Notes to the consolidated financial statements

3. Operating costs

	Before exceptional items, remeasurements and stranded				Exceptional items, remeasurements and stranded				Total
	2009 £m	2008 £m	2007 £m		2009 £m	2008* £m	2007 £m		2009 £m	2008* £m	2007 £m
Depreciation of property, plant
and equipment	1,058	940	830		–	–	–		1,058	940	830
Amortisation of intangible assets	64	50	41		5	4	–		69	54	41
Payroll costs	1,415	1,071	794		34	108	26		1,449	1,179	820
Other operating charges:
Purchases of electricity	2,199	1,589	1,680		28	(95)	(87)		2,227	1,494	1,593
Purchases of gas	3,228	2,011	544		334	(141)	–		3,562	1,870	544
Rates and property taxes	881	608	472		–	–	–		881	608	472
Electricity transmission services
scheme direct costs	904	574	558		–	–	–		904	574	558
Payments to Scottish electricity
transmission network owners	243	226	237		–	–	–		243	226	237
Other	2,345	1,452	1,165		326	137	5		2,671	1,589	1,170
	12,337	8,521	6,321		727	13	(56)		13,064	8,534	6,265
Operating costs include:
Research expenditure									10	13	6
Operating lease rentals
Plant and machinery									48	33	21
Other									33	30	63

*

Comparatives have been adjusted to present items on a basis consistent with the current year classification

(a) Payroll costs

					2009 £m	2008 £m	2007 £m
Wages and salaries					1,615	1,169	819
Social security costs					118	84	65
Other pension costs					160	218	132
Share-based payments					22	18	15
Severance costs (excluding pension costs)					16	14	14
					1,931	1,503	1,045
Less: payroll costs capitalised					(482)	(324)	(225)
					1,449	1,179	820

Payroll costs above represent continuing operations only. Payroll costs of discontinued operations for the year ended 31 March 2009 were £11m (2008: £16m; 2007: £37m).

(b) Number of employees

				31 March 2009 Number	Average 2009 Number	31 March 2008 Number	Average 2008 Number
UK				10,457	10,456	10,223	10,093
US				17,429	17,669	18,098	14,288
Rest of the world				–	–	5	5
Continuing operations				27,886	28,125	28,326	24,386
Discontinued operations				–	83	204	119
				27,886	28,208	28,530	24,505

The vast majority of employees in the US are either directly or indirectly employed in the transmission, distribution and generation of electricity or the distribution of gas, while those in the UK are either directly or indirectly employed in the transmission and distribution of gas or the transmission of electricity. At 31 March 2009, 3,597 employees were employed in other operations, excluding shared services.

(c) Key management compensation

					2009 £m	2008 £m	2007 £m
Salaries and short-term employee benefits					11	9	8
Post-employment benefits					3	8	5
Termination benefits					–	–	1
Share-based payments					5	3	3
					19	20	17

Key management compensation relates to the Board of Directors, including the Executive Directors and Non-executive Directors for the years presented.

(d) Directors’ emoluments

Details of Directors’ emoluments are contained in the auditable part of the Directors’ Remuneration Report, which form part of these financial statements.

(e) Auditors’ remuneration

						2009 £m	2008* £m	2007 £m
Audit services
Audit of parent company and consolidated financial statements						1.5	1.4	1.2
Other services
Audit of subsidiary financial statements pursuant to legislation						5.8	5.1	2.8
Other services supplied pursuant to legislation						2.4	2.4	2.2
Services relating to tax compliance						0.6	0.7	0.6
Services relating to tax advisory						0.3	0.5	0.7
Services relating to corporate finance transactions						0.1	0.7	1.4
All other services						0.8	0.4	1.3
Fees paid by associated pension schemes
Audit of pension schemes of the Company pursuant to legislation						–	–	0.2
						11.5	11.2	10.4
Total services pursuant to legislation						9.7	8.9	6.4
Total other services						1.8	2.3	4.0
						11.5	11.2	10.4

*

Comparatives have been restated to present items on a basis consistent with the current year classification

Other services supplied pursuant to legislation represent fees payable for services in relation to other statutory filings or engagements that are required to be carried out by the auditor. In particular, this includes fees for reports under section 404 of the US Public Company Accounting Reform and Investor Protection Act of 2002 (Sarbanes-Oxley) and audit reports on regulatory returns.

Other services include fees relating to corporate responsibility reporting, treasury related projects and sundry services, all of which have been subject to Audit Committee approval.

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