RD 12/02

TO THE REGULATORY DIRECTORS OF ALL
WATER AND SEWERAGE COMPANIES AND
WATER COMPANIES                                                                                                  4 April 2002

 Dear Regulatory Director

INTEREST RATES FOR REQUISITIONS AND INFRASTRUCTURE CHARGES -
SIX MONTHLY REVIEW

The basis on which Ofwat approves interest rates for requisitions and infrastructure charges was set out in a letter to companies on 9 April 1990 (FD4).

The latest published value of the reference rate (10 year gross redemption gilt yield) is 5.24% (March 2002). The rates that companies must adopt from 1 April 2002 will therefore be increased from those set out in my letter of 7 November 2001 (RD 18/01). They are, for borrowing, 6.75% (water and sewerage companies) or 7.00% (water only companies) and, for deposits, 4.50%.

Any queries on the content of this letter should be addressed to Peter Jordan on 0121 625 1312.

I am copying this letter to Rodney Anderson (DEFRA), Bob Macey (National Assembly for Wales) and Pamela Taylor (Water UK).

Yours sincerely

Paul Hope

Head of Tariffs