Cost of capital in determining petroleum prices

Genesis was commissioned by the Department of Energy to scrutinise the weighted average cost of capital (WACC) currently being used by the department when setting margins for four ring-fenced activities that are regulated through the price of petrol in South Africa. These include secondary storage, secondary distribution, wholesale and benchmark service station (retail).

The project team analysed the WACC methodology used by the DoE and the National Energy Regulator of South Africa to set pipeline tariffs and approve storage and loading facilities tariffs. It also recommended various changes to the WACC methodology as applied in respect of the ring-fenced activities in order to align this with best practice and the current approach to managing the regulatory asset base.