Water

Costs and Tariffs

Costs and Tariffs

NERA works with regulators and companies on estimating changes in unit costs or efficiency in the context of regulatory price reviews. NERA has undertaken a range of cost and efficiency studies for UK and international water companies focusing on:

  • Analyzing companies' relative efficiency using a range of benchmarking techniques, including statistical modeling.
  • Analyzing historic changes in efficiency to inform estimates of future performance.
  • Detailed "bottom-up" analysis of companies' costs at an activity-based level.
  • Forecasting input price changes for key components of companies' costs, such as energy and capital costs.
  • Advising on how efficiency targets should be incorporated within price limits.

NERA also works with companies on establishing the link between costs and tariffs to ensure final prices to consumers, recover companies' costs, and provide appropriate price signals for efficient levels of consumption. Our work includes:

  • Constructing activity-based costing models to allocate costs to different consumer classes (e.g., business and domestic customers) in order to set cost-reflective tariffs.
  • Estimating long-run marginal cost as the basis for setting efficient tariffs.
  •  Designing efficient tariff structures, according to time-of-day, customer class, and geographic location.
  •  Designing tariff structures that take into account customers' ability-to-pay.
Name Title Location Phone Email
Dr. Richard Hern Managing Director London
Berlin
+44 20 7659 8582
+49 30 700 1506 01
richard.hern@nera.com
James Grayburn Associate Director London +44 20 7659 8572 james.grayburn@nera.com
Dr. William Baker Affiliated Consultant London +44 20 7659 8520 bill.baker.affiliate@nera.com
Dr. Hethie Parmesano Affiliated Consultant Los Angeles +1 213 346 3000 hethie.parmesano.affiliate@nera.com
Title Type Author
Response to Ofwat’s Cost of Debt Consultation for PR19 Report By James Grayburn, Zuzana Janeckova, et al.
Incorporating Marginal Costs in Water Supply Tariffs: Prospects for Change Working Paper By George Anstey and Tom Graham
Economics in Environmental Decision-Making: US Environmental Protection Agency Provid... Working Paper By Dr. David Harrison, Jr. with Dr. Noah Kaufman
A Cross-Sector and Cross-Country Review of Approaches to Transitioning to Markets Report By Bill Baker, Daniel Radov, Adil Hanif, Tobie Cusson, Kevin Counsell, Wayne Olson and Harry Fearnehough
Setting Efficient Tariffs for Wastewater Infrastructure Published Article By George Anstey
Cost of Capital for PR09: Final Report for Water UK Report By Dr. Richard Hern, Tomas Haug, Anthony Legg, and Mark Robinson with Professor Paul Grout of the University of Bristol and Professor Ania Zalewska of the University of Bath
Reform of Italian Water Services Tariffs Calculations Report By Dr. Francesco Lo Passo and Maria Mocella with former NERA Senior Consultant Giordano Colarullo
Estimating Opex and Capex Efficiency: A Final Report for Water UK Report By Dr. Bill Baker and James Grayburn, et al.
The General Efficiency Assumption: Setting X in RPI-X, A Report for Water UK Report By Dr. Bill Baker, former NERA Senior Consultant Brian Williamson, and former NERA Analyst Helen Lay Jung
Title Date Type
NERA Economic Consulting Opens Office in Miami, Florida 14 November 2017 Press Release