Notice for Public Comments on DOMLEC’s Reconsideration of WACC

Notice for Public Comments on DOMLEC’s Reconsideration of WACC

Notice for Public Comments on DOMLEC’s Petition for Reconsideration on the IRC’s Decision Document Weighted Average Cost of Capital for Dominica Electricity Services Limited (DOMLEC) –
Document Reference 2015/001/D.

Take notice that DOMLEC has filed a Petition for Reconsideration of the Decision of the Independent Regulatory Commission on Weighted Average Cost of Capital (Document Reference 2015/001/D), which was issued on April 23rd, 2015.

The Public is requested to submit comments on this Petition within Ten (10) days of publication of this Notice.

Description of DOMLEC’s Request:

  • IRC Decision 1: DOMLEC’s capital structure shall be 40% debt and 60% equity for the tariff period 2015 – 2017.
    DOMLEC requests 33.1% debt and 66.9% equity
  • IRC Decision 3: The Commission determined that the risk free rate shall be the US 10 Year Treasury Bond rate as at December 2014 – that is 2.17%.
    DOMLEC requests a US 30 Year Treasury Bond rate at 3.34%
  • IRC Decision 4: The Commission proposes that there will be no risk premium due to DOMLEC’s size.
    DOMLEC requests a risk premium for size
  • IRC Decision 5: The Commission will use the group of 35 companies in the power sector used by Professor Damodaran as the proxy utilities.
    DOMLEC proposes 15 power utilities
  • IRC Decision 6: The Commission determines the Mature Market Risk Premium of 5.21%, stated by Professor Damodaran as the implied equity risks approach
    DOMLEC requests a Risk Premium of 8%
  • IRC Decision 7: The Commission has determined that, based on the results of the application of the DCF and CAPM methodologies, DOMLEC’s cost of equity for the tariff period shall be 10.44%.
    DOMLEC requests 14.5%
  • IRC Decision 8: The Commission has determined that the WACC to be applied to DOMLEC’s regulatory asset base shall be 8.56%.
    DOMLEC requests 11.6%

Pursuant to the conditions outlined in Part 8 (Reconsideration of Commission Decisions); of the Commission’s Decision Document Reference No: 2008/004/D: Regulatory Policy and Procedure – Rules of Practice and Procedures, the Public is therefore being asked to submit comments on the application within TEN (10) days of the said publication.

The Deadline for Receipt of comments is June 3, 2015.

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