Regulated return on equity
Fundamental analysisThe return on equity a regulator permits an asset to earn, built into the allowed revenue alongside approved capital cost, depreciation, operations and maintenance and interest.
In plain terms
The commission sets a return rather than a price, so the analysis moves to the allowance and the disallowances. Regulatory lag is where the margin actually goes: between an input cost rising and a tariff order recognising it, the company funds the gap itself.