This site uses the UK Government AccessKeys system
|
|
What's new | Publications | Media centre | Price review | FAQs Update alerts | Consumer issues | Site map | Competition | Contact us |
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Letters to Regulatory Directors
RD 17/08 26 August 2008 Dear Regulatory Director Approval of charges schemes 2009-10: process and timetable This letter sets out the process and timetable for the approval of charges schemes for 2009-10. A. Information capture systems We enclose a CD-ROM which contains the following four information capture systems that are specific to your company, all for the charging year 2009-10:
The CD-ROM also contains a Word file with guidance on how to complete the information capture systems. You must use the information capture systems on the CD-ROM to prepare both your draft and final submissions as required. B. Timetable summary
As usual, we would be pleased to meet companies in the autumn to discuss issues emerging from their draft submissions. Moreover, we are happy to meet companies at this or any other time to discuss their longer-term tariff plans. C. Annual change in Retail Price Index to November 2008 We have inserted "219.3" in cell K27 of section 0 of PS. This figure is our forecast of the 'All Items' Retail Price Index for November 2008. You must not change this for your draft submission. This figure yields 4.58% as the forecast annual change in the 'All Items' RPI for November 2008. The actual 'All Items' Retail Price Index for November 2008 will be published by the Office of National Statistics on Tuesday 16 December. For your final submission, you will need to overwrite our forecast with the actual figure. We have provided more details about this in the PS guidance document. D. Principal statement section 0 revenues We expect you to report Weighting Year revenues on a consistent basis between your June Return (JR) and your PS. Therefore, unless there has been a change in definitions relating to the PS after you submitted your JR, such as a change to the large user threshold specified under section 7(5)(a) of the Water Industry Act 1991, you should use the same revenues that you reported in lines 1 to 7 of table 23 of your JR to calculate your company's Weighted Average Charges Increase (WACI) in section 0 of your PS. In Condition B of your company's Instrument of Appointment, these revenues are referred to as "r(i) or r(j)" in the definition of WACI in section 2. They are further described in section 6.1(a). E. Measured/unmeasured tariff differential The DC section of your PSICS will enable you to calculate both your company's differential target(s) and actual differential(s) once you input the required information. Supporting information for company inputs in tables X2 and X3 The figures used in tables X2 and X3 to calculate both the differential targets and actual differentials are company-specific. We set out in RD 02/04 how companies should derive those figures. Nevertheless, some companies use their own methodology to derive those figures. We do not object, provided that those companies use the same methodology consistently in subsequent years. If your company belongs to that group, then you must submit a worksheet to explain how you derived those figures. We consider this information to be part of the differential calculations; without it your PSICS would be incomplete and we will not commence our checks until it is provided. Flexibility allowance We have no reason to believe that unmeasured consumption in your area was atypical in 2007-08. Consequently, you are only allowed £1 flexibility around each of your calculated water and, where applicable, sewerage differentials. However, if you wish to take additional flexibility, we may allow you this provided you can show evidence of atypical unmeasured consumption in your region in 2007-08. We would not normally allow additional flexibility because unmeasured consumption was falling (rising) over time. If that was the case, then, on Condition E grounds, this has to be reflected in the differential. Otherwise, all things being equal, the balance of charges would be shifted unfairly in favour of measured customers. However, we are mindful of the Secretary of State's guidance which says that customers should not face "changes in costs significantly out of line with changes to the overall company price limit". And in line with the Secretary of State's further wish that "phasing in of any sudden large changes in charges should be considered", we would consider allowing you to take additional flexibility if the average increase in one set of charges was significantly higher than WACI. F. Special agreement information capture system, treatment of bulk supplies from shared resources Where companies share a water resource, neither of the companies involved should include details of those transactions in their SAICSs. A company will share a water resource with another company if it owns part of the assets and contributes to the operating costs of that resource both in proportion to the amount of water that it is entitled to receive from that resource. Each company should report its contribution to the operating costs of that shared resource as part of its own costs in its Regulatory Accounts and not under third party costs where bulk supply costs are recorded. G. Checking for consistency between Regulatory Accounts and principal statement weighting year measured tariff basket revenue Correcting for inaccuracies in the measured basket of the weighting year PS is a complicated process, as it involves making adjustments to the PSs for the following two years for each inaccuracy. We think that this complication is not worth the increased accuracy. Therefore, we do not expect companies to make any relevant corrections if the value of all the inaccuracies, in monetary terms, is less than 1% of service turnover. If, on the other hand, you judge that the value of the inaccuracies is more than 1% of service turnover, then we expect you to make the necessary corrections. These should include, for the water service, instances where the value of the inaccuracy implies a volume greater than 1% of distribution input. This level of inaccuracy will cause a difference between measured revenues in the Regulatory Accounts (RA) and the PS. Consistency calculations The CCIS replicates the workings underlying the checks that we do to reconcile the measured properties, measured volume and measured revenue data that you report in your PS on the one hand and in your RA and JR on the other hand. Further details of this are in section 5 of the PS guidance document. H. Changes to information requirement in the Additional Information section of PSICS The first part of table 3 of the Additional Information (AI) has the same objective as table 4 of the CCICS. Once you complete the CCICS, you may decide not to complete the first part of table 3. However, the remaining sections of table 3 of the AI must be completed. I. Submission of charges schemes and information capture systems Draft submission At the draft stage, we require you to submit the following for your company:
Please send all your hard copy submissions to Lynne Currie and the electronic copies to its@ofwat.gsi.gov.uk by 5pm on 30 September 2008. We will provide written comments on your draft submission by 5 December 2008. In the covering letter to your submission, please provide an e-mail contact for any queries. Please send a copy of your draft charges scheme to the relevant CCWater office at the same time that you submit them to Ofwat. Please state in your covering letter to CCWater whether you want your proposals for large user tariffs to be treated as confidential. Final submission At the final stage, we require you to submit the final versions of all the documents that you submitted at the draft stage, plus the following:
We expect your Auditor and Reporter to submit their reports by 12 January 2008, that is one week after the final submission deadline. However, if you want early approval and as such make your final submission early, then it would help if your Reporter's and Auditor's reports are submitted within one week of the date you make your submission. We will provide additional information about your final submission in our formal feedback letter on your draft submission. J. Key tariff policy indicators For both your draft and final submissions, please provide the information in part A of appendix 1 and submit as an attachment to the respective covering letters. K. RV modifier The RV modifier is the amount that some companies add to the standing charge for unmetered customers to reduce the effect of variations in rateable value on bills for individual unmetered customers. The RV modifier has the effect of moving an unmetered bill for a high rateable value property closer to the unmetered bill for a low rateable value property. We want to know the level of RV modifiers that companies have. Please complete the RV modifier section in part B of appendix 1. L. Revisions to text of 2009-10 charges scheme Please indicate clearly, either in an attached schedule or in the scheme itself, where you have made any changes to any part of the charges scheme that we approved for 2008-09. This will greatly speed up our task of checking the schemes. If this is not possible for any reason, please indicate by means of an appendix to the submission exactly where you have made any changes in policy. If possible, please submit your draft charges scheme in the same format as the final one. Again, this will speed up the process of checking it. M. Surface Water Drainage In our conclusions1 to our consultation2 on future charges which we are scheduled to publish on or before 31 August, we expect to confirm that the fairest method of charging non-household customers for surface water drainage (SWD) is through a site area-based charge set by reference to a customer's impermeable site area. If you do not currently charge non-household customers for SWD by site area, we will be asking you to confirm the scope and timing of any plan that you have to move to this basis of charging, or, in the absence of any such plan, to justify why you think your current method of charging for this service is more appropriate. We will provide you with further clarification of this request in due course, after the publication of our consultation response. If you have any queries on the timetable or process for the approval of charges schemes, please contact Lynne Currie on 0121 625 1302. If you have any queries on any of the Information Capture Systems, contact Samuel Okyere on 0121 625 1485. Yours sincerely Lynne Currie Head of Tariffs
2 Ofwat's future strategy for customer charges for water and sewerage services: a consultation, January 2008 Appendix 1 Part A Key Tariff Policy Indicators for 2009-10 1. Weighted average charges increase (WACI), % 2. Weighted average charges increase – water, %* 3. Weighted average charges increase – sewerage, %* 4. Target for measured/unmeasured differential – water, £ 5. Target for measured/unmeasured differential – sewerage, £* 6. Actual measured/unmeasured differential – water, £ 7. Actual measured/unmeasured differential – sewerage, £* 8. Measured household standing charge – water, £ (and % change on 2008-09) 9. Measured household standing charge – sewerage, £ (and % change on 2008-09)* 10. Trade effluent/sewerage differential (weighted average treatment basis), p/m3* 11. Household surface water rebate offered, £ per property (or property band)* Part B RV Modifiers 1. Do you apply an RV modifier? 2. If you do, what is the current level of the modifier and its proportion of the average unmeasured bill? 3. Do you have any plans to change or adjust it in the future? 4. If so, what are your objectives? What level do you plan to reach? * required from water and sewerage companies only  |
© Crown copyright |
Disclaimer & Privacy Statement |