Aquarius 3: Financial model - Final determination version

Aquarius 3: Financial model - Final determination version - letter to RDs

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Letter to named RDs

25 November 2004

Dear

AQUARIUS 3 FINANCIAL MODEL – FINAL DETERMINATION VERSION

The final determination version of Aquarius 3 has been released today. The Aquarius 3 software has been released via the website and can be found at
http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/Content/Aquarius3_5.7

There have been a few changes since version 5.5 used in the draft determination. Some of these have been made in response to issues raised in representations. We have also continued to improve some of the functions within the software. The release note with the software includes full details of all the changes made since the draft determination version. In summary, the changes are:

Equation changes for:
- indexation of debt and closing RCV in calculation of gearing;
- using different asset lives in the CCD adjustment test to those in the calculation of CCD;
- removing COPI indexation from FD99 IRC in RCV;
- adjusting the change in the infrastructure renewals accrual taken through the RCV to be based on the difference between actual IRE and FD99 IRE rather than any linkage with actual IRC; and
- minor changes and corrections that are immaterial to price limits eg, interim dividend payments and splitting actual enhancement capex (reported in June Returns) into infrastructure and non-infrastructure.
K solving functions:
- apply initial K to K=0 non-tariff basket revenues; and
- gearing adjustment processing rules more tightly specified.

Database improvements including model version control.

The new version control will flag all your existing scenarios as being created in v5.5 and will invoke that version of the model when an existing scenario is opened. However scenarios created using versions of Aquarius pre-dating v5.5 will not be valid in either model version.

We have updated the input definitions guide and the user manual in light of the changes made to the model. These documents are available on our website.

We have constructed a trial dataset for company ABC. In this dataset we have generated two revenue assumption sets from the tariff basket model and a modelled scenario from the financial model using the final determination version 5.7 of the software. We have exported the modelled scenario and a revenue assumption set into csv file format in order for companies to test the import procedures in advance of 2 December.

The csv files we have created for company ABC trial draft determination are:

modelled scenario named "Trial final determination" - this uses the K=0 revenue assumption set; and
revenue assumption set named "K=K".

Section 2 of the Aquarius 3 User Manual provides a step by step guide to importing files to the Aquarius 3 database.

If you have any problems installing or using version 5.7 of the software please contact us on aquarius3@ofwat.gsi.gov.uk.

Yours sincerely

DAWN HARRISON
Head of Financial Modelling

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