The CRA sets the regulatory Cost of Capital at 10.45%.

The CRA has issued the Order Determination of the Cost of Capital for Service Providers declared as having a Dominant Position (CRARAC 2017/12/06), setting the Cost of Capital at 10.45% (pre-tax).

The Cost of Capital is the regulatory allowed rate of return, determined as the Weighted Average Cost of Capital (WACC).

The Cost of Capital also defines the regulatory fair profit margin that an operator should obtain from its investments in the business. A fair profit margin provides the operator with sufficient funds to cover its costs, while encouraging additional investments. Pricing services that include fair and efficient costs, and an accurate WACC, encourage competition and growth in the market.

 

The approved Cost of Capital shall be applied with immediate effect by Dominant Service Providers, including but not limited to:

  • Regulatory Accounting Systems;
  • Regulated Wholesale Charges;
  • Cost Justifications submitted to justify Retail Tariff Charges; and
  • Any other analyses or cost studies, which may be specified by CRA from time to time.

 

A review of the Cost of Capital is currently not planned prior to 2020.

This Order replaces the Order ICTRA 2013/08/05-A, dated August 5, 2013, which set the Cost of Capital at 10.75% (pre-tax).

The Order, the Final Economic Analysis, the two rounds of consultations held by the CRA and the responses of the Service Providers can be downloaded from below.

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