An Introduction to Financial and Economic Modeling for Utility Regulators
Keywords
REGULATORY ENVIRONMENTSUTILITIES
INCOME LEVELS
SAVINGS
LABOR MARKETS
MARGINAL COST
EXCHANGE RATES ACCOUNTABILITY
ACCOUNTABILITY
PUBLIC ENTERPRISES
MANDATES
CONSUMERS
PRODUCTIVITY
ECONOMIC MODELS
ECONOMIC EFFECTS
BALANCE SHEET
TAX SYSTEMS
INVESTMENTS
REGULATION
DEBT
POLICY INSTRUMENTS
COLLUSION
WILLINGNESS TO PAY
RISK PREMIUM
ACCOUNTING SYSTEMS
DEBT COVERAGE
PRIVATIZATION
TARIFFS
PUBLIC SERVICE
QUALITY
LONG RUN MARGINAL COST PRICING
CASH FLOWS
BASKET OF GOODS
TAX
EXCHANGE RATE
OPERATING COSTS
EQUILIBRIUM
CD
SHADOW PRICES
REGULATORY REGIMES
DECISION MAKING
EMPLOYMENT
PROFIT RATE
PROFITABILITY
CROSS SUBSIDIES
MONOPOLIES
PUBLIC HEARINGS
FORECASTS
RESOURCE ALLOCATION
LICENSES
PUBLIC UTILITY REGULATION
WHOLESALE PRICE INDEX
COST MINIMIZATION
ELECTRICITY
CONTRACTUAL ARRANGEMENTS
MACROECONOMIC CONDITIONS
PRICE LEVELS
COST OF CAPITAL
BENCHMARKS
FINANCIAL MARKETS
DEBT SERVICE
PRIVATE SECTOR
FINANCIAL STRUCTURE
ALLOCATIVE EFFICIENCY
GDP
SALES OF ASSETS
SOFT BUDGET CONSTRAINTS
AVERAGE COSTS
ASSET VALUATION
CONTRACT ENFORCEMENT
INCOME
TRANSPARENCY
LEGISLATION
SUBSIDIES
OPPORTUNITY COST
DEPRECIATION
EXCHANGE RATES
PRESENT VALUE
MARKET PRICES
BORROWING
PROVISION OF INFRASTRUCTURE
TOTAL COSTS
MARGINAL COST PRICING
INFLATION
REGULATORY FRAMEWORK
RATE OF RETURN
ACCOUNTING
PRICE DISCRIMINATION
BENCHMARKING
DECISION VARIABLES
EXTERNALITIES
CASH FLOW
TELECOMMUNICATIONS
QUALITY STANDARDS
CONSUMPTION LEVELS
CREDIT MARKETS
PRODUCT MARKETS
FINANCIAL PERFORMANCE
MARGINAL COSTS
DEVALUATION
PUBLIC SERVICES
PUBLIC SECTOR
PRICE CONTROLS
REGULATORY OBJECTIVES
ECONOMETRIC MODELS
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http://hdl.handle.net/10986/18275Abstract
The most effective regulators in
 developing countries are following remarkably similar
 approaches. The main common element across "best
 practice" countries is the use of relatively simple
 quantitative models of operators' behavior and
 constraints to measure the impact of regulatory decisions on
 some key financial and economic indicators of concern to the
 operators, the users, and the government. The authors
 provide an introduction to the design and use of these
 models. They draw on lessons from international experience
 in industrial and developing countries in ordinary or
 extraordinary revisions and in the context of contract
 renegotiations. Simplifying somewhat, these models force
 regulators to recognize that, in the long run, private
 operators need to at least cover their opportunity cost of
 capital, including the various types of risks specific to
 the country, the sector, or the projects with which they are
 involved. Because these variables change over time,
 scheduled revisions are needed to allow for adjustments in
 the key determinants of the rate of return of the operator.
 These revisions are a recognition of the fact that all these
 determinants-tariffs, subsidies, quality, investments, and
 other service obligations-are interrelated and jointly
 determine the rate of return. At every revision, the rules
 of the game for the regulator are exactly the same: to
 figure out the changes in the cost of capital and to adjust
 the variables driving the rate of return to ensure that it
 continues to be consistent with the cost of capital. If they
 can draw on reasonable data, these models do everything any
 financial model would do for the day-to-day management of a
 company but take a longer term view and include an explicit
 identification of the key regulatory instruments. They can
 monitor the consistency between cash flow generated by the
 business on the one hand and debt service and operational
 expense needs on the other to address the main concerns of
 the operators. They can also account for a large number of
 key policy factors including access and affordability
 concerns for various types of consumers. They generally
 account for the sensitivity of operators and users to
 various regulatory design options.Date
2003-03Type
Publications & ResearchIdentifier
oai:openknowledge.worldbank.org:10986/18275http://hdl.handle.net/10986/18275
Copyright/License
CC BY 3.0 IGOCollections
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