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Regulatory Risk and the Cost of Capital

Determinants and Implications for Rate Regulation

  • Burkhard Pedell

About this book

Introduction

Austrian Controller Award 2005

This book develops a comprehensive concept of regulatory risk integrating existing theoretical and empirical research. The focus is on explaining how the design of the regulatory system influences the risk of a rate-regulated firm, as well as on elaborating appropriate methods for the determination of the regulatory rate base and the allowed rate of return. Regarding the regulatory rate base, the question of whether market value of capital or book value of assets should be employed and the choice of the depreciation scheme are at the center of the discussion. Specific methodical issues concerning cost of capital assessment for rate-regulated firms are analyzed, i.e. the circularity of rate regulation, the sharing of risks between capital owners and rate payers, the length of the regulatory review period, the regulation of the capital structure as well as the conversion of a post-tax to pre-tax weighted average cost of capital.

Keywords

Controller accounting cost of capital regulation risk utilities

Authors and affiliations

  • Burkhard Pedell
    • 1
  1. 1.Betriebswirtschaftliches Institut, Abteilung V — Lehrstuhl ControllingUniversity of StuttgartStuttgartGermany

Bibliographic information

  • DOI https://doi.org/10.1007/3-540-30802-4
  • Copyright Information Springer Berlin · Heidelberg 2006
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-540-30801-0
  • Online ISBN 978-3-540-30802-7
  • Buy this book on publisher's site