Electricity Distribution Price Control Review - Background information on the cost of capital

Publication date
23rd March 2004
Policy area

Ofgem's estimated range for the real pre-tax cost of capital for the next price control period (2005-2010), based on the latest available data, is 4.3%-7.2%, compared with a range of 6%-6.9% at the last price control review. Ofgem proposes to adopt a Vanilla WACC (i.e. WACC without a tax adjustment) in the range of 5.1%-5.9% for the financial modelling for this price control (allowances for tax will be made separately). This isequivalent to a real pre-tax cost of capital in the range of 6% - 7.2%.