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On 27 July 2020, HAL sent us a request that we should make an adjustment to its regulatory asset base (RAB) to address the shortfall in the revenue it expected to recover in 2020 and 2021 due to the severe impact of the covid-19 pandemic on its business. Since then, HAL has made a series of further representations to us in support of its request.
CAP2140 sets out the CAA's response to HAL's request and its further representations. It provides our decision on the regulatory intervention package which we will apply ahead of making our proposals for the next (H7) price review. It follows on from our October 2020 and February 2021 Consultations on these matters.
In particular, this document sets out:
CAP2139 summarises our broad approach to the remainder of the Heathrow Airport Limited (HAL) H7 price control review programme. It deals with the following main issues:
Heathrow Airport Limited
CAP1996 discusses our treatment and assessment of two categories of historical capital expenditure (capex) incurred by Heathrow Airport Limited (HAL), namely capex incurred during the Q6 price control period; and early expansion costs incurred before March 2020.
In relation to the Q6 capex review, this working paper covers
In relation to early expansion costs, this working paper provides:
In October 2020, we published a consultation document in response to the request made by Heathrow Airport Limited (HAL) in July 2020 for the CAA to change its approach to the calculation of HAL's regulatory asset base (RAB) to take account of the impact of the covid-19 pandemic.
CAP2098 and CAP2098A provide our latest views on HAL's request and our developing thinking on whether HAL's price control framework should be changed in response to the circumstances created by the covid-19 pandemic. In particular the document sets out:
Responses to CAP2098
CAP1966 and CAP1966A are published in response to the request made by Heathrow Airport Limited (HAL) in July 2020 for the CAA to change its approach to the calculation of its regulatory asset base (RAB) to take account of the actual and expected impact of the covid-19 pandemic on its revenues in 2020 and 2021. It provides our initial views on HAL's request and proposes next steps for consultation.
The document sets out:
Stakeholder submission published alongside this consultation
Responses to CAP1966
CAP1964 discusses our approach to reviewing Heathrow's Airport Limited (HAL's) capital expenditure (capex) incurred during the Q6 price control. In particular, it includes:
CAP1951 follows on from the June 2020 Consultation (CAP1940) and provides further details of our proposed approach to capital efficiency incentives for Heathrow Airport Limited including:
Responses to CAP1951
CAP1940 deals with the following main issues:
HAL has paused its work on capacity expansion at Heathrow airport. We also address the regulatory treatment of expenditure incurred to date on expansion.
Responses to CAP1940
CAP1914 provides an update on our programme for the development of the economic regulation of Heathrow Airport Limited (“HAL”) in the light of the very significant uncertainties brought about by:
It outlines our proposals for changing our overall approach to developing the regulatory regime for HAL in the light of these developments.
Responses to CAP1914
CAP1876 consults on our approach to developing the regulatory framework for Heathrow Airport Limited (HAL) to support the efficient delivery of capacity expansion at Heathrow airport.
It outlines and consults on our approach to incentives for efficiency, allowed returns and other financial issues.
This consultation follows on from the March 2019 consultation on the regulatory framework for HAL (CAP1782).
Responses to CAP1876
CAP1871 provides further information on costs that Heathrow Airport Limited (HAL) expects to incur in advance of receiving a development consent order (DCO) under the Planning Act 2008 for the expansion of Heathrow airport.
It outlines the approach to this early spending that we consider is in the best interest of consumers and the regulatory arrangements that should apply.
This consultation follows on from our July 2019 consultation on early costs and the regulatory timetable (CAP1819).
Responses to CAP1871
CAP1852 gives notice under section 22(6) of the Civil Aviation Act 2012 ('CAA12') of the CAA's decision to modify Heathrow Airport Limited's (HAL) Licence granted under section 15 CAA12. The modifications that the CAA has decided to make are to:
The decision on these licence modifications follows on from the notice issued by the CAA under section 22(2) of CAA12 in August 2019 ('the August 2019 Consultation'), which built on the CAA's consultations on interim price control arrangements in February 2019 ('the February 2019 Consultation') and April 2018 ('the April 2018 Consultation') and its consultation on the regulatory framework to support capacity expansion at Heathrow in March 2019 ('the March 2019 Consultation').
CAP1847 follows on from the consultations that we published on the regulatory framework to support capacity expansion at Heathrow airport in January, June and December 2017 and April and October 2018. It provides an update of our policy on the surface access costs that Heathrow Airport Limited (“HAL”) should be allowed to recover from airport charges.
As noted above we have consulted a number of times on surface access policy and now regard the high-level policy as set out in this paper as settled. Nonetheless, we will consult where appropriate on the application of this policy to projects or groups of projects that HAL brings forward for funding under these arrangements (and if the application of this policy were to reveal unexpected difficulties we do not rule out consulting further on the underlying policy).
CAP1832 focuses on options the CAA is considering to provide further assurance that Heathrow Airport Limited (“HAL”) operates in a financially resilient manner and that risks to consumers arising from financial distress are appropriately mitigated while not cutting across the financing arrangements HAL already has in place to support its regulated business. It considers options for possible changes to the financial resilience and ring fencing provisions in HAL's licence that may be appropriate, in particular, given the scale and challenges of the development of new capacity at Heathrow airport. It develops further the thinking we set out in our consultations on the regulatory framework to support capacity expansion at Heathrow in June and December 2017.
Responses to CAP1832
CAP1825 gives formal notice under section 22(2) of the Civil Aviation Act 2012 (CAA12) of our proposal to modify Heathrow Airport Limited's (HAL) economic licence to:
• extend the current price control by a two year interim period, up to 31 December 2021, taking account of the commercial arrangement between HAL and certain airlines for this period;
• include a new licence condition to promote economy and efficiency; and
• make minor changes to update the price control arrangements, remove obsolete terms and make a change to HAL's regulatory audit requirements to reflect current auditing guidelines.
This statutory consultation follows on from our consultation on interim price control arrangements in February 2019 (see CAP1769) and our consultation on the regulatory framework to support capacity expansion at Heathrow in March 2019 (see CAP1782).
Responses to CAP1825
CAP1819 document focuses on the costs of expansion incurred by Heathrow Airport Limited (“HAL”) in advance of receiving a development consent order (“DCO”) under the Planning Act 2008 for the expansion of Heathrow airport. It deals with the new information that has emerged on these costs and notes that there could be significant implications for the wider programme timetable, depending on the levels of this spending and how we propose to treat the expenditure in the regulatory framework.
It also deals with issues relating to the regulatory timetable and updates the guidance we provided previously to HAL on the scope and content of its price control business plans.
Responses to CAP1819
CAP1812 sets out our updated assessment of the affordability and financeability of the development of new runway capacity at Heathrow. It follows on from the initial assessment of affordability and financeability included within our consultation in April 2018, updating that assessment to take account of developments in HAL's masterplanning process for the expansion of Heathrow Airport.
Responses to CAP1812
CAP1782 follows on from the consultations that we published on the regulatory framework to support capacity expansion at Heathrow airport in January, June and December 2017 and April and October 2018. It consults further on the development of the regulatory framework and includes:
CAP1782A, Arcadis high-level assessment of the Arora scheme proposal, by Arcadis, March 2019
CAP1782B, Possible ways of implementing ex-ante efficiency incentives for Heathrow's capital expediture, by CEPA, April 2019
CAP1782C, report on gearing sharing mechanisms and application to LHR, by EY, April 2019
Responses to CAP1782
We asked Arcadis to carry out an assessment of how Heathrow Airport Limited (HAL) had reflected the consumer interest in developing its expansion masterplan. This was an opportunity to gather information on HAL's masterplanning process, as well as evidence of how HAL was considering consumer views.
The CAA is consulting on the interim arrangement to apply after the end of the Q6 price control for Heathrow Airport Ltd.
CAP1769 seeks views from stakeholders on the commercial arrangements which are proposed to put in place and whether they are in the interests of consumers. The consultation also outlines proposed changes to the Heathrow licence.
The report follows on from our recent consultations CAP1610 and CAP1658.
Responses to CAP1769
We asked Arcadis to carry out an initial assessment of Heathrow Airport Limited's (HAL's) procurement strategy for capacity expansion at Heathrow airport. This was primarily an information gathering exercise but presented Arcadis with the opportunity to comment on the appropriateness of HAL's procurement strategy and activities.
CAP1762, working paper on the cost of capital: the implications of the RP3 draft performance plan for Heathrow Airport Limited (HAL), February 2019
Responses to CAP1762
We have published a review of the planning costs incurred by Heathrow Airport Limited (HAL) as part of its bid to build a third runway.
This independent review carried out by PwC is intended to increase transparency and allow interested parties to comment on the process so far. The review also looks at the level of efficiency associated with the planning costs.
This short consultation document sets out our initial views on the planning costs incurred by HAL during the period of the review.
Responses to CAP1752
CAP1722 follows on from the consultations on the regulatory framework to support capacity expansion at Heathrow airport that we published in January, June and December 2017 and April 2018. It consults further on the development of the regulatory framework and includes:
It also complements our letter to the Department for Transport of September 2018 on the progress of the “Enhanced Engagement” process under section 16 of the Civil Aviation Act 1982 reporting on airport-airline engagement.
We have also published an FTI report on scarcity rents at Heathrow Airport (CAP1722b)
Responses to CAP1722
We have published this Technical information note in the context of the possibility, raised by stakeholders, that capacity expansion at Heathrow may be developed by more than one party. Alternative means of delivering new capacity (or elements of it) have been suggested by respondents to our recent consultations (CAP1610 and CAP1658). The note also addresses issues raised by the Arora Group and HAL.
Responses to the Technical information note
CAP1674 focuses on technical issues relating to the cost of capital and incentives for the next main H7 price control review of HAL.
CAP1658 follows on from our consultations on the regulatory framework to support capacity expansion at Heathrow in June and December 2017. It consults further on the development of the regulatory framework and includes:
Our final report to the Secretary of State under section 16 of the Civil Aviation Act 1982 reporting on airport-airline engagement will be published shortly.
Responses to CAP1658
CAP1651, Guidance on preparation of the annual budget and statement for those costs associated with obtaining planning permission for a new northwest runway, April 2018
CAP1513,Policy Statement, February 2017
CAP1469, Final Proposals, November 2016
Responses to CAP1469
CAP1435, Initial Proposals, July 2016Responses to CAP1435
CAP1610 follows on from the June 2017 Consultation on the core elements of the regulatory framework to support capacity expansion at Heathrow.
It confirms our approach in respect of key elements of the regulatory framework for Heathrow Airport Limited and discusses issues around the relationship between the regulatory framework and alternative delivery mechanisms, the cost of capital, financeability, financial resilience, the regulatory treatment of early construction costs and the further extension of existing Q6 price control.
Responses to CAP1610
CAP1541 follows from our January 2017 consultation CAP1510 on the priorities and timetable for our programme of work on the economic regulation of new capacity at Heathrow. It confirms our priorities and seeks views on our latest thinking on the development of core elements of the regulatory framework for Heathrow Airport Limited (HAL). These core elements also build on our CAP1383 on Strategic Themes for the review of HAL's charges. The consultation also updates our thinking on the timetable issues discussed in CAP1540, our guidance for HAL in preparing its business plans for the H7 price control review.
Responses to CAP1541
CAP1540 Guidance for Heathrow Airport Limited in preparing its business plans for the H7 price control, April 2017
Responses to CAP1540
CAP1510 Consultation on CAA priorities and timetable, January 2017
Responses to CAP1510
Future of service quality regulation for Heathrow Airport Limited: Consultation on the design principles for a more outcome-based regime
CAP1476 - Consultation document
Responses to CAP1476
CAP1383, Discussion document
CAP1383a, Technical appendices
CAP1383b, First Economics, Report on regulatory innovations
Responses to CAP1383
The four strategic themes
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