Price Reviews

The regulatory process whereby new prices are established for a given number of years-often three to five. In the case of a price cap, the review will address a wide range of issues, including price baskets, price cap paths, automatic adjustments (as for inflation), productivity offsets (labeled the X-factor), quality of service, infrastructure expansion targets, and financial models. Other issues related to a mechanism’s design include a determination to use deadbands or to develop an index of service quality indicators (versus the use of individual indicators), the use of symmetric (versus asymmetric) schemes, and an identification of the types of events that should be excluded from incentive schemes. The resulting control will be specified in a price cap formula and associated rules and definitions.