German energy regulator publishes draft decision on cost of equity
The German energy regulator, Bundesnetzagentur, has today issued a draft decision on the allowed cost of equity to be applied for the calculation of electricity and gas network charges for the price control period commencing in January 2009. The regulator proposes a rate of 7.82% (nominal). This is composed of a risk free rate of 4.23% and a network specific risk premium of 3.59%.
The calculation of the risk free rate follows the approach as prescribed in the relevant decree and is based on the yield of German government bonds.
The estimate of the network specific risk premium in part draws on analysis by Frontier (Europe) of evidence from international capital markets on risks of energy network operators. In its analysis Frontier has employed the Capital Asset Pricing Model (CAPM).
The regulator has invited a consultation on its proposed decision.
Printer friendly