Tariff Toolkit: Primer on the Impact of Electricity Tariff Reform on Infrastructure Development and Economic Development

January 2022 – 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) has developed a Cost-Reflective Tariff Toolkit consisting of primers developed specifically to support electricity regulators in emerging markets.

As the final addition to the Toolkit, the Primer on the Impact of Electricity Tariff Reform on Infrastructure Development and Economic Development discusses the impact of electricity tariff reforms on a country’s economic development. The implementation of cost-reflective tariffs, based on sound economic principles, ensures that the appropriate incentives are in place for attracting investments in the sector, as well as for safeguarding the financial viability of the electricity sector.

It is divided into the following key sections:

Section 2: Electricity and economic development
Section 3: The benefits of cost–reflective pricing
Section 4: Transition toward cost reflectivity
Section 5: Recommendations for tariff reforms
Section 6: Final remarks

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).

This primer 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.


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