The Three-Point Formula & Allocating Interdepartmental Costs
Learn the 3-point Massachusetts formula and other industry-standard methods for allocating support costs between departments—with the journal entries, calculation steps, and fairness framework to put it into practice at your utility or co-op.
- 14 lessons · self-paced video
- Downloadable PDF & Excel materials
- 3-point formula calculation templates
- Service level agreement example
- NASBA-compliant final exam (5 questions)
- Certificate of completion (1.00 CPE)
Allocate Support Costs Fairly—and Defend Your Results
Every utility and co-op has support departments—IT, HR, finance, fleet—whose costs need to be allocated across the organization. How those costs are allocated affects departmental budgets, cost-of-service studies, and ultimately customer rates. This course gives you the framework to do it right.
You'll learn the fundamentals of cost allocation theory, the industry-standard 3-point Massachusetts formula, and how to calculate allocation rates step by step. The course also addresses the fairness questions that inevitably come up when departments push back—and gives you the tools to address them confidently.
Whether you're allocating IT costs across departments or preparing inputs for a rate study, this course gives you the practical skills and defensible methodology to get it done.
- Finance and accounting staff responsible for cost allocation
- Rate analysts preparing cost-of-service studies
- Controllers and CFOs overseeing interdepartmental billing
- Department managers involved in budget discussions
- Anyone preparing or reviewing joint IT service agreements
Russ Hissom, CPA
Russ Hissom, CPA is a principal of UtilityEducation.com, providing on-demand professional education in FERC, RUS, FASB, and GASB accounting, finance, and ratemaking for electric utilities and cooperatives. With over 30 years of hands-on industry experience, he brings real-world expertise to a modern learning platform trusted by more than 1,000 professionals.
What You'll Be Able to Do After This Course
Inside the Course
Orientation to the course, learning objectives, and downloadable course materials.
- Lesson Menu / Index
- 1. Course Overview
- 2. Course Learning Objectives
- 3. Course Materials Download
Introduction to the 3-point Massachusetts formula—what it is, why it's the industry standard, and how it differs from simpler allocation approaches.
- 4. The 3-Point Formula — Accounting Method for Interdepartmental Cost Allocations
Survey the full range of industry allocation methods, work through the 3-point and Massachusetts formula step by step, and reinforce skills with review questions.
- 5. Common Industry Allocation Methods Free Preview
- Thought Break
- 6. The 3-Point and Massachusetts Formula — Industry Standard Allocator
- 7. Review Questions — Part 1
Address the fairness questions departments always ask—and build the talking points to answer them confidently.
- 8. Addressing Departmental Concerns — Is It Fair?
- 9. Review Questions — Part 2
Apply what you've learned to your organization and pass the final exam to earn your 1.00 CPE certificate.
- 10. Applying the 3-Point in Your Organization & Final Thoughts
- 11. Course Evaluation
- 12. Final Exam
Trusted by Over 1,000 Utility Professionals
"Very good overview of the introduction to the electricity business. Will definitely be taking another course through UtilityEducation.com."
"This was an incredible overview! I cannot wait to share this with others. I LOVED how you explained things. You have great speaking and explanation skills."
"Russ was great and explained everything really well — someone who has actually been in the industry. I will be taking more courses!"
"Good basic understanding of RUS and the chart of accounts. I came from outside the utility world and was quite lost. This class helps provide a solid foundation."
"Great training for our Board members."
"Was a quick, easy and great information!"
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Capture Your Allocations
Join over 1,000 utility and co-op professionals building practical skills that improve cost accuracy and rate defensibility.
Utility Accounting and Rates Specialists, LLC is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: NASBAregistry.org.
Requests for refunds must be made in writing within 30 days of purchasing the course. No refunds will be granted after the qualified assessment has been completed. For any concerns, please contact us at 608-628-4020 or at russ.hissom@utilityeducation.com.
Course materials are provided for informational and educational purposes only. They do not constitute legal, accounting, or professional advice. © 2026 Utility Accounting & Rates Specialists, LLC. All rights reserved.