Asset Valuation
67. Chapter 8 (Asset Valuation) discusses asset valuation issues. The valuation of assets is a key variable in the assessment of normal returns, since capital costs are a significant proportion of the total costs.
68. The Commission's preference is to use opportunity cost to value non-sunk assets, and a cost-based approach (either historic cost or ODRC/ODV) to value sunk assets. The Commission notes that either the depreciated historic cost (DHC) or ODV approach may be used to assess excess returns under an NPV = 0 approach.
69. The Commission has based its advice on the ODV valuations. This is largely based on the greater availability of relatively robust and comparable data for this methodology compared to historic cost data. Non system assets were valued at historic cost as were easements.
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