Calculation of the Target Allowed Turnover Sample Clauses

Calculation of the Target Allowed Turnover. The Return on Capital Employed (ROCE) for Manx Gas would be permitted to achieve is 6.99%. Any amount of turnover which is over or under recovery against this percentage is either repayable to or collectable from Domestic Customers. The Heads of Terms Agreement permits Manx Gas a Target Allowed Turnover which is calculated as (6.99%) x Modified Asset Value (MAV) minus Eligible Financial Costs, this excludes inter-company loans, cash, and inter-company payments. The MAV relates only to assets which are used to supply gas to Domestic Customers. The detail of what will be included/allowable as Domestic Assets is to be agreed between the Departments and Manx Gas and will be included in the final agreement. Similarly, the MAV only includes the liabilities that relate to the Domestic Customer business, these liabilities also exclude operational cash balances over £1.5m and intercompany borrowing which is not directly related to the Domestic Customer gas business. There is also provision in the Heads of Terms to put controls in place to ensure any capital expenditure made by Manx Gas is appropriate and warranted (and thus the amounts to be taken into account when calculating the MAV). The HOTs include a provision which means that the Communications Commission must approve capital expenditure if the amount to be expended exceeds 110% of what has been spent by Manx Gas on capital on average over the preceding 3 years. The primary purpose of this clause is to ensure that only necessary expenditure occurs given the main method of control is a cap on return on capital rather than a price control. The Eligible Costs that are to be included in the calculation of the allowed ROCE include, that part of the Depreciation Costs (as shown on the company accounts) as is attributable to assets which serve the Domestic Customer Business, the cost of Gas from its supplier, and its Base Operating Costs. The Departments will agree an amount for the Base Operating Costs (based upon what costs are reasonable for the operation of the Domestic Customer Business) and this amount will be included in the final agreement and will then be increased adjusted annually by in line with CPI during the Term. As Manx Gas would effectively be operating under partial regulation there is a need to ensure that issues such as cross-subsidisation do not occur in order to protect consumers. The Commission would be required to develop and maintain cost models for assessing compliance with the Proposed Agr...

Calculation of the Target Allowed Turnover. 3.2.3.1. The Target Allowed Turnover for any Financial Year shall be the Target Allowed Return Percentage multiplied by the MAV as at the end of the immediately preceding Financial Year plus the Eligible Costs for such Financial Year. 3.2.3.2. The Eligible Costs for any Financial Year will be the sum of: (a) the Relevant Proportion of the Depreciation Cost in the immediately preceding Financial Year; (b) the Gas Commodity Cost in the immediately preceding Financial Year; (c) the Base Operating Costs for such Financial Year (reflecting any prior adjustments in accordance with clause 3.2.5.3, meaning the original Base Operating Costs as increased in accordance with clause 3.2.4.3); (d) the Pension Cost in the immediately preceding Financial Year; and 3.2.3.3. The Eligible Costs will exclude: (a) financing costs both of a profit and loss and balance sheet nature, such as interest and source of finances (regardless of whether they are short or long term), including costs relating to inter-company loans and non-operational cash and bank balances; and (b) taxation on income and any associated corporation tax or deferred tax (all of which must be construed in accordance with the provisions of the Income Tax Act 1970); and (c) inter–company payments that do not reflect the provision of goods or services but that serve to transfer funds between entities.