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Learn key principles & regulations in asset valuation and cost allocation for utility tariffs. Understand the treatment of O&M costs & activities outside the utility. Explore how costs are allocated for regulated & non-regulated activities. Predict supply cost volatility.
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Georgian National Energy and Water Regulatory CommissionGNERC Bucharest Workshop 18-20 May, 2008
Valuation of AssetsBasic Principle – Original Cost Less Accumulated Depreciation • Privatisation of Distribution Networks and six HPPs (2007). Cost of assests was equal to that of under original cost less accumulated depreciation • Assets used in non-regulated activities are not considered in tariff calculations
Treatment of O&M CostsActivities Provided Outside the Utility • Only the costs that are necessary to carry out regulated activities are treated in tariffs • Costs should incurr at reasonable (acceptable) prices
Allocation of Costs Between Regulated and Non-regulated Activities • List of costs related to regulated activities is defined in the methodology of setting tariffs • According to The Law the Licensees are required to keep separate accounting of costs and revenues for regulated and non-regulated actitivies.
Disallowable Costs in Setting Tariffs • Only the costs necessary for carrying out regulated activities are subject to inclusion in tariff calculation • All other costs remain as disallowable
New Construction Investors start to recovery the costs for new constructions only after the plant is put into service • Supply Cost Different sources of supply bear different costs High volatility is forcastable to some extent
