• Purpose and format of course
• Welcome and introductions

• Why regulate utilities?
• Role of independent regulators
• Rate of return versus RPI-X regulation
• Periodic reviews and appeal mechanisms

• Operating expenditure (opex), capital expenditure (capex), regulatory asset value (RAV) / regulatory capital value (RCV), depreciation, and weighted average cost of capital (WACC)
• How price controlled revenues are calculated from the building blocks
• Profiling of revenue (P0 and X factor)

In this session attendees will break out into smaller groups to practice building up price controlled revenues from the building blocks using Excel models. Doing the calculations with the illustrative data provided will help attendees to cement their understanding of how the process works.

• Collecting information – regulatory accounts and business plan questionnaires
• Assessing case for proposed capital expenditure
• Bottom-up and top-down assessment of cost efficiency
• Overview of econometric approaches (for non-specialist)
• Catch-up and frontier shift

Breaking into small groups, delegates will perform an interactive case study, with each group focusing on a different perspective. For example:

• Company perspective – putting the case for opex and capex proposals
• Regulator perspective – assessing what costs should be allowed
• Customer perspective – advocacy on behalf of customers

• Each break-out group to present back to overall group
• Different perspectives compared / debated
• Share and discuss the key lessons to take away from each break-out group

• Brief overview of what was covered on previous day
• Introducing the key topics for Day Two

• Definition and role of cost of capital
• Types of risk and the Capital Asset Pricing Model (CAPM)
• Cost of equity: risk free rate, equity beta and equity risk premium
• Cost of debt: risk free rate and debt premium
• Gearing and taxes
• Financeability

Breaking into small groups, delegates will be given an interactive case study involving  tasks that consider different aspects of the WACC and financeability. Topics include:

• Risk free rate
• Equity beta
• Equity risk premium
• Debt premium
• Gearing and financeability

• Each break-out group to present back to overall group

Share and discuss the key lessons to take away from each break-out group

• Valuing the asset base
• Depreciation policy and asset lives

• Rolling opex and capex efficiency incentives
• Incentives for quality of service
• Incentives for submission of appropriate capex plan

Breaking into small groups, delegates will be given an interactive case study with each group focusing on a specific perspective. For example:

• Company perspective – seeking rewards and minimising financial exposure
• Regulator perspective – balancing statutory duties
• Customer perspective – taking account of customer preferences

• Each break-out group to present back to overall group
• Different perspectives compared / debated
• Share and discuss the key lessons to take away from each break-out group

• Brief summary of what has been learned during course
• Final opportunity to ask questions