What Is RAB?
RAB (Regulatory Asset Base) is a system of long-term tariff design aimed primarily at encouraging investment in the expansion and modernization of infrastructure.
World practices have shown that RAB-based tariff regulation in the electric grid sector has several advantages for electric grid companies and customers over the existing cost-plus pricing system.
Companies in the RAB system provide a secure payback and return on investment sufficient to service loans and generate profits. Additionally, they are stimulated to reduce their costs because, unlike Russia’s conventional cost-plus pricing, the RAB system allows them to retain the funds resulting from cost cutting.
As for customers, the RAB system’s advantages are a more reliable power supply and services of better quality owing to new investments.
According to the results of 2008 and as part of preparations for introducing the RAB-based new tariff regulation method into Russia, the Federal Tariff Service of the Russian Federation approved the Guidelines on Tariff Regulation Applying the Return on Invested Capital Method and determined rates of return on invested capital. The Russian Government amended the legal framework for electricity and heat pricing in Russia. This made it possible for the new tariff design method to be used widely in Russia.