17.11.16
ORR confirms commitment to ‘incremental’ shift towards route-based regulation
The ORR has confirmed it is pressing ahead with introducing regulation for each of Network Rail’s individual routes as it published the initial findings from its 2018 periodic review consultation – but as a result of industry concerns, promised changes would be “incremental”.
In a summary of the response, John Larkinson, the ORR’s director of railway markets and economics, said: “Today, we are confirming that we will change how we regulate Network Rail.
“We will be putting an increasing focus on regulating each of Network Rail’s route businesses, building on changes that the company is making to devolve more responsibility to these routes.”
The ORR said the changes would make Network Rail’s operation more efficient, but could only be achieved through “a much closer relationship between each route and its train operator customers and stakeholders”.
It also promised to change the outputs framework to reflect these changes, as well as increasing the involvement of train operators and making performance metrics more passenger-focused.
The ORR said feedback from stakeholders had been broadly positive, but that there had been concerns about proposals to increase transparency around costs.
In particular, stakeholders were concerned that the changes would lead to higher charges, and would put too much pressure on industry and ORR resources if they were implemented alongside route-based devolution.
Freight representatives in particular said the changes could create too much uncertainty for their sector.
Therefore, the ORR said it would make “incremental, rather than fundamental” changes. This would include prioritising reform of charges for open access operators, but not working on proposed reforms for the geographic disaggregation of the variable usage charge.
Responding to today’s announcement, a Network Rail spokesperson said: “We welcome ORR’s decision which supports our move to devolve more responsibility to our operational routes. This brings us closer to our customers, and will be beneficial to passengers.”
Network Rail NSO
Today, the rail regulator also opened a consultation on proposed changes to the role of the Network Rail national system operator (NSO) – a business unit within NR whose decisions affect the reliability, punctuality and value delivered by train services, both now and in the future.
The NSO’s role is due to become more important and complex over time as a consequence of route devolution, the growth in passenger demand and an increased role for devolved administrations, local transport authorities and private funding.
To deliver these changes, the ORR said the NSO would have a separate settlement, with its own performance measures and separate reports on its costs and revenue.
The settlement would be based around the NSO taking over the functions for leading the long-term network planning processes, managing medium-term network capacity, and meeting near-term access requests from Network Rail’s network strategy and capacity planning directorate.
The ORR is planning to encourage the NSO to engage more with customers and stakeholders, and provide additional mechanisms to give the NSO more incentives to invest.
The consultation is open until 11 January. To take part, click here.
The regulator will follow it up with another consultation on its draft guidance for Network Rail’s strategic business plans. In December, it will open consultations on both charges and incentives and the financial framework.
In February 2017, each Network Rail route will host an engagement session with stakeholders to develop its plans for CP6.
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