RD 5/01

TO REGULATORY DIRECTORS OF ALL
WATER AND SEWERAGE COMPANIES AND
WATER ONLY COMPANIES

20 April 2001

Dear Regulatory Directors

REGULATORY ACCOUNTS FOR 2000/01
REPORTING REQUIREMENTS – RAG 3.04

Regulatory Accounts should be submitted as soon as possible after the end of the financial year and before 15 July. Five copies of the printed reports and confidential information should be submitted, in addition to five copies of the statutory accounts and the holding company's group accounts. Copies of the ultimate holding company's consolidated accounts and those of common services companies should also be submitted, where applicable.

In past years there have been variations between information included in the June Return Reports and that submitted with the Regulatory Accounts. Companies are required to have their June Return information audited and it is expected that information in the June Return submission and the Regulatory Accounts will be consistent.

Reporting Basis

Regulatory Accounts for 2000-01 should be drawn up on the basis of the regulatory accounting guidelines currently in force. All accounting standards extant at 31 March 2001 should be complied with (except FRS12 as detailed in RD 11/00). If the requirements of these conflict with those included in RAGs, please contact me.

Issues noted in RD11/00 and corresponding letters in previous years remain relevant.

Analysis of Turnover

In line with the June Return submissions the analysis of turnover and operating income in the notes to the Regulatory Accounts should be further disaggregated to identify large user revenues. The categorisation should be provided in the same sequence as the June Return Table 23.

Reflecting changes in RPI

The relevant measures of changes in RPI to be used in preparation of the 2000-2001 current cost accounts are as follows:-

                                                                       Year End                                           Year Average

1999-2000 to 2000-2001                             2.3                                                      3.0

1998-1999 to 1999-2000                             2.6                                                      1.6

1997-1998 to 1998-1999                             2.1                                                      3.2

1996-1997 to 1997-1998                             3.5                                                      3.3

The above percentage figures are calculated from the changes in the retail price indices of:-

                                                                     Year End                                             Year Average

2000-2001                                                   172.2                                                   171.3                                 

1999-2000                                                   168.4                                                   166.4

1998-1999                                                   164.1                                                   163.8

1997-1998                                                   160.8                                                   158.8

1996-1997                                                   155.4                                                   153.7

Review of the RAGs

As indicated in Ofwat's Forward Programme 2001-02, there will be a review of all the Regulatory Accounting Guidelines except RAG 5. A consultation paper will be issued shortly. This review will take account of recommendations from the Joint Regulators' Working Group on regulatory accounting and ensure best practice is followed. It is not intended to change the fundamental principles of regulatory accounting.

I would be grateful if a copy of this letter could be shown to your auditors.

Yours sincerely

Keith Mason
Director of Regulatory Finance