Advisory Services on Cost of Debt Approaches for PR19 and H7

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The Water Services Regulation Authority awarded a contract to Cambridge Economic Policy Associates for advisory services to undertake a fundamental review of potential approaches to setting the cost of debt for PR19 and H7.

The work involved assessing alternative approaches such as fixed cost of debt, indexation methodologies, and risk-sharing mechanisms, drawing on market evidence and considering the relative merits for customers and investors.

The contractor analyzed who bears the risk under different approaches, how financial outperformance could be shared, and the principles for determining the appropriate approach, including implications for longer price controls or significant changes in regulated asset size.

The contract value was AUD 126,990.