Economic and Technical Issues in the Assessment of the Regulatory WACC for Utilities

Alberto Dell'Acqua

No 17, GREEN Working Papers from GREEN, Centre for Research on Geography, Resources, Environment, Energy & Networks, Universita' Bocconi, Milano, Italy

Abstract: In this discussion paper I review and discuss the main economic and technical issues affecting the Regulatory WACC assessment in the sector of regulated utilities. I focus on three main compelling issues (the estimation of the risk-free rate, the treatment of risky debt, the calculation of the equity risk premium), for which I analyse the proposed approach of the Italian Regulatory Authority for Energy, Networks and Environment (ARERA) and some alternative viewpoints that can fulfil the current debate. Moreover, I also analyse some minor technical issues relating the consideration of a small size risk premium in the cost of capital estimation and the optimal investment level.

Pages: 11
Date: 2021
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