Training Module on Electricity Market Regulation - SESSION 4

Session 4: Revenue requirements and Regulatory Asset Base

The allowed revenue for provision of regulated services includes the operating cost, depreciation and return on regulated assets. The return, if calculated as the allowed rate of return (cost of capital) is charged on the regulatory asset base. This session explains how to the regulated revenue is set and the role of regulatory asset base (RAB).

· Revenue components : Depreciation / Return on assets (Regulatory asset base (RAB) - Rate of return on assets) / OPEX

· RAB : Existing assets / New investments / Capital contributions / Rolling forward

· Asset valuation : Historic cost / Replacement cost / Optimised replacement cost / Deprival value