CAP1769A: CEPA review of Heathrow Airport Limited’s (HAL’s) initial business plan submission for the Heathrow interim H7 price control (iH7)

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Title:CEPA review of Heathrow Airport Limited’s (HAL’s) initial business plan submission for the Heathrow interim H7 price control (iH7)
Description:We commissioned Cambridge Economic Policy Associates (CEPA) to undertake an independent assessment of HAL’s iH7 business plan. This report outlines CEPA’s projections of HAL’s regulatory building blocks.

The iH7 regulatory price review (the process by which we would estimate the underlying revenue allowances used to set HAL’s price control) started in October 2018, when HAL submitted a short business plan. This provided stakeholders with HAL’s views on the forecast revenue drivers or regulatory building blocks for 2020 and 2021.

In parallel to the iH7 regulatory price review, HAL has been negotiating commercial pricing arrangements with airlines, with the intention of any agreement reached replacing the CAA’s price review in 2020 and 2021. As a result, CEPA’s preliminary assessment of HAL’s regulatory building blocks has been used to help assess whether the proposed commercial arrangement agreed between HAL and airlines is in the interests of consumers.

We consider the CEPA projections outlined in this report are preliminary. As part of the planned regulatory price review process, HAL would have had an opportunity to challenge CEPA’s analysis and provide further evidence to support its iH7 business plan, and CEPA would have provided a final assessment on this basis (see CAP1769, paras 1.16-1.23 for further detail).

Review Comment:None
Date:28 February 2019
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