Ofwat's capital maintenance econometric return

Ofwat notice (one page with Microsoft Word and Microsoft Excel attachments) of the arrangements for collecting information from companies for a "capital maintenance econometric return". This follows from the September 2007 consultation. Companies will need to enter the information into a Reservoir information collection system between December 2007 and February 2008.

Ofwat's general guidance on the return states that:

The purpose of the capital maintenance econometric return is to collect explanatory data necessary to review, update and run the existing econometric models used for assessing companies’ relative capital maintenance efficiency. The information collected as part of this submission will update companies’ asset positions from 31 March 1998 to 31 March 2003. This is vital to maintain the robustness of the models.

The September 2007 consultation had stated that:

The [capital maintenance econometric return] forms an essential part of our periodic review process. It is key to setting capital maintenance efficiency assumptions under our existing approach and would be part of baseline setting if we were to adopt menu regulation.

Ofwat's October 2007 consultation on menus proposes an approach to setting baselines which claims to “deliver simplification” by (amongst other things):

Removing the use of econometrics for capital maintenance.

For further information or advice please contact Franck Latrémolière.

Filed under Ofwat, Water.

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