RD 11/00

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

6 April 2000

REGULATORY ACCOUNTS FOR 1999-2000
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 1999-2000 should be drawn up on the basis of the regulatory accounting guidelines currently in force. All accounting standards extant at 31 March 2000 should be complied with (except FRS12 as detailed below). If the requirements of these conflict with those included in Rags, please contact me.

Issues noted in RD15/99 and corresponding letters in previous years remain relevant.

Infrastructure renewals accounting

Both FRS12 - Provisions, contingent liabilities and contingent assets and FRS15 - Tangible Fixed Assets are effective for the 1999-2000 financial year. As a consequence full infrastructure renewals accounting can no longer be used for statutory accounts purposes. For the purposes of regulatory accounts, however, full infrastructure renewals accounting should be continued and the relevant sections of FRS12 and FRS15 dis-applied.

A full reconciliation between the statutory accounts and the historic cost regulatory accounts should be included within the regulatory accounts in accordance with the pro forma set out in Appendix 1.

Revisions to MEA's

The majority of companies revised their MEA values within their 1999 Business Plans. Where this is applicable companies should include all the effects of the asset revaluation in the 1999-2000 regulatory accounts. This is mandatory for all companies for the current year in order to provide a consistent position across the industry. (A pro-forma is provided in Appendix 1)

Dividends

The Appendix to Condition F requires companies to report on the value of any dividend paid to an associate and also to report on the basis on which the value of the dividend has been established. Companies are reminded of this requirement and the need for a comprehensive explanation of the basis of the dividend.

Reflecting Changes in RPI

The relevant measures of changes in RPI to be used in preparation of the 1999-2000 Regulatory Accounts will be advised when available.

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

Yours sincerely

Keith Mason

Head of Regulatory Accounts and Business Affairs

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Appendix 1

In the preparation of its statutory accounts, the company has followed common industry practice and adopted the infrastructure renewals accounting basis as set out in FRS15: Tangible Fixed Assets. However for the purposes of the Regulatory Accounts, Ofwat has requested that FRS15 is not applied for infrastructure renewals accounting, thereby providing a basis consistent with prior years. A reconciliation to the balance sheet shown in the statutory accounts is set out below:
	Infrastructure Assets
	£m
Cost
Cost at 31 March per Regulatory Accounts	A
Adjustment to opening balance	B
Infrastructure renewals expenditure capitalised in the year	C
Cost at 31 March 2000 per Statutory Accounts	A+B+C
Depreciation
At 31 March per Regulatory Accounts	D
Adjustment to opening balance	E
Depreciation charge for IRE	F
At 31 March 2000 per Statutory Accounts	D+E+F
Net Book Value
At 31 March per Regulatory Accounts	A-D
Adjustment for Infrastructure renewals accounting	B+C-E-F
At 31 March 2000 per Statutory Accounts	A+B+C-D-E-F
Provisions and Liabilities
At 31 March per Regulatory Accounts
Less Infrastructure renewals accrual
At 31 March 2000 per Statutory Accounts
Debtors
At 31 March per Regulatory Accounts
Less Infrastructure renewals prepayment
At 31 March 2000 per Statutory Accounts

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