RD14/06: Consultation: Review of regulatory accounting guidelines 1, 3 and 4 and of the regulatory accounts tables (18-29) for the June return 2007-10
To Regulatory Directors of all
water and sewerage companies
and water only companies
Dear Regulatory Director
Consultation: Review of regulatory accounting guidelines 1, 3 and 4 and of the regulatory accounts tables (18-29) for the June return 2007-10
This consultation sets out our proposals for the regulatory accounts for 2006-07 and for the associated tables within the 2007 June return.
In our consultation exercise for the June returns in July 2005 (RD11/05), 'Consultation: AMP4 June Returns 2005-10', we stated that we would consult separately on changes to both the regulatory accounting guidelines (RAGs) and the associated June return tables. This will allow us to:
- reflect changes to statutory reporting requirements; and
- align the regulatory accounting tables with our required inputs in our financial model Aquarius 3.
We do not propose any changes to RAGs 2 or 5. These changes have been discussed at a meeting of the information requirements consultative group (IRCG). This group includes representatives from water companies, auditors and reporters.
In the 2007 June return we will require companies to also provide the comparative figures for 2005-06 in the revised format.
The changes also reflect requirements in respect of the provision in the Water Act 2003 for the disclosure of information relating to the links between directors' pay and standards of performance. Our view is that such information would be best reported in the regulatory accounts themselves and we do not see a need for repetition in the June return. We set out the requirement for this in RD06/06 'Regulatory accounts for 2005-06 reporting requirements - RAG 3.05' for the 2005-06 regulatory accounts. The requirements set out in RD06/06 have been incorporated in RAG3.
We intend to introduce a requirement for an 'Operating and Financial Review' (OFR) for the 2007 regulatory accounts. This would have been a requirement for all listed UK companies for the 2006 year end. On 28 November 2005, the Chancellor of the Exchequer announced that the statutory requirement to produce an OFR would be removed. The requirement was repealed on 12 January 2006. However, RAG 3.06 will make this a requirement for all water companies.
The Accounting Standards Board subsequently issued a 'Reporting Statement' on the OFR (26 January 2006), which describes best practice that should be adopted for companies who choose to publish an OFR. We believe that water companies should use the 'best practice' described in this reporting statement.
The Companies (Audit, Investigations and Community Enterprise) Act 2004 introduced a clause, which requires directors to make a statement on the provision of information to auditors. We intend to make this a requirement for the regulatory accounts.
I enclose a copy of our consultation paper.
I would appreciate your comments on the changes to the Regulatory Accounting Guidelines and associated June return tables by 30 November 2006. If possible, comments on the June return table structures should be completed and returned to me before this date. Please note that responses will be published on our website.
Please send your comments to:
Robert Lee
Deputy Team Leader
Regulatory Accounts and Business Affairs
Ofwat
Centre City Tower
7 Hill Street
Birmingham B5 4UA
or by e-mail to: robert.lee@ofwat.gsi.gov.uk
or by fax to: 0121 625 3609
Yours sincerely
KEITH MASON
Director of Regulatory Finance & Competition
Encs. Consultation paper
