Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119312
Authors: 
Schober, Dominik
Weber, Christoph
Year of Publication: 
2015
Series/Report no.: 
ZEW Discussion Papers 15-065
Abstract: 
In the context of yardstick regulation with long-lived assets, the influence of heterogeneous investment cycles on the ability to recover capital is found to be important. The application of efficient firm standards based on historic (straight-line) depreciation given heterogeneous investment and cost cycles will cause instantaneous yardstick levels below the long-run refinancing level. The efficient firm standard will prevent capital recovery in later periods. An illustrating example from electricity distribution illustrates the relevance of the problem. Finally, two alternatives, branch average cost yardstick determination and correction factors based on the share of capital under depreciation, are discussed.
Subjects: 
yardstick regulation
infrastructure investment
capital-recovery
sustainable refinancing
electricity distribution
JEL: 
L51
L52
Document Type: 
Working Paper

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