Global Journal of Management and Business Research, B: Economics and Commerce, Volume 21 Issue 5

• Occurrence of the event prior to the winning proposal (in cases of bids at auctions); • Absence of a causal link between the events; and • Bad management signs and guilt (intention) of the company for increasing his charges. In case of port authorities that are government- owned, the lack of a contractual provision does not affect the application of the re-equilibrium model, because its foundation is not contractual, it is legal. The Regulator should define an incentive-based regulation scheme that minimizes uncertainties and reduces information asymmetry, with a main driver of incentives for cost reduction during the tariff revisions period. During the intervals between tariff revisions, the Brazilian regulator applies a price-cap readjustment methodology. In this model, a tariff cycle is imposed, which consists of the corresponding period of time between two ordinary tariff revisions, comprising a minimum period of 03 (three) years and a maximum of 05 (five) years, according to ANTAQ. It also informs that the first cycle, in existing contracts, begins with an extraordinary review. See Table 2 that the cycle starts with an extraordinary review. Table 2: The tariff cycle to Brazilian ports Procedure Period 1st Extraordinary Review year 0 Annual readjustments Year 1,2, 3 and 4 1st Ordinary Review Year 5 Annual Readjustments... Year 6, 7, 8 and 9 First year, RN 32/2019 says that the extraordinary tariff revisions will be carried out at a request and promotion by the Regulator, ex officio. This will be the opportunity to contemplate the migration from the current tariff structure to the structure standardized by ANTAQ. Normally, every year or at the end of each Tariff Cycle, the Agency publishes calendars for companies in order to present their claims for annual readjustment or for an ordinary tariff review within a fixed period, which may coincide with the contract anniversary date. Now it is finally necessary to state: applying the rate of return method is always difficult for Brazilian government agencies. This is explained below. First, the regulation by rate-of-return method, given the complexity of its operation, is an appropriate method only when cost and demand conditions do not change significantly in short periods of time, i.e, when costs and demand are relatively stable. In the opposite situation, this process becomes much slower. In this condition, the cost and demand estimate is impaired for a medium period, say four or five years ahead, making it difficult to find the equilibrium parameters of the equation: what will be the Total Revenue and what will it be the Total Cost of the firm, remembering that the natural monopoly has that characteristic of subadditive cost: the more it produces, the lower the cost per unit. It seems to be the case in the Brazilian port sector, generally having annual incremental demand at a rate of less than 4% in most cases. Furthermore, it is known that variable costs in port authorities are substantially reduced when compared to fixed costs, a condition that inhibits the application of pricing techniques related to marginal cost, which also depends on knowledge of a more accurate demand curve (MONTEIRO, 2017). Second, applying only regulation by rate of return, there are no incentives for the firm to seek efficiency, due all costs are passed on to consumers, and as companies' efforts to reduce costs do not increase their profits. The non-exogenous behavior of costs must be considered: the charging form affects the cost of production of the service. The doctrine shows us the existence of the Averch-Johnson effect (over investments). Finally, the regulation by rate of return requires a lot of information to be submitted to, lacking a good deal of confidence um some of those. However, the Cost of Service model still persists in Brazil, especially when we observe the presence of state-owned companies as service providers, or even private concessionaires, which is the model adopted by ANTAQ, with increments related to performance (productivity) and value (elasticity), as recommended by UNCTAD (1995). c) Practical model of regular tariff review In order to present projects, Article 16 of RN 32/2019 sets out a list of requirements to be attended by port authorities, as shown in Figure 1: A Practical Tariff Methodology for Port Authorities © 2021 Global Journals 14 Global Journal of Management and Business Research Volume XXI Issue V Version I Year 2021 ( ) B