The Oxera report on capital structure, prepared on behalf of Ofwat, examined the question of how high levels of gearing affect companies' cost of capital, the potential social consequences of highly leveraged utilities, and how regulators should respond in arriving at their gearing assumptions at periodic reviews. The study explored the various theories of capital structure determinants, the drivers of increased gearing in water, and the potential effects on the cost of capital for those companies pursuing the restructuring route. On balance, the study urged caution, and that, in making assumptions about the capital structure of companies, regulators should not place too much weight on recent water company restructurings.