Tariff calculation and regulatory approval for gas pipeline infrastructure I
Our client owns and operates a gas pipeline with capacity in excess of 100MGJ/annum. A requirement arose to increase pipeline capacity by investing in a large compressor station. NERSA has published guidelines and methodologies for transmission tariffs for piped gas. The client required advice regarding the choice of an appropriate tariff methodology, the calculation of an appropriate tariff and escalation mechanism, and the completion of the application for regulatory approval of the tariff.
After a thorough analysis of the client’s business strategy, we constructed both a levelised cost tariff model and a rate of return tariff model. Based on the client’s business requirements we advised the implementation of a levelised cost tariff indexed to inflation. We created a complex levelised cost model to calculate the appropriate tariff to be charged considering the financial implications of various operational scenarios. We were instrumental in the NERSA application process, writing all submission documentation for the client’s final review. The tariff application was successfully approved, unchallenged, by NERSA in March 2013. To our knowledge this was the first levelised cost tariff to be approved by NERSA.
Expertise: Advanced Financial Modelling, Build Customer-facing spreadsheet tools, Cost of Capital Assessment, Preparing Regulatory Tariff Applications, Pricing Mechanism Development, Project Risk Assessment, Project Valuation, Regulatory Engagement, Scenario Assessments, Tariff Application Strategy, Tariff Design