The QCA released the Issues in the Application of Annuities information paper on 4 February 2014.
This paper illustrates various examples of the use of annuities in economic regulation. Both the annuity approach and the RAB building blocks approach can be defined to achieve the NPV=0 principle, but the resulting annual prices may be different.
The paper debunks many misconceptions associated with annuities, including the proposition that the use of annuities would lead to lower prices.
The paper also illustrates that the application of rolling annual annuities may result in under-recovery of sunk asset cost, and introduces an alternative known as the aggregated rolling annuity.