildings, and mobile home parks.

Multifamily Residential customers includes master-metered multifamily dwelling units such as condominiums, apartment buildings, and mobile home parks.

Commercial customers includes business entities and institutions, except governmental entities, that provide goods or services. Churches and parochial schools are not governmental and are classified as commercial.

Industrial customers includes customers who are engaged in the manufacture or production of goods.

Public Authority customers includes any department, agency, or entity of local, state, or federal government, including public schools, colleges, and universities.


In addition, some utilities have chosen to establish a separate class for irrigation-only customers, which typically includes customers who have a separate meter for outdoor water use. This class is defined as follows:

Irrigation customers includes customers who have water service provided primarily for landscape irrigation. For the purpose of this schedule, landscape irrigation includes the use of water to sustain crops, lawns, or landscapes on any residential, multifamily residential, commercial, industrial, or public authority property, including water used for irrigating athletic fields, parks, and golf courses. Irrigation customers include those customers that have multiple meters installed on a single lateral for the purpose of measuring water that is not discharged to the sanitary sewer system. The utility shall classify each additional meter as an irrigation meter and treat each meter as a separate general service customer.

How are rates designed?

The final rate design step is developing rates that allow a utility to meet its revenue requirement and provide a fair distribution of the costs between customers based on the cost of providing service. There are several important criteria to keep in mind when designing rates. Rate development involves addressing multiple objectives and should result in a rate design that is practical, easily understood, has a clear, single interpretation, is based on the cost of providing service and meets the appropriate revenue requirement based on those costs, provides relatively stable revenues, avoids unnecessary rate shock, is not unduly discriminatory, and discourages wasteful use. Rate design issues are covered in depth in AWWA's M1 Principles of Water Rates, Fees, and Charges Manual.

What is a test year?

The “test year” used in a conventional rate case refers to the calendar year over which the utility estimates its expenses and revenues for the purpose of setting rates. Rate case applications submitted prior to August 1 will use the current year as a test year, while applications submitted after August 1 will use the next calendar year as a test year. If a utility plans to include the cost of a major construction project in the revenue requirement for a given test year, construction must be completed and in service within that test year. These projects are considered “used and useful.” Projects not completed within the test year are not included in the revenue requirement and are not recoverable in rates. Even if an asset is not in service for the entire test year, a utility should estimate the depreciation, tax equivalent, operating expenses, and return for the major project for the full year. This practice ensures the revenue requirement reflects future annual expenses accurately.

Our utility is planning a major water construction project. How do we incorporate the cost of the project into our water rates?

In order to incorporate costs associated with a major construction project into rates, a utility needs to file a Conventional Rate Case (CRC). In developing the utility’s revenue requirement, Commission staff will consider the annual depreciation and tax equivalent, ongoing operating and maintenance expense, and reasonable return on investment associated with the newly constructed asset. A utility that is concerned about the rate shock associated with a major construction project can either file a Simplified Rate Case (SRC) to keep up with existing costs prior to filing a CRC that includes project-related costs, or phase its construction and apply for a Two Step Rate Case.

Our utility plans to use State Revolving Loan Program funding to help pay for our project. What are the requirements for filing a rate case in a timely manner?

In order to incorporate costs associated with a major construction project into rates, a utility needs to file a Conventional Rate Case (CRC). If a utility intends to use Safe Drinking Water Loan Program (SDWLP) funds to help pay for its project, it is important to make sure all SDWLP requirements are met, including filing a rate increase with the PSC in a timely manner.  The DNR Environmental Loans webpage provides the following guidance:

  1. A municipality planning to apply for SDWLP financial assistance should develop its proposed water rate changes while its engineering report is being developed.

  2. SDWLP applications must be submitted by June 30 for the upcoming state fiscal year (SFY) funding cycle.

  3. A municipal applicant should submit the proposed water rate changes to PSC in an application to increase rates no later than the September 15 following the SDWLP application submittal.

  4. A copy of the PSC approved rate order must be submitted to the applicant's DNR project manager by the March 15 prior to execution of the Financial Assistance Agreement (FAA).

  5. SDWLP loan closing – Sign the FAA by the June 30 following the calendar year in which funding was allocated

What is a Two Step Rate Case?

If a utility has a major project that will not be completed in the current test year but will be completed in the first half of the next test year, filing a Two Step Rate Application may be appropriate. The utility excludes the project in preparing its current test year revenue requirement and includes the project in its revenue requirement in its future test year revenue requirement in Step II pages at the end of the rate application. Commission staff prepares two rate proposals: one to meet current needs without the project, and another that incorporates the cost impact of the project. The first step takes effect following the public hearing and order issuance. The second step is implemented once the utility notifies the PSC that the construction project has been completed and is in service.


FAQs: Tariffs

What are tariffs?

Formal filings that utilities make with the Commission, tariffs cover everything from the rates a customer pays for water service each month to what qualifications a customer must meet in order to take service under a given rate offering. Tariffs have the force and effect of contracts. As contracts, tariffs can be viewed as setting out the legal obligations of both parties – the customer’s and the utility’s. Tariffs are subject to review by the PSC, and in some instances, the courts.

A utility must file its tariff with the PSC. Tariffs on file with the PSC are available to the public for inspection on the PSC web site. Once in effect, a utility must charge a customer the tariffed rate. Per Wis. Stat. § 196.60, a utility cannot discriminate in the rates it charges customers. Tariff revision requires a hearing if the new tariff would diminish the level of service received by a customer under an existing tariff or have the effect of increasing charges to a customer for an existing service. A hearing is not required if the effect of the tariff would be to reduce rates, or if the utility is offering a new, optional tariffed service. However, the revised tariff would still be subject to PSC staff review.

How should the utility apply the service charge for bulk water use?

The manner in which a water utility applies the service charge in Schedule BW-1 (i.e. per month, per day, per project, per tank load, etc.) is at the discretion of the utility. However, once the utility determines the manner for doing so, it must be consistent in applying the charge. Commission staff recommends that the utility include this policy in its policy manual or service rules.

What charges can the utility apply to properties, vacant or including buildings, which are not receiving water service?

Provided they are included in the utility's current tarriffs, two rates could apply:


Standby water service:

Schedule Sws-1, Standby Water Service, allows the utility to apply a charge to each lot or equivalent parcel of land if water system facilities are available but the property is not connected, meaning that it is fronted by a water main. This rate is not applicable to land declared by the local municipality to be unbuildable. If the utility has Schedule Sws-1 in its authorized rates, each lot would be subject to the standby charge. Standby charges are not common.

Direct public fire protection charges:

Direct charges for public fire protection are applied to any customer receiving water service under the following tariff schedules: Mg-1, General Service – Metered; Ug-1, General Water Service – Unmetered; or Sg-1, Seasonal Service. Beginning in 2011, the Commission is eliminating Fd-1 and combining this tariff with F-1. While the Commission is in the process of phasing these tariffs out,some communities will still have them in their tariffs if they have not recently applied for a rate adjustment.

Direct public fire protection charges also apply to customers receiving service under Mgt-1 or Mz-1. While the Commission is in the process of phasing these tariffs out, they may still be in the tariffs for communities that have not applied recently to the Commission for a rate adjustment.

Under Wisconsin Statute § 196.03(3)(b)(2), a utility may request that direct public fire protection charges also apply to any person who is not a general service customer of the utility but owns land located in the city, village, or town and in an area in which the municipal utility has an obligation to provide water for public fire protection. Such parcels shall be billed at the ⅝-inch meter rate. This rate is not applicable to land declared by the local municipality as unbuildable. If the utility chooses to charge non-general service customers, Schedule F-1 will be amended to include such language.

How should the utility recover the cost of a cross connection control program?

If the cross connection program is being administered by water utility staff using water utility resources or by a utility-approved outside contractor, the expense of the program is a recoverable cost. If deemed reasonable by Commission staff during a CRC, these costs would be recovered through general service water rates at the time of the utility’s next water rate case. The water utility may not place a direct charge for inspections and program administration costs as a line item on water utility bills. Cross connection-related dollars expended prior to new general service water rates being approved by the PSC ordinarily would not be considered deferred and are thus not recoverable. Utilities may provide small items such as vacuum breakers or other backflow preventers for hose bibs to customers. It is the utility's decision as to whether it provides these items at no cost or for a small charge to the customer.