Risk – Related Regulatory Investment Incentives for Projects of Energy Community Interest, Recommendation Paper April 2015AEL Updates May 2015Posted by Adv. Lorenc Gordani, PhD Sat, July 25, 2015 08:56:26
It is widely recognized that the general “financial climate” for energy networks infrastructure projects, i.e. their financial viability, is significantly influenced by the applicable regulatory framework. Being subject of price regulation, electricity and natural gas transmission companies reimburse their capital and operational expenditures based on pricing mechanisms (price controls) developed by the NRA.
Normally, well-designed price controls should ensure recovery of all prudently incurred costs, including investment projects costs, taking into consideration at least the average systematic risk of the TSO’s investment portfolio via the regulator’s estimate of the cost of capital (more precisely, equity risk premium, usually using firm’s beta23), but also other risks depending on the features of the applied model of price regulation.
ECRB recognizes that the PECI promoters may be exposed to additional non-controllable risks that were not observed or accounted for by the NRA while setting the price controls, and that such risks may adversely influence both the project promoter’s decision to invest and the lenders perception of the bankability of the project.
For more find the below document.