We understand utility price control reviews, particularly in the UK. We are familiar with the key building blocks: cost of capital, efficiency projections and benchmarking, regulatory asset value, demand forecasts, incentive schemes.
We have particular knowledge and experience of methods for "efficiency analysis" to be used in price control reviews.
This includes ways of determining assumptions for future efficiency improvement. We understand how cross-industry studies of productivity improvement and within-sector analysis of expenditure levels can contribute to the development of these estimates, and how they need to be combined with each other.
We are familiar with the debates that inform the estimation of the cost of capital and the determination of the return on capital to be allowed in price controls, including:
We have expertise in:
Reckon's staff have experience of advising both regulators and regulated companies on these issues.
Once the policy, the numbers and the incentives schemes have been set, price controls need to be converted into workable legal documentation.
We have specific expertise and experience in drafting and reviewing the licence conditions or other legal documents which give effects to the price control determinations, particularly in cases where there are complex revenue driver arrangements or financial incentive schemes.
We can also help with modelling, forecasting and other tasks involved in the day-to-day management of price controls.