ANCILLARY REVENUES IN CONCESSIONS AND PUBLIC-PRIVATE PARTNERSHIPS: between tariff affordability, economic incentives, and economic-financial equilibrium

Abstract

This article examines how the legal treatment of alternative, complementary and ancillary revenues, as well as associated projects, affects the balance between tariff affordability, economic incentives and the preservation of the economic and financial equilibrium in public service concessions and public-private partnerships (PPPs). It starts from the assumption that tariff affordability does not simply mean “low tariffs”, but rather the lowest overall cost compatible with adequate service provision, cost recovery and a reasonable return on invested capital. Methodologically, this is a doctrinal and qualitative study, based on the analysis of legislation, specialized legal scholarship and recent contractual examples, with an emphasis on street lighting PPPs (Porto Alegre, Maringá and Goiânia), while also drawing selectively on experiences from other sectors. The paper first reconstructs the remuneration regime of the concessionaire and the principle of tariff affordability, then examines different models for allocating and sharing ancillary revenues, proposes normative and analytical criteria for their design and applies this framework to the experience of street lighting PPPs. It concludes that there is no single “correct” model; instead, the inclusion of ancillary revenues in the base case, the degree of revenue sharing with the granting authority and the governance mechanisms must be calibrated in light of sectoral maturity and consistency with the project’s reference internal rate of return.