HELM TALKS: Regulating Utilities and Infrastructure

A lecture series on Regulating Utilities and Infrastructure

Course outline & topics:

  • The Economics of Utilities
  • Regulatory Models
  • The Cost of Capital
  • The Regulated Asset Base
  • CAPEX
  • OPEX
  • Financial Ring Fencing, Licences and Special Administration
  • The Regulators’ Divergent Paths

Lecture one: The Economics of Utilities

Download lecture one slides

  • Time inconsistency
  • Natural monopoly
  • Market power
  • Externalities
  • Government failures

Lecture two: Regulatory Models

Download lecture two slides

  • The regulatory licence vs. Contracts
  • Rate of return regulation
  • Price caps & RPI-X
  • State and municipal ownership
  • System operator models without periodic reviews

Lecture three: The Cost of Capital

Download lecture three slides

  • The price of time and the risk free rate
  • The price of risk
  • The stages of risk – development, securitisation
  • The WACC and its incentive problem
  • Dividend growth model
  • The uplift cost of capital
  • Indexation

Lecture four: The Regulated Asset Base

Download lecture four slides

  • Solutions to time inconsistency
  • Risk-free RABs
  • The initial stakes & customers equity
  • RAB revision rules
  • Depreciation, CCA accounting & capital maintenance

Lecture five: CAPEX

Download lecture five slides

  • The incentive problem
  • Changes in exogenous circumstances
  • Risk in delivery
  • Revision rules, updating and new requirements
  • Competitive bidding
  • System evaluation

Lecture six: OPEX

Download lecture six slides

  • Defining OPEX
  • Comparative efficiency measures and yardstock competition
  • Comfortable costs & the licence functions

Lecture seven: Financial Ring Fencing, Licences and Special Administration

Download lecture seven slides

  • The duty to finance functions
  • Treatment of exogenous shocks
  • Gearing rules
  • Special administration & selling on licences

Lecture eight: The Regulators’ Divergent Paths

Download lecture eight slides

  • Water
  • Electricity & gas
  • Rail
  • Communities