Cost of capital for British Columbia Utilities Commission

At the request of the British Columbia Utilities Commission, Brattle experts authored a report on methods commonly relied upon to determine the regulatory cost of capital and the practices of Canadian provinces. The Brattle team surveyed all Canadian provinces regarding recently relied upon estimation methods used to determine the cost of equity, cost of debt, and capital structure, as well as whether individual provinces had specific regulatory recovery mechanisms in place. The British Columbia Utilities Board continues to refer to our review in cost of capital proceedings and have accepted our description that ultimately the cost of capital is determined in the market place and an opportunity. The Commission has also accepted our recommendation that several cost of equity estimation methods be used and cites our report on key issues to consider such as: the importance of consistency between measurement variables, considering forward-looking measure, evaluating, the challenges in using accounting measures to measure the cost of capital.