ABSTRACT

This chapter demonstrates economic techniques that are useful specifically to a utility and are simple to use. These techniques are developed around such concepts as present worth, carrying charge, cost of losses, and operating costs as well as customer satisfaction. The "time value of money" means that a dollar today has a different value than a dollar a year from now. The process of taking money and finding its equivalent value at some point in the future is called future worth. When the costs are uniform, like our mortgage or car payment, then the value of these payments is estimated at some time by using compound interest factors for a "uniform" series of payments. There are many different methods that utilities use to depreciate their plant and equipment. The most common is called "straight line" where a fixed percentage of the investment is returned each year until the entire investment is returned.