Cost of Capital Methodology Review 2012-14
The QCA determines a cost of capital to apply to the regulated firms under its jurisdiction.
The QCA previously undertook a review of its cost of capital methodology in 2003-04. That review was undertaken by Associate Professor Martin Lally, and a copy of Dr Lally's paper can be downloaded from the Cost of Capital Methodology page.
Since that time, there have been new developments in relevant research and changes in conditions in financial markets. Accordingly, the QCA is undertaking a comprehensive review of its current cost of capital methodology.
This review (2012-14) is being undertaken in stages, with the QCA researching and preparing discussion papers on various topics relevant to determining the cost of capital. The QCA will publish these discussion papers on its web site for public comment. These papers, in conjunction with stakeholders' submissions on them, will inform the QCA's position on a particular topic.
On 25 October 2013, the QCA released three cost of capital related papers on these topics: risk-free rate and the market risk premium; cost of debt; and on gamma. On 26 November 2013, the QCA released a second paper on gamma. Additional work on other cost of capital related issues is in progress.
Comments on these papers are due by 20 January 2014. To assist in the preparation of those comments, the QCA will hold a forum on 13 December 2013. Further details on the forum will be provided closer to that time.
Queensland Competition Authority
GPO Box 2257
Brisbane QLD 4001
Fax: 07 3222 0599
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