The objective of this primer is to assist energy regulators working in emerging economies with building their understanding and knowledge of key concepts related to depreciation, and to support effective decision making when developing cost-reflective tariffs.

This primer presents key factors affecting allowed depreciation costs as well as alternative approaches and regulatory considerations when determining allowed depreciation in the context of cost-reflective tariffs for regulated entities operating in monopolistic market segments (e.g. network companies).

Background: With funding support from USAID, the NARUC is developing a Cost-Reflective Tariff Toolkit aimed at supporting policymakers, regulators, and utilities on the design and implementation of cost-reflective tariffs through effective engagement of the public and key stakeholders in the decision-making process. The Toolkit consists of several short primers providing practical information and guidance on specific elements and topics of cost-reflective tariffs to utility service regulators in emerging economies.