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# California-Great Basin

Welcome to the Bureau of Reclamation California-Great Basin

              - Reclamation
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              - Ratesetting Process Overview
              - Cost Allocation

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## Cost Allocation

The following flowchart depicts the timeline for completing major tasks associated with the annual accounting phase of the ratesetting process. For detailed information, click on the task or scroll down the page.

**Definition**. "Cost allocation" is the process of identifying and allocating the costs of a multi-purpose project among the various authorized project purposes. Cost allocations are performed on an annual basis for plant-in-service (construction) costs and of annual operation and maintenance (O&M) costs. The cost allocation phase updates (1) the respective repayment obligations of the reimbursable project functions (which include irrigation and M&I water supply and power) and (2) the costs allocated to nonreimbursable project functions including flood control, navigation, recreation, fish and wildlife and water quality improvement.

The method used to allocate plant-in-service costs is based upon the factors derived in the separable cost-remaining benefits (SCRB) allocation method. This is the standard economic method that Reclamation uses to allocate costs of multipurpose projects to authorized project purposes.

The method used to allocate O&M costs closely follows the plant-in-service allocation, although when O&M costs are not specifically related to particular CVP plant in service features, alternative factors are used for identifying costs to project purposes.

**Purpose**. The purpose of the annual cost allocations is to identify responsibilities for payment by project beneficiaries of reimbursable costs.

**Background**. Annual cost allocations are based upon periodic cost allocation studies. The last comprehensive cost allocation study of the CVP was completed in 1970 using the SCRB method. A "short-form" reallocation study using revised benefits and indexed costs was completed in 1975. The 1975 reallocation study did not include an evaluation of hydrologic operations, resizing, or re-costing of alternatives. The COA subsequently required Reclamation to conduct an interim cost allocation study for the CVP. That study report was issued in June 2001. As a result of the study, the Interior Region 10al Director approved the updated existing method for application to the CVP until such time a new or modified cost allocation study is funded. This alternative was selected over one recommended by the General Accounting Office, and another proposed jointly by a consortium of CVP water and power contractors.

**Process**. The major schedule and tasks associated with the cost allocation phase are as follows:

*Last Updated: 8/3/20*

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