Methodology for the Regulatory Deflation of the Weighted Average Cost of Capital (WACC) in Electricity Markets

[摘要] This paper presents a methodology for deflating the weighted average cost of capital (WACC) in which the WACC components (cost of equity and cost of debt) are first individually deflated and after that they are combined to obtain the deflated WACC. This approach reverses the ordering used by the Brazilian Electricity Regulatory Agency (ANEEL), who first combines and then deflates the resulting WACC. It is contended that the proposed methodology is the right one, on the ground that WACC is a virtual rate without direct connection with the effective practice. It is presented as an example of application of both criteria using the real data of a power distribution company and comparing their respective impacts on the economic value added. The obtained difference, albeit small at first sight, would lead to financial discrepancies which justify the use of the new proposal...

[学科分类] 自动化工程

[关键词] Electricity market regulation ;Value-based management  ;Weighted average cost of capital ;Electrical energy distribution