Opinion Delivering the goods Chris MacRae
Better communication by the Office of Rail Regulation on track access charges could have saved damaging confusion says Chris MacRae
F
TA remains fundamentally concerned at the change of approach to freight track access charging and consequential
damaging uncertainty that has been caused with ORR’s Periodic Review 13 that covers the period 2014-2019. During a process that started its
current phase in March 2012, the ORR signalled that it wanted to increase charges in order to reduce taxpayer support for rail overall and make freight ‘pay more of its shared network costs’, termed ‘freight avoidable costs’, i.e. the costs that would not exist if there were no freight on the network. Previous Control Period ‘periodic reviews’ by ORR have seen freight track access charges decline, and this has been accompanied by increases in rail freight.
So at the start of the process a fundamental change of policy was
publicly heralded that caused significant unsettling in the market. It was a significant concern to operators that access charges could increase, especially as any presumptions that these could at least initially be passed on by them if they happened is not accurate, as cost increases will end up being shared inevitably along the supply chain adding cost to the whole industry. For shippers and logistics service providers, however, such concern translated into fear of increased costs casting doubt on proceeding with facility investment or commitment to new services, and inability to enter into accurate and meaningful customer contractual negotiations. Overall this led to a significant
denting of confidence in rail due to the uncertainty and drawn out nature of the process. Damage such as this is difficult to easily rectify. And ORR’s ‘Conclusions’
on track access charges in January this year indicated the likelihood that charges would indeed increase. With facilities investment decisions based on ten year pay back periods, and locomotive and freight rolling stock investment based on asset lives of up to thirty years, change of access charging policy of this nature and on a five year basis casts doubt over the viability of these decisions.
Who’s next for a ‘mark up’? Concern earlier in the year focused on the fact that the variable track access charge (paid by all Foc’s) could increase by up to 23 per cent on current levels. The additional charges on Electricity Supply Industry (ESI) coal and iron ore (the ‘freight specific charge’), could have seen these sectors’ costs rise by an additional 15 per cent and 9 per cent respectively as well. This had worrying prospects for the extractive coal industry in Scotland during a time of economic difficulty and for steel production investment decisions in Britain. The continued uncertainty over biomass was also undesirable at a time of prospective investment. Worry about cost increases for aggregates and intermodal sectors has potentially damaged modal shift to rail with fear of reverse modal shift from rail. An additional worry in this was that unlike franchised passenger train operating companies that pay both a fixed and variable track access charge (the former offset as part of the franchise value calculations), licensed rail freight operating companies pay a variable charge only. Under EU rail liberalisation directives this is supposed to be a marginal charge only, reflective of the actual incremental infrastructure wear and costs that running each freight train imposes upon the network. There is though an ability to charge a mark-up on traffics that can be assessed as being economically able to bear such, i.e. that are inelastic. The desire in this process
October 2013 Page 37
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140