This model was proposed in a regulatory framework in Brazil. Its main idea is the obtainment of a dynamic control model to avoid the related parties issues on regulated public services over contract extensions. As the terminal condition of these contract extensions is NPV=0, the firms would have an incentive to contract related parties to inflate costs, and diminish their profits, in order to request a larger time extension. So, this system creates a stable "shadow" based on the 5 years before these extensions, where the company did not have such incentives.
