12 Steps to implementing tariff reform

Steps 1-5 explore the steps necessary to evolve existing tariffs to become cost reflective, and to bring them in line with the principles of cost causation and economic efficiency. Steps 6-12 deal with additional considerations that policymakers and regulators may wish to assess as part of their tariff reform efforts (such as the role of incentives, the development of lifeline tariffs, among other issues).
01
Step 1: Determine the underlying cost structure
02
Step 2: Calculate the appropriate cost of capital
03
Step 3: Assess whether the existing tariff is cost reflective; if not, determine an approach to reach cost recovery
04
Step 4: Examine customer classes to determine whether tariffs reflect cost causation; redefine as needed
05
Step 5: Examine billing determinants and block design to assess whether economically efficient
06
Step 6: Determine role of incentives
07
Step 7: Explore whether tariff formula should include flow-through elements
08
Step 8: Develop lifeline tariff
09
Step 9: Assess collection issues
10
Step 10: Describe how tariffs are revised and investments approved
11
Step 11: Determine appropriate length of regulatory periods
12
Step 12: Develop formulas for rate adjustments within regulatory periods
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