Rate base is the value of property, on which a public utility is permitted to earn a specified rate of return, in accordance with rules set by a regulatory agency.

In general, the rate base consists of the value of property, as used by the utility in providing service.

It may be calculated by any one or a combination of accounting methods, such as fair value, prudent investment, reproduction cost, or original cost.

The rate base can include: cash, working capital, materials and supplies, deductions for accumulated provisions for depreciation, contributions in aid of construction, customer advances for construction, accumulated deferred income taxes, and accumulated deferred investment tax credits, all dependent on the method that is used in the calculation.^[1]

The utility's rate of return (a ratio of net operating income earned) is calculated as a percentage of its rate base.^[2]