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ORR recommends higher freight charges

A new package of charges for freight operators has been proposed by the ORR, to be introduced from 2016.

It follows a consultation into how the costs can best be balanced through the industry, but freight providers and campaigners say the potential 23% cost increase on today’s level is “disappointing” and for some sectors “deeply concerning”.

Freight currently creates costs of between £280m and £400m each year, through factors such as track wear, but freight operators only pay around 21-28% of this through minimal fixed costs.

The ORR plans to set a maximum cap of £1.68 per 1000 gross tonne kilometre on the average variable usage charge that freight operators will pay to access the network in CP5.

A new freight specific charge will also be introduced. For ESI coal, the charge will be capped at a maximum of £4.04 per 1000 gross tonne mile (kgtm); for nuclear fuel the charge will be capped at £11.64 per kgtm; and for iron ore at £2.96 per kgtm.

ORR’s director of markets and economics, Cathryn Ross, said: “Under the current regime, freight companies only pay a small proportion of the costs they create using the network – and we need to redress this balance.

“The new charges, capped at manageable levels, will mean freight operators paying, at most, a third of the costs their services create. This will help to ease some of the burden from taxpayers’ and passengers’ shoulders.”

The new charges will be introduce gradually, between 2016 and 2019, to allow businesses time to adjust and plan accordingly.

Maggie Simpson, Rail Freight Group executive director, said: “The rail freight sector is committed to increasing its efficiency and contributing to a lower cost railway. But significant increases in access charges – such as the potential 23% rise for all traffic – risks destabilising the sector and forcing business back to road. ORR has made some welcome decisions, but the overall package of conclusions does not give the comfort and confidence necessary for rail freight to fulfil its potential in the next five year period. We will be pressing ORR and Network Rail to ensure that a more satisfactory position can be reached by the summer.”

GB Railfreight managing director John Smith said the “deeply disappointing” plans could threaten the competitiveness of the growing industry and could “counter the ORR’s duty to promote the use and growth of freight on rail”.

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