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
Richard Druce Senior Managing Director London +44 20 7659 8540 richard.druce@nera.com
Dr. Richard Hern Senior Managing Director London
+44 20 7659 8582
+49 30 700 1506 01
James Grayburn Director London +44 20 7659 8572 james.grayburn@nera.com
Dr. Hethie Parmesano Affiliated Consultant Los Angeles +1 213 346 3000 hethie.parmesano.affiliate@nera.com
Title Type Author
Using Price Signals to Better Manage Water Use Published Article Kevin Counsell
Response to Ofwat’s Cost of Debt Consultation for PR19 Report James Grayburn, Zuzana Janeckova, et al.
Incorporating Marginal Costs in Water Supply Tariffs: Prospects for Change Working Paper George Anstey, et al.
Economics in Environmental Decision-Making: US Environmental Protection Agency Provid... Working Paper Dr. David Harrison, Jr. et al.
A Cross-Sector and Cross-Country Review of Approaches to Transitioning to Markets Report Kevin Counsell, et. al.
Setting Efficient Tariffs for Wastewater Infrastructure Published Article George Anstey
Reform of Italian Water Services Tariffs Calculations Report By Dr. Francesco Lo Passo and Maria Mocella with former NERA Senior Consultant Giordano Colarullo
Title Date Type
NERA Economic Consulting Opens Office in Milan, Italy 19 November 2019 Press Release