Mathematical Model for Rate Studies

A mathematical model adaptable to digital computer applications is developed for estimating the total annual cost of a newly constructed or expanded public water supply or wastewater disposal system to provide cost information for rate studies. One unique feature is the inclusion of the effects of inflation and construction cost increases. The estimated annual costs will be in the form of a time series useful for long-range financial planning. A numerical example is presented to illustrate the application of the model. The results of the example indicate that inflation has pronounced effects on the estimated annual costs, and its omission in making cost estimates may result in insufficient revenue for the proper operation of the system. A sample computer program is presented to show the programming technique required to obtain correct results. The model is also a good tool for comparing alternative projects in water resources planning.