Services
Tandem Economics provides economic advice in connection with policy development and regulatory and commercial disputes in energy and other markets. We advise about pricing, valuation, regulatory policy and market design. Our clients are law firms, regulators, infrastructure owners, infrastructure users, energy suppliers, energy consumers and government departments. We have worked in jurisdictions across Australia, New Zealand, the US, Canada and Southeast Asia.
Some of the areas we work in are described below. Past projects are described here.
Regulation of energy infrastructure
We advise clients about the application and development of economic regulation to electricity networks, gas networks, pipelines and other infrastructure. Our work concerns the pricing of services provided by infrastructure owners to third parties, valuation of the infrastructure, and the revenues that infrastructure owners are permitted to collect.
Transfer pricing
Determining an appropriate transfer price is challenging where there is no market in which unrelated parties make similar transactions, or where there is a market but the terms of transactions in that market are not transparent. Similar challenges arise in commercial disputes about pricing of long-term pipeline gas and Liquefied Natural Gas (LNG), and in disputes about infrastructure access pricing. We provide opinions about transfer prices by drawing on expertise in energy markets or experience valuing infrastructure to estimate the results of arm’s-length bargaining between unrelated parties in similar circumstances.
Risk and the cost of capital
We advise infrastructure owners and regulators about the rate of return on investment in infrastructure that needs to be included in a building up of a cost-based price for services provided using that infrastructure. We have advised on methods for determining an appropriate rate of return, and about the risks borne by investors in infrastructure that require compensation in regulated prices.
Pricing of pipeline gas and LNG
Long-term gas supply agreements—for pipeline gas in Australian domestic gas markets or for LNG in the Asia-Pacific region—contain re-opener provisions to allow the parties to adjust the contract price periodically. Such provisions are needed because there are no price indexes that adequately capture changes in market conditions over time, so there is otherwise a risk that contract prices will become out of line with market conditions as the latter evolve. We advise clients about what evidence about current market conditions implies for redetermining the contract price.