PR19 - Balance of Incentives and the Cost of Equity

The overall objectives of this work is to: • Review the overall incentive framework for aligning company interests (including company management and investors) with customers now and in the long term. This includes the setting of the single notional allowed return on capital, ODIs, cost outperformance, financing outperformance, as well reputational and procedural incentives associated with risk based review of business plans to consider whether this is most likely to allocate risk and align returns with best interests of customers. • Consider whether menu based differential on allowed return on equity would improve the overall incentive framework and what the implications might be for…

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