Valuing the opening regulatory asset base
Establishing the regulatory asset base, on which regulated firms are allowed to earn a return, is clearly crucial to the process of setting effective price controls. Much has been written on how to update this base over time.
Establishing an economically robust starting point – the value of assets inherited at the point of privatisation – is however quite as important, often shrouded in confusion, and subject to serious disagreement between investors and regulators. This bulletin draws on Frontier’s experience in advising on how to achieve practical solutions.