‘When it comes to regulatory strategy, we work closely with clients at every stage of the price control process.’
In this Q&A, Oxera economic experts discuss the success stories and key issues our clients face in regulatory reviews.
What key issues do our clients face?
Dr Leonardo Mautino The business plan submission is often the most important part of a price review for our clients. By getting this right, they gain the trust of the regulator and avoid the worst regulatory outcomes.
Dr Luis Correia da Silva A successful price review is about persuasion. It requires a good grasp of the regulator’s agenda and objectives, and technical mastery of how the regulated business is run.
LM Clients are asking detailed questions like ‘How do you assess the economic and financial sustainability of tariffs?’ and ‘What’s the role of regulation in the transition to competition?’ while looking into the bigger picture of how a business plan can be improved.
What are the main client groups we work with?
LM We interact with many parts of a business, including operations and finance departments. This helps us to understand and work on asset valuation, cost allocation, and risk analysis. We also assess pricing proposals in regulated markets for legal teams.
LCdS Sometimes we work directly with regulators as clients, from their senior directors in charge of price reviews to their chief economist. We work with both sectoral regulators and regulatory appeal bodies, like the Competition and Markets Authority in the UK or the ACM in the Netherlands.
LM Intermediaries such as investors and lawyers often contact us for advice on the process. The work we did recently for a European airport was facilitated by one of the investment funds that owns part of the airport.
What are our clients’ most pressing needs?
LCdS We support regulators and companies in developing and assessing regulatory incentives to encourage efficiency, service quality, innovation, and investment.
LM Strategic and detailed economics-based efficiency advice is essential.
LCdS When it comes to regulatory strategy, we work closely with clients at every stage of the price control process. They need help throughout, from submissions before initial decisions to evidence for final decisions.
What are the most valuable benefits we provide our clients?
LM Achieving a good regulatory settlement that’s consistent with the company business objectives. For example, influencing the allowed cost of capital by demonstrating the company is efficient compared with its peers.
LCdS We help guarantee a good regulatory outcome by putting together consistent business plans supported by robust economic analysis.
LM We’ve helped clients understand the strengths and weaknesses of different arguments so the regulator trusts what the client is saying.