Cost of Capital

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The cost of capital is the financial return investors require from an investment given its risk. The input methodologies require the Commission to publish estimates of the cost of capital at regular intervals for each type of service. Estimates of the cost of capital for information disclosure purposes are determined annually.   Estimates of the cost of capital for price-quality regulation are used in setting prices so they are determined before each new regulatory period.

Prior to the Commerce Amendment Act being passed in 2008, the Commission was developing generic Cost of Capital Guidelines to apply across all services it regulates. The purpose of the Guidelines was to ensure that the cost of capital will be estimated in a predictable way across a wide spectrum of regulatory functions over time.   Work done in developing the draft Cost of Capital Guidelines was used in determining the input methodologies.  

On this page you can find:

• Commission consultation documents and submissions relating to the draft Cost of Capital Guidelines;
• Commission papers and submissions relating to the cost of capital workshop held in November 2009;
• Expert reports on the cost of capital obtained by the Commission as part of the input methodologies process;
• The cost of capital sections of the Input Methodologies (Electricity Distribution and Gas Pipeline Services) Reasons Paper and Input Methodologies (Airport Services) Reasons Paper;
• Determinations of the cost of capital made in accordance with the input methodologies determinations.

Other consultation documents and submissions relating to the cost of capital for input methodologies can be located on the input methodologies page.