August 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.
As the latest addition to the Toolkit, the Primer on the Impact and Treatment of Grants, Donor Assistance, and Concessional Financing is designed as a resource to increase knowledge and equip decision makers with an understanding of the importance and impact of donor-financed assets on the tariff setting process in emerging economies. The Primer also provides key criteria that regulators can use to determine their best individual solution when choosing concessional finance products and offers examples of how utility regulators in countries with emerging markets have treated donor-financed assets in tariff setting.
It is divided into the following key sections:
Section 1 provides an overview of concessional financing, including definitions and key issues.
Section 2 explores the effect of concessional financing on rate design.
Section 3 identifies key criteria that regulators can use to determine a “best fit” solution when selecting concessional finance products.
Section 4 provides examples from five countries with emerging economies and how they have treated donor-financed assets in tariff setting.
Section 5 compares and analyzes the case studies to draw out key takeaways.
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.
This primer 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.
This primer is designed to help utility regulators around the world understand the primary drivers of electricity tariffs based on the revenue requirement concept, with a specific focus on the expenses that are incorporated into revenue requirements. These components are primary drivers of effective cost-based ratemaking and developing cost-reflective tariffs.
This primer is designed to assist energy regulators working in emerging economies with building their understanding and knowledge of key concepts related to depreciation. It presents key factors affecting allowed depreciation costs as well as alternative approaches and regulatory considerations when determining allowed depreciation in the context of cost-reflective tariffs for regulated entities operating in monopolistic market segments (e.g. network companies).
To further the Toolkit, NARUC is currently preparing an additional primer on the following topic:
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