49SMeaning of *accrual building block methodology*

49S Meaning of *accrual building block methodology* (1) An ***accrual building block methodology*** is a methodology that— (a) provides for an allowance to recover— (i) a return on assets used by a State sponsored port operator to provide relevant services (the ***capital base of a State sponsored port operator***); and (ii) a return of the capital base of a State sponsored port operator through depreciation; and (iii) the forecast efficient operating expenditure that would be incurred by a State sponsored port operator acting prudently in the provision of relevant services; and (b) requires that— (i) an initial capital base of a State sponsored port operator be established utilising the depreciated optimised replacement cost approach; and (ii) the value of that capital base be updated on an annual basis by applying a roll forward principle that takes the opening value at the start of a financial year, adds in capital expenditure when incurred or to be incurred and deducts an amount for the return of capital; and (iii) the value of any assets transferred from a public sector entity to a private sector entity that form part of a private cost contribution for a State sponsored port be included in the capital base of a State sponsored port operator of that port at a value calculated using the depreciated optimised replacement cost approach; and (c) requires costs incurred by a State sponsored port operator be allocated between different types of relevant services, and other services (if any), on the basis that— (i) costs that are directly attributable to a service are to be allocated to that service; and (ii) costs that are not directly attributable to a service are to be allocated on the basis of the expected revenue share of that service to expected total services revenue; and (d) provides for the establishment of an aggregate revenue requirement that provides a State sponsored port operator with a reasonable opportunity to recover the allowances referred to in subsection (1)(a); and (e) requires the aggregate revenue requirement to be used to establish the prices for relevant services that, if paid, would provide a State sponsored port operator a reasonable opportunity to recover its aggregate revenue requirement. (2) For the purposes of subsection (1)(a)(i), an ***accrual building block methodology*** must provide for the recovery of a return on assets to be determined— S. 49S(2)(a) amended by No. 68/2017 s. 124(1). (a) by reference to that which would be required by a benchmark efficient entity providing services with a similar degree of risk; and (b) using an appropriate method that distinguishes between the cost of equity and debt so that a weighted average cost of capital can be derived. (3) An ***accrual building block methodology*** must not, for the purposes of subsection (1)(c), allow for the inclusion, in the capital base of a State sponsored port operator, of any value attributable to rail, road or other landside infrastructure at a place that is outside a State sponsored port operated by that operator. S. 49T inserted by No. 10/2016 s. 108.