By Dow Jones Business News,
February 17, 2014, 02:29:00 AM EDT
LONDON-- The U.K. electricity and gas regulator Ofgem Monday published guidance which it says will reduce the assumed
cost of equity and cost of capital for electricity distribution companies.
-Proposed changes will lower assumed cost of equity to 6% resulting in an assumed cost of capital of 3.8% for five
electricity distribution companies in 2015-16, with further falls projected in subsequent years
-Western Power Distribution, which was proposed for fast-tracking in November, will need to lower its assumed cost of
equity and therefore its cost of capital if it is to remain in the fast- track process
-In November, Ofgem assessed the business plans from all six distribution companies and sent five of these plans back
as we considered that they could deliver more value for consumers.
-As these companies are yet to resubmit their plans, a decision cannot be finalized at this stage.
-Western Power Distribution was the only electricity distribution company deemed suitable to be considered for fast-
tracking, as its plans demonstrated clear value for consumers.
-Monday's decision means that to stay in the fast-track process, WPD will need to make an equivalent reduction in its
assumed cost of equity to 6.4% resulting in an overall cost of capital estimated at 3.9% for 2015-16.
-WPD now has to decide whether to accept these adjustments.
-If it does not, it will revert to the slow-track process and resubmit plans in March, along with the other five
-Write to Rory Gallivan at email@example.com; Twitter: @RoryGallivan
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