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RD 11/01

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

                                                                                                                                                    14 August 2001

Dear Regulatory Director

APPROVAL OF CHARGES SCHEMES 2002-03: PROCESS AND TIMETABLE

This letter sets out the detailed timetable Ofwat will follow in approving companies' Charges Schemes for 2002-03. The key stages and dates are as follows:

• Early July 2001 to mid August 2001 – Meetings with all Water and Sewerage Companies (WaSCs) and CSCs, and the Water only Companies (WoCs) who requested them.
• Mid-August 2001 to mid-September 2001 – Ofwat sets out its conclusions to tariffs policy issues identified in the Forward Programme;
• 6 September 2001 – Ofwat issues detailed instructions on process for submission of draft Charges Schemes and draft Principal Statements;
• 5 October 2001 – Companies submit draft Charges Schemes and draft Principal Statements to Ofwat, with copies to the CSCs.
• Mid-October 2001 to Mid-November 2001 – Meetings/correspondence with companies on Ofwat concerns about draft Charges Schemes;
• 5 November 2001 – CSCs to provide comments on draft Charges Schemes to Ofwat.
• 6 December 2001 – Ofwat issues Principal Statement RD letter and Information Capture System (ICS);
• 7 December 2001(or earlier) – Ofwat provides formal written comments to companies on draft Charges Schemes;
• Mid-December 2001 to 7 January 2002 – Clarification of any outstanding issues (through correspondence, and by exception, meetings);
• 15 January 2002 – Submission of final Charges Schemes and Principal Statements; and
• 15 February 2002 (or earlier) – Ofwat issues approval of Charges Schemes letters.

Meetings with companies and CSCs

To date meetings have been held with nine of the ten WaSCs and two other WoCs who specifically requested to meet us. The CSCs were in attendance for all of our meetings with the WaSCs, and notes of all the meetings have been copied to Regional Managers.

Tariffs Policy Issues

We have now completed further work on optional low user tariffs and reduced charges for customers with unadopted sewers (MD 165 issues outstanding) and are in discussions with DEFRA. We will set out our position on both issues for 2002-03 in a letter to companies by end of the first week of September 2001.

We have also undertaken further work on the methodology for allocating costs between the component elements of trade effluent tariffs and are taking forward any issues arising through bilateral contacts with individual water and sewerage companies.

We will be setting out our positions on the other tariff policy issues identified in the Ofwat Forward Programme in time for companies to take account of these for draft Charges Schemes for 2002-03.

Draft Charges Scheme and Draft Principal Statement

Your draft Charges Scheme and draft Principal Statement for 2002-03 should arrive at Ofwat no later than 5 October 2001. At the same time as you submit your draft Charges Scheme to us, a copy should be sent to the Regional Manager your CSC. We set out our views on the confidentiality of draft Charges Schemes in RD 15/00. We will provide detailed instructions on how to submit draft Charges Schemes by no later than 6 September 2001.

Principal Statement RD letter and Information Capture System (ICS)

We will issue an RD letter which contains guidance on how to prepare the 2002-03 Principal Statement, Special Agreement and Large User Information Capture Systems on 6 December 2001. This is earlier than in previous years and is in response to requests for early issue from a number of companies. This means that companies will be required to enter the final ONS figure for November 2001. All Items RPI for themselves.

The Principal Statement Information Capture System for 2002-03, in Excel 97 format, will be enclosed with the RD letter.

Submission of final Charges Scheme 2002-03 and Principal Statement

We will provide formal approval within 30 days of receipt of your final documents. Companies who want approval before 8 February 2002 will be expected to submit before 8 January 2002. No approvals will be given before 1 February 2002.

If you have any queries on the above please do not hesitate to contact either myself (until 30 August) on 0121 625 1320 or David Musco on 0121 625 3621.

Charles H Whitworth

Head of Tariffs