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Margins and Tariffs

1. Market demand studies

The current demand and projected demand due to substitution and demographic growth are considered. The market can be segmented by consumption category, demand agent, geographic area, etc. Demand projection over a horizon of 4, 8, or 20 years.

2. Engineering infrastructure design and modeling

Conceptual and basic engineering design for new infrastructure projects and the expansion of existing facilities, including processing plants, storage units, and transportation systems for crude oil, natural gas, and gas distribution networks.

3. Design efficiency is associated with the concept of Net Realisable value

Long-term planning projects future demand more accurately, facilitated by long-term contracts. This approach enables the proper sizing of infrastructure and helps maintain stable tariffs over an extended period. In contrast, short-term planning, which relies on conservative demand projections, requires frequent infrastructure adjustments and can disrupt market stability due to fluctuations in costs and tariffs.

4. Development current and projected CAPEX

The system components are defined, including pipelines, valves, pumping stations, compression stations, and others according to design requirements. Construction activities are developed for each component by technical specialties such as civil, mechanical, electrical, and instrumentation. For each construction activity, the required resources and associated costs are determined, including labor, equipment, tools, and logistical support. These costs are classified according to the level of engineering (CAPEX Class 4, 3, or 2 as per AACE International standards).

5. Development of operating costs

Efficient operation and maintenance processes are established for each component based on manufacturer recommendations and expert judgment. Maintenance frequency and required resources such as labor, materials, tools, and equipment, along with logistical support, are determined.
Benchmarking data from comparable companies’ O&M costs is utilized as a reference to assess project’ system efficiency.

6. WACC calculation or Capital Cost

The WACC , is the discount rate to be used in the calculation of the discounted cash flow, or to discount the future flows of CAPEX, OPEX, and projected volumes in the calculation of the margins or rates. The WACC represents the minimum rate of return of the committed investments. In a regulated service, the WACC whose value is correlated with the risks of the project, can be calculated, and proposed by the private company for the approval of the regulatory entity.

7. Average cost of the service

The Average cost of service is calculated by dividing the Present Value of the Annualized Investment (AI) and the Annual Cost of Operation, Maintenance, and Administration, including taxes projected according to local regulations (COM), by the Present Value of the projected volumes (V) over the same period.

This Average Cost, representing the unit cost of the service, is determined through discounted cash flow using a regulated Discount Rate (r), approved by the Regulator and/or accepted by the investor.

8. Margins and tariffs aplicable

The applicable margin or tariff can be a flat rate (postage stamp tariff), the average cost across the entire system, tariffs by segments or zones, or by consumption categories. Additionally, tariff design may include a mix of fixed and variable charges, distance-based or segment-based charges, and entry and exit charges. Furthermore, the calculation models are based on criteria such as cost-of-service regulation, price cap, average costs, marginal costs, discount rate, and more.

9. Support during the regulatory process

Support in regulatory processes for regulated businesses to secure approval from the Regulatory Authority. From initial preparation to final tariff approval, we ensure adherence to regulations and transparency throughout the entire process

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