Economic regulation of Heathrow Airport Limited: Q6 capital expenditure and early expansion costs

Overview

Heathrow Airport Limited's (HAL) capital expenditure (capex) is a key element in setting airport charges, as it feeds through to HAL's regulatory asset base (RAB) and so into airport charges (through a regulated return and depreciation on the capital invested). It is also essential that HAL invests efficiently to provide an appropriate quality of service and, where appropriate, new capacity. Previous CAA consultations have discussed the treatment and assessment of two categories of historical capex:

• early expansion costs; and
• capex incurred during the Q6 price control period.

Why your views matter

This working paper discusses our treatment and assessment of two categories of historical capex incurred by HAL:

• capex incurred during the Q6 price control period, and our ex post assessment of its efficiency; and
• early expansion costs relating to the work to develop a planning proposal for a third runway at Heathrow airport.

In relation to the Q6 capex review, this working paper covers:

• an overview of stakeholder responses received to our September 2020 Working Paper;
• an update on the key policy areas; and
• our emerging conclusions from this review.

In relation to early expansion costs, this working paper provides:

• an update on our policy; and
• our assessment of costs incurred by HAL before March 2020.

Views invited

We welcome views on any of the issues raised in this working paper.

Please e-mail responses to economicregulation@caa.co.uk by no later than 18 June 2021.

We expect to publish the representations on our website for other interested parties to read after the period for written representations expires. Any material that is regarded as confidential should be clearly marked as such and provided in a separate appendix. Please note that we have powers and duties with respect to information under Section 102 of the Act and the Freedom of Information Act 2000.