This brief paper outlines standard approaches to utility cost allocation and explores how decisions made by regulators affect eventual rate designs (i.e., how a utility’s revenue requirement is apportioned among customer classes). Jim Lazar provides an overview of different approaches to cost of service studies, which attempt to reflect utility costs in a causal manner. Depending on the approach taken—marginal cost, incremental cost, or embedded cost—these studies can produce significantly different results. Regulators routinely consider the results of multiple studies in determining a cost allocation and rate design that meets the legal test of “fair, just, and reasonable.” The availability of increasingly sophisticated usage data allows utilities to implement time-varying rates that more accurately apportion costs among customer classes. (This paper originally appeared as Appendix A to RAP’s “Smart Rate Design for a Smart Future.”)