Refinancing under yardstick regulation with investment cycles - the case of long-lived electricity network assets

Schober, Dominik ; Weber, Christoph

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URN: urn:nbn:de:bsz:180-madoc-398152
Document Type: Working paper
Year of publication: 2015
The title of a journal, publication series: ZEW Discussion Papers
Volume: 15-065
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: L51 , L52,
Keywords (English): Yardstick regulation , infrastructure investment , capital-recovery , sustainable , refinancing , electricity distribution
Abstract: In the context of yardstick regulation with long-lived assets, the influence of heterogeneous investment cycles on the ability to recover capital is found to be important. The application of efficient firm standards based on historic (straight-line) depreciation given heterogeneous investment and cost cycles will cause instantaneous yardstick levels below the long-run refinancing level. The efficient firm standard will prevent capital recovery in later periods. An illustrating example from electricity distribution illustrates the relevance of the problem. Finally, two alternatives, branch average cost yardstick determination and correction factors based on the share of capital under depreciation, are discussed.

Das Dokument wird vom Publikationsserver der Universitätsbibliothek Mannheim bereitgestellt.

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