Today, the German Federal Supreme Court has confirmed the allowed return on equity for German gas and electricity network operators as it had been determined by the regulator (Bundesnetzagentur, BNetzA).
Click here to read the full decision. This means that the Federal Supreme Court does not follow the decision by the Higher Court Dusseldorf that came to the conclusion that the allowed return was too low.
For the third price control period for gas and electricity networks BNetzA had decided an allowed return on equity of 6.91% (compared to 9.05% in the previous regulatory period).
In determining the risk premium for equity, BNetzA relied, as in previous price control determinations, on a study by Frontier Economics, which concluded that the regulator had some discretion to set the cost of equity within an interval of adequate returns.
Frontier regularly advises companies and authorities on cost of capital and other regulatory issues.
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