The Australian Competition and Consumer Commission (ACCC) has released a statement detailing its methodology for determining the weighted average cost of capital (WACC). This approach serves as a foundational guideline for the ACCC's economic regulatory functions.

The WACC is crucial for calculating the return on capital that investors expect when investing in regulated infrastructure. By establishing a suitable WACC, the ACCC aims to ensure that regulated firms can attract and retain the necessary capital to cover prudent costs.

Setting an appropriate WACC not only compensates investors for the risks associated with capital supply but also incentivizes firms to invest efficiently in regulated assets. This ultimately leads to more efficient pricing for end-users of the firm's services.

The ACCC's review of its WACC methodology involved collaboration with Cambridge Economic Policy Associates (CEPA) and extensive consultations with stakeholders in the telecommunications sector. This review was part of two regulatory processes: the NBN replacement module determination and the voice interconnection services access determination inquiry.

In addition to the statement, the ACCC is publishing CEPA's final recommendations and will consult on the WACC methodology when making specific decisions. The ACCC also plans to periodically review and update its WACC methodology as necessary.