How a Gas Distribution Company Set Tariffs Using ROI and IRR Analysis



Setting the right tariff rate is critical in the gas distribution business—too high and you lose competitiveness, too low and profitability suffers. Our client, a gas distribution and filtration company, needed a precise, data-driven approach to determine per-gallon pricing for end users.

We helped them solve this challenge by building a financial model that incorporated the key variables influencing tariff rates and delivered actionable insights for strategic pricing.

The Challenge

The company struggled with setting optimal tariffs in a market where small price changes could have a significant impact on revenue and customer retention. Without a robust analytical framework, it was difficult to account for multiple cost drivers, forecast returns, and compare scenarios.

The Solution

We developed a comprehensive financial model with full control over critical input variables affecting the tariff rate. The model:

  • Calculated ROI (Return on Investment) and IRR (Internal Rate of Return) for any given tariff

  • Allowed scenario-based adjustments to test different market conditions

  • Provided clear visibility into the financial impact of each tariff decision

This enabled the company to confidently evaluate different pricing strategies and understand their effect on profitability.

The Outcome

With the new model, the client gained a data-backed approach to tariff setting. They could:

  • Quickly identify the most competitive per-gallon price

  • Accurately forecast financial returns under various scenarios

  • Make informed pricing decisions that balanced market competitiveness with profitability

📥 Download the full case study to explore the model and results:
Financial Modeling to Determine Competitive Pricing – PDF

🔗 Read more on our website:
Financial Modeling to Determine Competitive Pricing – Case Study

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