Resetting Price Controls for Privatized Utilities : A Manual for Regulators

by Green, Richard; Pardina, Martin Rodriguez

• ISBN13: 9780821343388
• ISBN10: 0821343386
• Format: Paperback
• Copyright: 1999-04-01
• Publisher: World Bank

Summary

"The aim of regulation is to protect consumers, while ensuring that the company remains viable and has an incentive to operate efficiently."In many developing countries private companies are replacing government agencies as owners and operators of infrastructure services. Governments must now develop new skills in economic regulation of these private providers to protect consumer interests, while also ensuring that the companies remain economically and financially sound and have incentives to operate efficiently. This manual provides new economic regulators with practical guidance on how to proceed in this fairly technical new field.Chapters cover:- Revising Price Controls- Procedures for Resetting a Price Control- Present Value Calculations- Investment and the Regulatory Asset Base- The Rate of Return- The Philosophy of Price Controls- The Form of a Price Control- Operating Costs- Revenues

Table of Contents

Foreword	v
Acknowledgments	vii
Introduction and Summary: Revising Price Controls	1	(4)
The Philosophy of Price Controls	5	(10)
Rate of Return Regulation	7	(1)
RPI-X Regulation	8	(4)
Profit-Sharing Regulation	12	(3)
Procedures for Resetting a Price Control	15	(12)
Information Gathering	15	(3)
Analysis and Decisionmaking	18	(1)
Announcement	19	(4)
Implementation	23	(3)
Possible Timetables	26	(1)
The Form of a Price Control	27	(20)
Price Structure	28	(2)
Price-Basket Controls	30	(1)
Revenue-Yield Controls	31	(5)
Pass-through Terms	36	(5)
The Choice of Price Index	41	(4)
Duration of the Control	45	(2)
Present Value Calculations	47	(14)
The Cost-Based Approach	48	(6)
The Value-Based Approach	54	(3)
The Path of a Price Control	57	(4)
Operating Costs	61	(8)
Cost Projections	61	(3)
Yardstick Regulation	64	(5)
Investment and the Regulatory Asset Base	69	(8)
Investment	70	(1)
The Regulatory Asset Base	71	(3)
Depreciation	74	(3)
Revenues	77	(8)
Revenue Forecasting	77	(4)
Unregulated Sales	81	(1)
Quality Standards	82	(3)
The Rate of Return	85	(14)
Taxation	85	(2)
Stock Market Measures of the Cost of Capital	87	(5)
Other Methods	92	(2)
The Cost of Capital for the Gas Industry in Argentina	94	(5)
Appendix: Taxes	99	(4)