Cost of Capital/Return on Equity/Rate of Return At A Glance

Capabilities and Services

Prices in regulated industries rely upon costs, which include the cost of capital as a core component. NERA has been at the forefront of issues concerning the cost of capital for regulated industries for over 40 years -- ever since Alfred Kahn devoted an Appendix in his great work, The Economics of Regulation, to NERA's Herman Roseman's cost of capital work in the 1960s.

The utility businesses have changed drastically over those 40 years, in structure, ownership, pricing, and competitiveness. Throughout all of these changes, regulation has continued to play a key role in the protection of consumers who buy from the remaining "natural" monopolies -- local distribution in gas and water, transmission and distribution in electricity, and local service in telecommunications. For these regulated businesses around the world, the cost of capital remains an enduring issue -- the base of regulated prices and a continuing subject of debate, concern, and empirical investigation -- in which NERA continues to play a key part.