Tariff adjustment frameworks for privately financed infrastructure projects

Sudong Ye and Robert Tiong

Construction Management and Economics, 2003, vol. 21, issue 4, 409-419

Abstract: Since privately financed infrastructure (PFI) projects are usually natural monopolies, their tariffs should be regulated to ensure socially desirable outcomes. In reality, the regulation is usually realized through tariff adjustment mechanisms. There are four basic tariff adjustment frameworks for PFI projects - adjustment based on sale price, revenue, operating income and profit after tax. They have different risk exposures and incentives. The adjustment based on the sale price provides the project company with the highest potential to increase profit but exposes it to the highest risk, while the adjustment based on the guaranteed ROR exposes the project company to the lowest risk but provides the least potential for increasing profit. Adjustments based on the revenue or the operating income are somewhere in between. In practice, a hybrid of two or more adjustment frameworks may be adopted to adapt to specific project environments. A well-designed tariff adjustment framework can create a 'win-win' solution for both the public and private sectors.

Keywords: Regulation; Tariff Adjustment Framework; Privately Financed Infrastructure; Bot; Risk Management (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/0144619032000073550 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:conmgt:v:21:y:2003:i:4:p:409-419

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RCME20

DOI: 10.1080/0144619032000073550

Access Statistics for this article

Construction Management and Economics is currently edited by Will Hughes

More articles in Construction Management and Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().