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  • Question

    When I look at my current LCCE and the respective O&M Costs in relation to the CDD Affordability document what year(s) should the O&M (Acquisition) costs be from and then also the O&M (Operations) costs be from?


    Answer

    The Dollar year denomination of the LCCE and related estimates (such as your O&M portion of the LCCE), are usually the Base Year (Constant Year Dollars) of your estimate.  This is a ground rule for your estimate, so organization policy would dictate the year and should be clearly stated as a ground rule for your work.

    Note, the correct process for developing an estimate is to estimate the costs in the dollar denomination of when those costs would be incurred (ie, a THEN YEAR dollar) and then escalate/de-escalate those Then Year dollars into the Base Year Dollar of the estimate (CONSTANT YEAR dollar).

    Regarding the CDD affordability document, ensure you use the denomination of the affordability estimate.  If comparing it to a budget figure for affordability purposes, you would escalate those costs to a Then Year dollar unless the ground rules of your analysis suggests that you would be performing the analysis in some constant year. 

    The following statement from the INFLATION AND ESCALATION BEST PRACTICES FOR COST ANALYSIS: ANALYST HANDBOOK (January 2017), paragraph 5A, page 24, it is recommended to present costs for affordability analyses in either Then Year dollars, Constant Year dollars, or both.

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