Any service provider deemed to have significant market power (SMP) is obliged to prepare so-called regulatory accounts which will be used as the basis for setting statutory price controls and interconnection rates. Accuracy and transparency are critical for the operator to be fairly represented, and to avoid any legal challenges to dubious calculations.
A typical Excel deliverable leaves much to be desired in terms of consistency and reliability; even the perceived transparency is questionable if a suitable expert would need weeks to audit one version of the logic throughout. We have now prepared a demonstration model showing how to calculate the economic depreciation required for a long run incremental cost (LRIC) model in STEM. This model can be accessed online at LRIC example model.
Thus, we can offer a systematic approach for these calculations which is guaranteed to be consistent across all relevant elements.
A more detailed explanation can be accessed on our website.
Screenshot of Economic Depreciation model live on our website