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Letters to Regulatory Directors
RD29/03 21 August 2003 Dear Regulatory Director APPROVAL OF CHARGES SCHEMES 2004-05: TIMETABLE AND PROCESS This letter sets out the process and timetable for the approval of charges schemes for 2004-05. It begins with a summary of the timetable, and then provides more detail on the process for submitting draft charges schemes and principal statements. Timetable summary · August 2003 - Ofwat issues RD letters on policy review work. · 3 October 2003 – Companies submit draft charges schemes and principal statements. · Mid-October 2003 to mid-November 2003 – Meetings/correspondence with companies on Ofwat concerns about draft charges schemes. · 3 November 2003 – WaterVoice Committees to provide comments on draft charges schemes. · 1 December 2003 – Ofwat issues RD letter on principal statements. · 5 December 2003 (or earlier) – Ofwat issues formal feedback letters on draft submissions. · Mid-December 2003 to 7 January 2004 – Clarification of any outstanding issues (through correspondence and, if necessary, meetings). · 13 January 2004 – Companies submit final charges schemes and principal statements. · 13 February 2004 (or earlier) – Ofwat issues letters approving companies' charges schemes. Policy review We have been reviewing several policy areas over the summer. The areas we have looked at are: · Conclusions resulting from RD05/03 on non-household tariff policy issues – covering standby charges and subscribed demand tariffs. · Surface water drainage. · Measured/unmeasured tariff differential. We intend to publish our views on these issues in RD letters in August. We will consult on our proposed changes to the differential, which will not take effect until the 2005-06 charging year. Draft charges schemes We should receive your draft charges scheme and principal statement for 2004-05 by 5pm on 3 October 2003. Please provide six copies (at least one unbound) of the charges scheme and three copies of the principal statement. Send your submissions to Paul Hope. We do not require the additional information section of the principal statement, special agreement information capture system and large user information capture system at the draft stage. Nor do we require either an Auditor's or Reporter's Report on the draft principal statement. In addition to three hard copies of your draft principal statement, we also require an electronic version. Please use last year's information capture system to prepare your submission. Parts of the information capture system are protected to prevent changes. We have set out the process to remove this protection in Annex 1. If you no longer hold an electronic copy of the information capture system please contact Suzanne Wright on 0121 625 1389. Please send a copy of your draft charges scheme to the Regional Manager of the relevant WaterVoice Committee at the same time that you submit it to Ofwat. Please state in your covering letter to the WaterVoice Committee whether you want your proposals for large user tariffs to be treated as confidential. We will provide written comments on your draft submission by 5 December 2003. All items Retail Price Index – assumption for November 2003 You must base your draft principal statement on Ofwat's estimate of the annual change in the Retail Price Index to November 2003. To ensure consistency, all companies should use an assumption for inflation of 2.7%. Revisions to text of 2003-04 charges scheme Please indicate clearly, either in an attached schedule or in the scheme itself, where you have made any changes to the text of the charges scheme approved by Ofwat for 2003-04. This greatly speeds up our task of checking the schemes. If this is not possible, due to a restructuring of the charges scheme, please indicate 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 them. Key tariff policy indicators Please set out in an Annex to your draft charges scheme submission the calculated or implied values for key charging policy indicators for the charging year 2004-05 (in November 2003 prices). Please use the attached pro forma for this (Annex 2). Measured / unmeasured tariff differential Last year we calculated the official maximum level of the differential as £34. We expect the maximum to remain constant at £34 for 2004-05. Parts of the calculation depend on the value of November 2003 all items RPI. We will confirm the maximum level of the differential for 2004-05 at the same time as confirming the value of November's RPI in December. Take-up of recent tariffs You should provide, with your draft submission, the number of customers at 30 September 2003 on any tariff for which you forecast take-up in your previous principal statement. Please provide a split for measured/unmeasured households and non-households, where appropriate. Additional Queries Please provide in the covering letter to your draft submission an e-mail contact for any queries. Principal statement RD letter and information capture systems On 1 December 2003 we will issue a RD letter containing guidance on how to prepare the 2004-05 principal statement, special agreement and large user information capture systems. We will enclose with the RD letter the relevant information capture systems for 2004-05, in Excel 97 format. You will need to enter the final ONS figure for the November 2003 all Items RPI in the principal statement information capture system. Submission of final charges scheme 2004-05 and principal statement We will provide formal approval within 30 days of receipt of your final documents. If you want us to approve your charges scheme before 6 February 2004 you must submit it before 6 January 2004. This year we will require Reporters to scrutinise the revenue details in your Additional Information. This information is important because we use it to ensure that you are complying with condition E. We also use it to calculate average bills for the Water and Sewerage Bills leaflet and for the tariffs report. We want to ensure that: · you have correctly reported revenue for the last complete charging year for households and non-households in the principal statement additional information, and that this is consistent with the June Return table 23, lines 1 and 2; · you have estimated provisional and forecast revenues on a basis consistent with both the additional information to the principal statement and the respective year's charges. You must make no allowance for bad debts. And you must allocate revenues between households and non-households on a basis consistent with the way you allocated revenue for the previous charging year; and · we understand any further assumptions that you make. Your Reporter must examine your methodology, revealing any assumptions you have made, and comment on whether it is consistent with our objectives. If you have any queries on the timetable or process for the approval of charges schemes or principal statements for 2004-05 please contact Paul Hope on 0121 625 3612 or Suzanne Wright on 0121 625 1389. Yours sincerely Paul Hope Head of Tariffs Annex 1 Process to remove protection from 2004-05 Principal Statement Information Capture System Create a copy of the principal statement Open copy of principal statement Press "Enable Macros" and then "Continue" Go to cell Q3 in principal statement sheet (cell currently has "1" entered and is next to "version") Type in '03Generatewip' – capital G is required. Save file Close file (click no to save file) Re-open file (press "Enable Macros") If you are unsuccessful in removing the protection, start the process again, beginning with the copying of the principal statement, and follow the above instructions exactly. Once you have removed protection any cells and formulas can be changed. Annex 2 Key Tariff Policy Indicators: Draft Charges Schemes for 2004-05 weighted average charges increase (WACI), % weighted average charges increase – water, %* weighted average charges increase – sewerage, %* measured/unmeasured differential – water, £ measured/unmeasured differential – sewerage, £* household standing charge – water, £ (and % change on 2002-03) household standing charge – sewerage, £ (and % change on 2002-03)* trade effluent/sewerage differential (average treatment basis), p/m3* household surface water rebate offered, £ per property (or property band)* * required from water and sewerage companies only  |
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