Track and signalling

24.01.18

Network Rail disputes UTG ‘fairer’ rail access cost claim

Network Rail officials have written to the Office of Road and Rail (ORR) to dispute claims from the Urban Transport Group (UTG) about rail access costs.

The UTG had initially claimed that future changes to costs imposed on regional rail services could have a negative impact on the operators “least able to bear it.”

In response, Network Rail says the new approach to charges is actually a “significant improvement” to the current system.

The centre of the dispute is the issue of whether regional services should be classed as “marginal users” of the rail network, a point which was raised by the UTG as a reason why these organisations should have less costs levied against them.

However, Network Rail says this is not the case and that it is not reasonable to describe regional services this way or to imply that they should only be responsible for the “wear and tear” costs of track.

In the letter, Peter Swattridge, head of regulatory economics at Network Rail and writing on behalf the organisation’s CEO Mark Carne, said: “At present, neither Network Rail nor any other industry body allocate the fixed costs of the GB rail network to all train services on a consistent basis (i.e. franchised passenger, freight and open access services).

“This means that it is not clear which train services are responsible for our fixed costs being incurred. It is, therefore, currently not possible to make meaningful like-for-like comparisons between different types of service.”

Swattridge also said that his organisation would be happy to discuss issues involved in the letter in more detail.

In addition to the dispute over regional services, the letter also deals with two issues from the UTG’s document which the infrastructure manager claims are factually incorrect.

In particular, this refers to the assertion that the damage caused by freight trains to infrastructure is largely ignored. Network Rail said that this was not the case because freight companies are subject to the Variable Usage Charges which reflects the type of cargo being hauled.

The UTG also made the claim that allotting service costs to regional operators in this way could lead to gains for long-distance services, potentially meaning money could be diverted away from rail services and investment.

Swattridge wrote: “We do not agree with this statement. To the extent that cost allocations are reflected in operators’ fixed charges, the franchising process aims to hold operators harmless to methodological changes in charges.

“Therefore, any changes in the level of operators’ fixed charges from the introduction of our new methodology would be passed back to funders, under the terms of operators’ franchise agreements, and be available for reinvestment in the rail industry.”

The decision to allocate more of the network’s overall costs to regional rail services has come following a series of industry consultations by ORR and Network Rail.

Network Rail’s recent consultation on fixed cost allocation could see Northern Rail’s fixed costs increase by 50%, whilst Merseyrail, which the Urban Transport Group says is “largely self-contained” could see its allocation increase by 66%.

Virgin West Coast and Virgin East Coast would both see their allocations reduce by 58%.

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Comments

Huguenot   24/01/2018 at 17:34

The old BR concept of Prime User seemed to work well.

Lutz   24/01/2018 at 19:15

Given the lack of capacity on various routes it seems reasonable to start allotting costs on a more even basis and let the market price-out under-valued services.

Frankh   25/01/2018 at 11:51

"let the market price-out under-valued services." And the franchisee is then in default of the contract because they can't run services as agreed. Then what?

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