Rail franchises operators & contracts

16.12.16

ORR opens consultation on changes to TOC charges

Rail operators will be required to pay fixed charges from 2018 as part of new proposals from the ORR.

The ORR has previously said it supports a greater role for open access operators, who are at risk of being deterred by the cost of franchise bidding.

In the new consultation, it announced that it has chosen to recover fixed costs from all passenger operators, including open access operators, in PR18.

“This would represent a step forward in terms of transparency and cost reflectivity, and could facilitate more competition in passenger services,” the report says.

The ORR said the charges would be introduced following a ‘market can bear’ test to establish which passenger market segments could pay the charges.

It considered alternate options, where the amount operators pay is linked to their use of capacity or their access rights, but decided against them because they require too wide a scale of changes at this time.

However, the ORR noted that these alternate options could form part of a “longer term direction of travel”.

It said that costs linked to capacity utilisation could be introduced if a way to measure utilisation is introduced by the 2023 period review, while charges linked to access rights would only be appropriate if “significantly more open access services” were in operation.

For freight operators, the freight only line charge (FOL) and freight specific charge (FSC) will be combined. Furthermore, it proposed abolishing the coal spillage charge on freight operators because of downward trends in coal transport.

However, the ORR said it would not pursue fundamental reform of the variable use charge (VUC) because changes elsewhere, such as the move to increased route-based regulation, made it unnecessary.

It also wanted to consult on whether to either remove caps on the capacity charge or abolish it altogether, saying there were “good arguments” for changing the charge because it is too complex and does not offer sufficient incentives for Network Rail to grow traffic.

The consultation is open until 9 March. To take part, click here.

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