As the UK prepares for a significant wave of energy and water investment, a narrower question sits underneath it: if the regulated cost of equity is derived from listed comparators, what happens when only 5 of the 39 regulated electricity, gas and water entities in the UK are still listed on the domestic market? In our September roundtable we examined how stock market movements reach the regulatory cost of equity, and whether listing itself changes how a utility is financed.
We looked at the decomposition of what moves utility share prices and like-for-like comparison of listed and privately held water companies across AMP7. These case studies showed us how far a market-derived cost of equity can sit from the risks a regulated business carries, and where regulators, investors and utilities can align on a more durable basis for setting returns.