The cost of capital is a fundamental consideration in regulated industries, influencing investment decisions, regulatory outcomes, and financial stability. This publication explores 10 hot topics that are currently shaping cost of capital discussions, including climate change objectives, stability and predictability of regulatory approaches, diminishing comparator firms, and competition for the right to supply. It also examines emerging trends, such as the impact of large-scale investments in renewable energy and the challenges of estimating market risk premiums. Backed by extensive research and regulatory case studies from Australia, New Zealand, and the UK, this paper offers valuable insights for policymakers, industry professionals, and investors.

Cost of capital plays a crucial role in determining regulated revenues, investment attractiveness, and financial resilience in capital-intensive industries. This paper identifies and examines 10 key topics currently influencing regulatory cost of capital decisions, including climate change considerations, evolving methodologies for estimating the market risk premium, and the impact of diminishing publicly listed comparator firms. The study provides a comparative analysis of regulatory approaches from key jurisdictions such as Australia, New Zealand, and the UK, offering insights into best practices and emerging challenges. Additional areas of interest include the role of reasonableness checks, financeability testing, and competition in infrastructure investment. By addressing these pressing issues, this publication serves as a resource for regulators, businesses, and investors seeking to understand and navigate the complexities of cost of capital determinations.

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Electricity North West Limited (ENWL), a regulated monopoly distributing electricity to 5 million customers across North West England, was acquired by Iberdrola in 2024 for €5 billion. MCC Economics’ publication examines the intricacies of this deal, including a significant 44% premium over ENWL’s Regulatory Asset Value (RAV). The analysis delves into ENWL’s financial inefficiencies, high cost of embedded debt, and regulatory challenges under Ofgem’s framework, juxtaposed with its strong equity performance and potential synergies with Iberdrola’s existing networks. This publication provides a comprehensive exploration of the value drivers, risks, and opportunities associated with the acquisition, offering valuable insights for investors and stakeholders in regulated utility markets.

This publication investigates the 2024 acquisition of Electricity North West Limited (ENWL) by Iberdrola, a transaction valued at €5 billion, including debt, and reflecting a substantial 44% premium over ENWL’s Regulatory Asset Value (RAV). ENWL serves as a regulated monopoly responsible for electricity distribution across North West England, supporting the UK’s decarbonisation goals. Key themes explored include ENWL’s financial challenges, regulatory constraints, and Iberdrola’s strategic motivations, including synergies with adjacent networks and growth potential in the transition to electrification. This case study offers critical insights into the valuation of utility assets, regulatory impacts, and the evolving energy landscape.

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Dive into MCC Economics' in-depth review of the Phoenix Energy acquisition, focusing on its valuation, regulatory framework, and the broader energy market dynamics. With exclusive gas distribution rights across Greater Belfast, Phoenix Energy faces both challenges and opportunities in the shift towards renewable energy. This case study examines the company’s performance within Northern Ireland’s unique regulatory environment, the implications of stranded assets, and the potential pace of electrification. The report also considers the strategic value of this acquisition for CK Infrastructure Holdings and its alignment with global trends in sustainable energy.

This publication provides a comprehensive analysis of the 2024 acquisition of Phoenix Energy by CK Infrastructure Holdings, valued at approximately £760 million. Phoenix Energy operates as the sole gas distributor in Greater Belfast and has rebranded to reflect its renewable energy aspirations. The report evaluates the deal’s valuation metrics, highlighting a rare alignment with its regulatory asset base, and discusses the risks posed by stranded assets and the potential acceleration of electrification. It further explores the implications of Northern Ireland’s regulatory framework, which supports renewable gas solutions while promoting continued gas network connections. This case study serves as a key reference for stakeholders in mergers, acquisitions, and regulatory policy within the energy sector.

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Abu Dhabi stands at the forefront of the UAE's clean energy transformation, and distributed solar generation plays a pivotal role in achieving its sustainability goals. Our report delivers a comprehensive analysis of the potential for rooftop and ground-mounted solar systems to reshape the emirate's energy future. The report examines the inefficiencies of electricity subsidies, compares solar costs with current tariffs, and evaluates the economic benefits of adopting distributed solar. It features real-world data on levelized cost of energy (LCOE), payback periods, and return on investment (IRR) for different consumer groups. By modeling growth scenarios, the report highlights how solar adoption could reduce government subsidies by AED 1.5 billion annually and avoid 5 million tonnes of CO₂ emissions by 2030. Packed with actionable insights and practical recommendations, this report is essential for policymakers, investors, and energy professionals looking to lead the UAE’s transition to a sustainable, clean energy future.

This report investigates the potential for distributed solar generation to drive Abu Dhabi's transition to clean energy while addressing the inefficiencies of current electricity subsidies. It explores the economic and environmental case for rooftop and ground-mounted solar systems, highlighting recent cost declines that make solar a viable alternative to fossil fuel-based power. By outlining a clear roadmap, the report positions distributed solar as a key driver of economic efficiency and environmental sustainability in Abu Dhabi.

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Our comprehensive study on UAE GDP forecasting evaluates the effectiveness of three popular econometric models: ARIMA, VAR, and Linear Regression. Using real GDP data, the paper highlights each model's strengths and limitations over short-term and long-term horizons. The findings suggest that ARIMA is most effective for long-term forecasting, while Linear Regression shines in short-term, scenario-based predictions, provided accurate exogenous variable forecasts are available. Dive into this publication to gain valuable insights into forecasting methodologies that can enhance decision-making for businesses and policymakers in the UAE's dynamic economic landscape.

Forecasting GDP is crucial for economic planning and policymaking. This study compares the performance of three widely-used econometric models—ARIMA, VAR, and Linear Regression—using GDP data from the UAE. Employing a rolling forecast approach, we analyze the models’ accuracy over different time horizons. Results indicate ARIMA’s robust long-term forecasting capability, LR models perform better with short-term predictions, particularly when exogenous variable forecasts are accurate. These insights provide a valuable foundation for selecting forecasting models in the UAE’s evolving economy, suggesting ARIMA’s suitability for long-term outlooks and LR for short-term, scenario-based forecasts.

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MCC Economics and Finance has submitted a detailed response to the Australian Energy Market Commission’s (AEMC) proposed rules for accelerating smart meter deployment. Our submission examines several strategic trade-offs such as balancing consumer consent with retailer flexibility, flat tariffs versus cost-reflective pricing, and managing implementation costs while ensuring consumer benefits. It emphasises the importance of consumer-centric outcomes, particularly for vulnerable groups, and explores international examples from the UK, Finland, Germany, and France to highlight successful models of smart meter integration. MCC also raises questions about whether retailers are best positioned to lead the roll-out and suggests considering network companies for this role if early success is not achieved under the current proposal. The submission concludes by supporting the AEMC’s initiatives while advocating for ongoing evaluation and innovation to maximise consumer benefits.

This paper discusses the strategic trade-offs involved in implementing new rules, including balancing consumer protection with retailer flexibility and cost-effectiveness. It draws from international case studies to illustrate best practices for smart meter integration, particularly in relation to consumer benefits, technology, and phased implementation. The submission also questions whether retailers are best placed to lead the deployment and suggests considering network companies if needed. MCC fully supports the AEMC’s efforts and offers recommendations for ensuring the success of smart meter rollouts in Australia.

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