Competition and regulation update — WACC: a new world order?

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The Australian Energy Regulator (AER) on Friday released its Draft rate of return guideline, August 2013 (AER Draft Guideline). The AER Draft Guideline sets out the methodologies, models and other material that the AER proposes to use in estimating the rate of return for regulated energy network businesses, in light of recent changes to the rate of return regulatory framework.

The approach adopted by the AER is likely to have a much broader impact than just on energy network regulation, with potential implications for the pricing of regulated and unregulated infrastructure such as communications networks, gas pipelines, water pipelines, airports, rail lines and ports.

This update highlights key changes in the AER’s approach to determining the rate of return as proposed in the AER Draft Guideline and considers the AER’s proposed approach against the background of the current legal framework…

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