International Comparison of Utilities' Regulated Post Tax Rates of Return In: North America, The UK and Australia
31 March 2002
By Greg Houston with former NERA Associate Director Dr. Tom Hird
NERA was commissioned by the Australian Competition and Consumer commission (ACCC) to survey declared post tax regulatory rates of return for gas and electricity transmission and distribution businesses across various jurisdictions in the United Kingdom and North America. The ACCC also asked NERA to provide commentary on the impact of these regulatory decisions on the incentive for efficient investment in the carriage of gas and electricity in that jurisdiction. The data collected for this survey concentrates on the calculation of the real vanilla post tax WACC.
Based on the declared returns examined in the survey, NERA determined that Australian regulators appear to offer approximately the same or higher returns than North American regulators who in turn appear to offer significantly higher rates of return than in those in the United Kingdom. Declared post tax rates of return are only one element of the regulatory regime that impacts on incentives to invest and a detailed analysis of all elements must be carried out before drawing firm conclusions regarding the relative incentives for investment across jurisdictions. Nonetheless, this report provides some support for the view that Australian regulators provide comparable incentives for investment as do North American and the United Kingdom regulators.
