Sponsored by Leverhulme Trust
In recent years controversy has developed over the effect utility regulation has had on the perceptions of risks, in what are primarily supposed to be relatively stable industries. In particular some regulatory bodies have come under severe criticism for their implementation of the RPI-X price control mechanism and there have been suggestions that a lack of clarity in regulatory procedures were leading to increases in the cost of capital required by investors. A primary objective of the Regulatory Rish and Cost of Capital project has been the desire to ascertain the extent to which these views are shared between three integral parties of the regulatory process, namely regulators, regulatees, and investment analysis. A series of one-to-one interviews were carried out between July 1995 and January 1996 with all the regulatory bodies, seven investment analysts, five companie each in the electricity and water industries, and British Gas (BG), British Telecom (BT), and British Airports Authority (BAA). Issues discussed focussed on the sources and nature of risk, the cost of capital and other pressing concerns of the interviewees.