Discounting for cost benefit analysis involving private investment, but public benefit

Joint Regulators Group (JRG) statement on cost benefit analysis methodology

JRG has published a statement on the methodology used for discounting for cost-benefit analyses (CBAs) pdf icon PDF, 93 Kb

These analyses may be used by regulators when considering measures that generate consumer or wider public benefits, while requiring regulated firms to incur some costs. 

CBAs enable regulators to estimate the value of the overall benefits of a proposed regulatory intervention.

The JRG brings together various UK regulators to discuss issues of mutual concern and to report on recent developments in their own particular sector. 

The issue of discounting in CBAs is one which many sector regulators face, and therefore it is an area where regulators can benefit from sharing and promoting good regulatory practice.

October 2011 consultation

Reference: ORR/018/2011
Date published: 4 October 2011
Start date: 4 October 2011
Closing date: 5 December 2011

This consultation paper outlined the approaches to discounting that could be taken by regulators within the JRG.

The focus of this paper was on discounting in the particular case of a cost benefit analysis (CBA) where a firm finances the investment, but benefits mainly accrue to consumers and/or the wider public. 

This paper did not seek to determine whether or not a regulator should be intervening, but rather if the regulator was considering intervening and using a CBA, what the appropriate technical framework for CBA might be.

Consultation document