avkastningsregleringen

Avkastningsregleringen, often translated as "rate of return regulation" or "profit cap regulation," is an economic concept primarily used in regulated industries such as utilities and telecommunications. The core principle is to limit the profits a company can earn to a "fair" or "reasonable" rate of return on its invested capital. This is typically achieved by setting a maximum allowable profit percentage.

The purpose of avkastningsregleringen is to balance the interests of both the regulated company and its customers. For the company, it provides a guaranteed level of profit, incentivizing investment in infrastructure and services. For customers, it aims to prevent companies from exploiting their monopolistic or near-monopolistic positions to charge excessively high prices and earn exorbitant profits.

The process usually involves a regulatory body determining the company's rate base, which is the value of the assets used to provide the service. Then, a reasonable rate of return is established, often based on the company's cost of capital and comparable market returns. The regulated profit is calculated by multiplying the rate base by the allowed rate of return. If the company's actual profits exceed this allowed amount, regulators may require them to reduce prices or share the excess profits. Conversely, if profits fall below the allowed rate, it might signal that the regulated rate is too low or that the company is inefficient.