Man in suit on staircase
Sydney harbour birdseye

In making price determinations, IPART usually adopts a CPI-X framework. The price-cap framework embodies well-known incentive properties that encourage cost-savings early in a determination period but encourage deferral of cost-savings later in a determination period. This staff paper indicates how three other regulators – Ofwat and Ofgem in the UK and the AER in Australia – have sought to create mechanisms that overcome the incentive to delay cost savings. It concludes that the carry-over mechanisms as used by Ofwat and the AER achieve this aim and that the annual sharing of benefits as proposed by Ofgem from 2013 should achieve this aim.

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