The 2010 calendar year has been a watershed year for the
determination of regulated weighted average costs of capital
(WACCs) for infrastructure service providers.
In late 2009, the Australian Competition Tribunal
(Tribunal) made a decision that hinted at the
prospect of a greater preparedness to take a proactive approach to
the determination of questions of WACC estimation than at any time
previously. In 2010, the Tribunal has realised this prospect,
finding errors in fundamental elements of the Australian Energy
Regulator's (AER's) approach to the
estimation of service providers' weighted average cost of
capital (WACC). These errors have been found in
respect of both the assumed utilisation of imputation credits (or
gamma) and the debt risk premium (DRP), and in
respect of more than one aspect of the AER's approach to
estimating those parameter values. In addition, a number of
additional review proceedings before the Tribunal were commenced in
2010 that raise
