News

 

 

19 September 2018: International comparisons of the allowed cost of capital 


John Earwaker, director at First Economics, has contributed this paper to the Australian Energy Regulator's review of its rate of return guideline.

3 September 2018: Water company business plans published 


Water companies are today publishing their business plans for 2020-25. First Economics has been working with seven of the ten water and sewerage companies and one of the water-only companies during the formation of their plans. 

25 January 2018: Privatisation 


John Earwaker, director at First Economics, has written this piece as a contribution to the debate about private vs public ownership of England's water and sewerage companies.


Announcement: Introduction to Economic Regulation, 25 and 26 October 2017, Singapore

First Economics, in partnership with The Lantau Group, will host an Introduction to Economic Regulation training course in Singapore in October. 

Details may be found here.

28 June 2017: CMA decision on Firmus Energy appeal

The Competition & Markets Authority has today published its determination of Firmus Energy's appeal against the Northern Ireland Utility Regulator's GD17 price control decision. John Earwaker was the Utility Regulator's expert witness on cost of capital and financeability.

4 May 2017: Cost of capital conference
 
John Earwaker (Director, First Economics) was one of the chairs at a regulated industries Cost of Capital Conference that took place today. The conference looked at the factors that are going to impact on the rates of return that regulators will include in future price control decisions, and involved the likes of the CAA, Ofgem, Ofwat and the NI Utility Regulator.
 
If you would like to receive a note of the key points, please email info@first-economics.com.
 
1 March 2017: Report on 'direct procurement'

A new report by John Earwaker and Dr Harry Bush on Ofwat's ideas for direct procurement - contestability for large projects in the water industry - is available here.

15 September 2016: GD17 price control decision published

The Utility Regulator has today published its final determination of new price controls for Northern Ireland's gas distribution networks. The documentation includes an expert report from First Economics on cost of capital.

7 March 2016: CAA begins H7 price review of Heathrow Airport
 
The CAA has today published a consultation document to kick off the latest review of Heathrow Airport's price control arrangements. The document is accompanied by a new report from First Economics which surveys recent regulatory innovations from across the UK's regulated sectors..

17 November 2015: First Economics report on CPI indexation
 
A new First Economics report on the possible ways of transitioning from RPI - X to CPI - X regulation has been published here.
 

2 November 2015: Study into customer and stakeholder engagement during price reviews

 
A report by John Earwaker (Director, First Economics) and Dr Harry Bush for UK Water Industry Research (UKWIR) on the options for customer and stakeholder engagement during price reviews has been published here.
 
30 September 2015: RIIO-ED1 appeals
 
The Competition & Markets Authority has published its determinations of British Gas Trading's and Northern Powergrid's appeals against Ofgem's RIIO-ED1 price control determinations for 2015-23. First Economics has been supporting UK Power Networks during this appeal.
 
25 August 2015: Commerce Commission Input Methodologies Review
 
The New Zealand Commerce Commission has published a report by Dr Harry Bush and John Earwaker (Director, First Economics) for the NZ Airports Association on the factors that should be considered when selecting a WACC percentile for regulated airports.
 
7 July 2015: Energy Market Investigation
 
The Competition & Markets Authority has today published provisional findings in its inquiry into the workings of Britain's energy retail market. One of First Economics' directors, John Earwaker, is acting as an expert adviser to the Authority in relation to financial and regulatory matters.
 
30 June 2015: Study into customer and stakeholder engagement during price reviews
 
First Economics has been appointed as the contractor for a new UK Water Industry Research (UKWIR) project on the options for customer and stakeholder engagement during price reviews. The project resume may be found here.
 
23 March 2015: RIIO-ED1 appeals
 
The Competition & Markets Authority has given British Gas Trading and Northern Powergrid permission to appeal Ofgem's RIIO-ED1 price control determinations for 2015-23. First Economics will be supporting one of the affected electricity distribution networks through this appeal.
 
12 December 2014: Ofwat PR14 final price control determinations published
 
Ofwat has today published price controls for 18 water and sewerage companies for the period 2015-20. First Economics has been supporting a number of these companies in the run-up to today's announcement, having previously contributed to the companies' original business plans.
 
10 December 2014: PC15 determination for NI Water
 
The NI Utility Regulator has today published its PC15 price control determination for NI Water. First Economics has been supporting the regulator during this review, focusing especially on efficiency assessment.
 

28 November 2014: Ofgem RIIO-ED1 final price control determinations published

Ofgem has today published final RIIO-ED1 price control determinations for the five slow-tracked electricity distribution networks. First Economics has been working closely with three of these companies in recent months, having previously supported WPD to its fast-track determination earlier this year. 

 
30 July 2014: Ofgem RIIO-ED1 draft price control determinations published
 

Ofgem has today published draft RIIO-ED1 price control determinations for the five slow-tracked electricity distribution networks. The proposals include an about-turn from Ofgem on its cost of debt index, in response to concerns that First Economics first raised more than two years ago  here

26 March 2014: Competition Commission final report in NIE price control inquiry

 

The Competition Commission has submitted its final report in the Northern Ireland Electricity price control inquiry to the Utility Regulator. First Economics has been supporting the Utility Regulator during this inquiry.

 
17 March 2014: Revised RIIO-ED1 business plans

 

The GB electricity distribution network owners have today published revised business plans for 2015-23. Most of these plans reference independent reports produced by First Economics. Please go to the  reports section on the website for more information.

 

14 February 2014: Draft UK-Ireland air navigation services performance plan

 

The CAA (UK) and IAA (Ireland) have today published proposals for the countries' air navigation services in the period 2015-19. First Economics has been giving economic and financial advice to the IAA.
 
6 January 2014: Ofgem consultation on the cost of equity

 

First Economics has contributed a report to Ofgem's consultation on the cost of equity for its RIIO-ED1 review.
 
2 December 2013: Water company business plans

 

Water companies are today publishing their business plans for 2015-20. Most of these plans reference independent reports produced by First Economics. Pleas e go to the reports section of the website for more information.
 
12 November 2013: Competition Commission provisional findings in NIE price control inquiry

 

The Competition Commission has published its provisional findings in its inquiry into NIE's price control. First Economics has been supporting the Utility Regulator during this inquiry.
 

3 October 2013: CAA price control proposals published

 

The CAA has today published final price control proposals for Heathrow and Gatwick airports from 1 April 2014. First Economics has been supporting the CAA during its review.
 

1 July 2013: RIIO-ED1 business plans

 

The six GB electricity distribution network owners have today published their business plans for 2015-23. Most of these plans reference independent reports produced by First Economics. Please go to the reports section on the website for more information.
 

10 May 2013: Report on retail cost escalation published

 

First Economics has recently been working with Water UK to assess the natural rate of change in water retail costs. The final report in this study can be accesse d here .
 
30 April 2013: Reference of NIE's price control to the Competition Commission

 

The Northern Ireland Authority for Utility Regulation has today referred Northern Ireland Electricity's price control arrangements to the Competition Commission. First Economics will be the Utility Regulator's economic adviser during the six-month inquity.
 

31 January 2013: Report on 'price monitoring' of regulated airports published

 

The CAA has today published a report by First Economics which looks at 'price monitoring' as an alternative to RAB-based regulaton of UK airports. The report can be accessed here.
 
19 April 2012: Utility Regulator publishes price control proposals for NIE

 

The Northern Ireland Utility Regulator has today published initial price control proposals for NIE. The cost of capital in these proposals is based on a report prepared by First Economics. The report is available here .
 

1 July 2011: Report on alternative approaches to efficiency assessments and economic incentives published

 

UK Water Industry Research has published a report on possible alternatives to Ofwat's methods of efficiency assessment and possible new ways of designing opex and capex incentives. The report, authored by First Economics, compares the value of econometric models to other forms of benchmarking techniques and 'bottom-up' challenges to efficiency. It also analyses Ofgem's supposedly equalised expenditure incentives and examines whether water companies ought to be exposed to similar incentives in future control periods.

1 June 2011: Sir Roy McNulty's report on value for money in the railway published

 

The DfT and ORR have today published the independent report they commissioned from Sir Roy McNulty on value for money in the GB railway. First Economics carried out a number of pieces of advisory work for the study team, covering issues such as asset ownership, Network Rail's corporate governance and possible new industry structures.

19 October 2010: CAA's price control proposals for NATS published

 

The CAA has today published its proposals for NATS' price controls for the period 2011 to 2014. First Economics has been acting as an adviser to the CAA during the review.

1 May 2010: Frontier shift

First Economics has today published a new report on the subject of frontier shift. It looks at the analysis that has been carried out since we first questioned why it was that regulators were assuming that regulated companies should be expected to go on reducing opex in real terms indefinitely. It also highlights a number of areas where we think that further work is still required.

The report can be accessed here

21 April 2010: Financeability

First Economics has today published a new report on the subject of financeability. It questions the proposition that companies which fail regulators' financeability tests should be expected to raise new equity and argues instead that NPV-neutral advancement of revenue is the most appropriate regulatory response to weak financial ratios.

The report can be accessed here

7 December 2009: Ofgem's final electricity distribution price control proposals published

Ofgem has today published its final proposals in the 2009 periodic review of electricity distribution price controls. First Economics worked with the electricity DNOs during the review, playing a central role in debates about future input price inflation and the scope for efficiency improvement.

26 November 2009: Ofwat determination of water and sewerage price controls published


Ofwat has today published its
final determination in the 2009 periodic review of water and sewerage charges. First Economics has been a key adviser to the industry during the periodic review process, working at various stages with Anglian Water, Northumbrian Water, South East Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water, as well as the industry association Water UK.

5 March 2009: Estimation of betas

The CAA has today published a report by First Economics which provides a preliminary estimate of NATS' asset beta.

The report can be found here

4 November 2008: Competition Commission inquiry report published

The UK's Competition Commission has today published its recomendations on the price control that should apply at Stansted airport. John Earwaker, Principal, First Economics, has been acting as the Commission's expert adviser on cost of capital.

The Commission's report can be found here

1 June 2008: Assessment of risk in the UK's regulated industries

The Office of Rail Regulation has today published a report by First Economics which compares the riskiness of regulated companies in the airport, electricity, gas, rail and water sectors.

The report can be accessed here

1 May 2008: Efficiency study

Water UK commissioned First Economics to advise on the rate of frontier shift affecting water industry operating expenditure. Our report is available here.

 

1 May 2008: Competition Commission price control inquiry

The UK's Competition Commission has appointed First Economics to be its expert adviser on cost of capital issues during its inquiry into price control arrangements at Stansted airport.

The Commission's inquiry homepage can be accessed here

1 February 2008: Dates for next training course announced

The next Periodic Review Training Course will be take place over two days on 14 and 20 May 2008. Designed for individuals with first-hand experience of regulation who wish to expand or refresh their skills, the course covers some of the more advanced concepts that appear in regulation and aims to equip participants with the knowledge that they require in order to engage fully in reviews affecting their organisation.

 

Further information and a course brochure can be found here.

4 October 2007: Competition Commission airport inquiry report published

The UK's Competition Commission has today published its recomendations on the price controls that should apply at Heathrow and Gatwick airports. John Earwaker, Principal, First Economics, has been acting as the Commission's expert adviser on cost of capital.

The Commission's report can be found here

22 May 2007: Competition Commission/University of Exeter cost of capital conference

John Earwaker, Principal, First Economics, spoke at the Competition Commission/University of Exeter cost of capital conference on 7/8 June 2007. His presentation examined the proposition that regulators should index the allowed rate of return in line with the prevailing risk-free rate/cost of debt.

More information about the conference can be found here

30 April 2007: New report on efficiency and 'frontier shift'

 

First Economics has produced a new report on the rate of 'frontier shift' affecting regulated companies' costs. It argues that regulators are wrong to expect companies to go on reducing operating expenditure in real terms indefinitely, and suggests instead that it is a sufficient challenge to ask companies privatised in the 1980s and early 1990s to hold their costs in line with RPI.

The report can be found on Ofgem's website and here

8 February 2007: Water UK 2007 City Conference

 

John Earwaker, Principal, First Economics spoke at the 7th annual Water UK City Conference in a session entitled 'A cross-sector view - lessons from other utilities'.

Further details of this event can be found here

15 November 2006: Economic Regulation Forum

 

First Economics has launched a new group for Regulation Managers/Directors from across the regulated sectors. Every quarter the group examines the latest developments from the periodic reviews taking place in the aviation, energy, transport and water sectors, helping participants to identify and deal with the key emerging issues.

If you are interested in participating in these sessions, further details can be found here

31 August 2006: Dates for training course announced

The next Advanced Utility Regulation training course will be take place over two days on 22 and 30 November 2006. Designed for individuals with first-hand experience of regulation who wish to expand or refresh their skills, the course covers some of the more advanced concepts that appear in regulation and aims to equip participants with the knowledge that they require in order to engage fully in reviews affecting their organisation.

Further information and a course brochure can be found here

1 May 2006: Further thoughts on financeability

 

On 27 April 2006, John Earwaker, Principal, helped to facilitate the discussion at the joint Ofgem/Ofwat 'Financing Networks' seminar. We have also prduced a short briefing note highlighting what we consider to be the key issue in the debate about financeability: the fact that regulators allow companies a real return on the RAB at a time when most businesses pay interest in nominal terms to their lenders.

Our note can be accessed here

12 December 2005: Efficiency

 

First Economics has produced a briefing paper on the influence that changes in the drivers of inflation are having on regulated companies' ability to meet efficiency targets.

The paper shows that a sharp slowdown since 1999 in the rate of inflation affecting goods such as food, clothing and motor vehicles has helped maintain RPI-measured inflation at 2.5% despite an acceleration in inflation across the rest of the economy. We argue that it is now more difficult for companies to hold opex in real terms and suggest that the productivity improvements that must be delivered in order to meet regulators' targets might have increased.

The full paper can be accessed here.

7 December 2005: Postcomm publishes final proposals for Royal Mail's price control

 

The UK's Postal Services Commission has published its final proposals for the price control that will apply to Royal Mail from April 2006. John Earwaker, Principal Consultant at First Economics, has been acting as an adviser to Postcomm on issues relating to quality of service, efficiency and cost of capital.

The consultation document can be found here

24 August 2005: Dates for training course announced

 

The next Advanced Utility Regulation training course will be take place in November/December 2005. Designed for individuals with first-hand experience of regulation who wish to expand or refresh their skills, the course covers some of the more advanced concepts that appear in regulation and aims to equip participants with the knowledge that they require in order to engage fully in reviews affecting their organisation.

Further information and a course brochure can be found here

1 June 2005: Postcomm publishes initial proposals for Royal Mail's price control

 

The UK's Postal Services Commission has published its initial proposals for the price control that will apply to Royal Mail from April 2006. John Earwaker, Principal Consultant at First Economics, is acting as an adviser to Postcomm on issues relating to quality of service and efficiency.

The consultation document can be found here

24 May 2005: The CAA publishes firm proposals for NATS' price control

 

The UK's Civil Aviation Authority has published its firm proposals for the price control that will apply to National Air Traffic Services from 2006. First Economics has acted as an adviser to the CAA throughout the course of the review.

The proposals document can be found here

4 April 2005: Financeability

 

First Economics has produced a briefing paper on what we see as the key issue in regulation today: financeability.

The paper examines why regulators across the UK utility sector have been discovering that the conventional 'building block' model of price setting does not always make regulated companies financeable in the perception of investors and rating agencies - and why allowing firms returns in excess of the cost of capital may not necessarily be the best way to deal with the problem.

The full paper can be accessed here

6 January 2005: The 2004 Water and Electricity Distribution Periodic Reviews - Issues and Implications

 

First Economics has produced a new report looking at the main themes and issues emerging from the recent determinations by Ofwat and Ofgem.

The report provides a comprehensive summary of the main building blocks within the two regulators' final conclusions and assesses how far there is consistency in the two methodologies. It is written specifically for individuals who wish to understand fully the decisions that the regulators have reached -- and particularly the precedents that these decisions set for future reviews -- but who require only a concise overview of the key points and expert analysis of the implications.

Further details and an order form can be downloaded here