Tariff Toolkit: Primer on Rate Design for Cost-Reflective Tariffs

January 2021 – With the support of the United States Agency for International Development (USAID) Energy Division, Center for Environment, Energy, and Infrastructure, Bureau for Development, Democracy, and Innovation (DDI), the National Association of Regulatory Utility Commissioners (NARUC) is working on the development of a Cost-Reflective Tariff Toolkit consisting of primers developed specifically to support electricity regulators in emerging markets.

The latest addition to the Toolkit, the "Primer on Rate Design for Cost-Reflective Tariffs," is a resource for electricity regulators and utilities outlining the fundamental principles of cost-reflective rate design and describing key rate design processes. Additionally, it offers regulators and utilities a practical guide for adopting, reviewing, and assessing rate structures based on core principles, international case studies, and widely accepted practices.

It is divided into four key sections:

  • Section 1: Provides an overview of the principles of rate design
  • Section 2: Explores key concepts and processes associated with rate design
  • Section 3: Discusses common rate structures and their various pros and cons
  • Section 4: Explores several issues in rate design that often arise in emerging markets

Access the primer here.

Additional primers from the Tariff Toolkit include:

This Primer focuses on developing a set of recommendations that regulators in countries with emerging economies may want to consider when designing a communications strategy, particularly with regard to engaging the public and key stakeholders during a pending tariff change.

This Primer is a guide to the structure and function of a system of accounts that regulated utilities can use to ensure they are accurately recording and categorizing financial transactions and presenting coherent data to the regulator.

This Primer is a guide to helping utility regulators around the world understand the capital markets and estimate the cost of capital, which is one of the elements of effective cost-based ratemaking and developing cost-reflective tariffs.

Upcoming Primers

To further the Toolkit, NARUC is currently preparing additional primers on the following topics:

  • Depreciation
  • Primary Drivers of Electricity Tariffs
  • The Impact of Electricity Tariff Reforms on Infrastructure Investment and Economic Development
  • Impact and Treatment of Grants, Donor Assistance and Concessional Financing


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