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| |  Price review 2009 |
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What is the price review?
At a price review we set annual price limits for each company for five years. To do this we review the companies' business plans and assess their future revenue needs. These reflect assumptions about what they need to spend to meet their capital expenditure programmes and to finance their operations. We also make assumptions about the cost of borrowing, capital charges, companies' operating costs and about future operating and capital efficiency savings.
We set price limits for each company by forecasting the revenue that it is likely to need to run its business efficiently. We then compare this with the revenue the company is expected to receive and calculate the percentage change needed after allowing for inflation.
As part of our determinations we also set out the minimum services we expect companies to deliver, but the companies decide how they will meet our targets.
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