Primer on Primary Drivers of Electricity Tariffs for Utility Regulators

The latest addition to the Toolkit, the “Primer on Primary Drivers of Electricity Tariffs for Utility Regulators,” is meant to help utility regulators around the world understand the primary drivers of electricity tariffs based on the revenue requirement concept, with a specific focus on the expenses that are incorporated into revenue requirements. These components are primary drivers of effective cost-based ratemaking and developing cost-reflective tariffs.

It is divided into the following key sections:

  • Section 2 provides an electricity tariffs overview.
  • Section 3 explains the need for cost-reflective tariffs.
  • Section 4 describes the need for high quality accounting data.
  • Section 5 describes typical expenses incorporated into revenue requirements.
  • Section 6 explains typical rate base assets and liabilities incorporated into revenue requirements.
  • Section 7 categorizes total bill impacts to end-users by distribution, transmission, and generation.
  • Section 8 summarizes primary drivers of electricity tariffs.
  • Section 9 concludes with final remarks.

In addition, it contains an annex featuring a case study on the tariff-setting process of Uganda, which describes how the Uganda Electricity Regulatory Authority (ERA) approves cost-reflective electricity tariffs by incorporating expenses and rate base items into revenue requirements for its regulated entities.