Opinion
not to proceed with a new freight specific charge for biomass is welcome. However, concerns over continued pursuit of the principles set out in this Access Charges Review of targeting inelastic markets and increasing freight costs at the next periodic review remain.
of ORR to target in its consultation markets deemed inelastic such as ESI coal, spent nuclear fuel, iron ore and biomass sent negative signals to those using or contemplating rail as it implies that captive markets will be targeted. While at previous reviews ESI coal and spent nuclear fuel have been targeted for mark-ups, the extension now potentially to other sectors during consultation has sent worrying concern to shippers. The question of ‘who next’ i.e. which sector will next have additional charges applied is being asked by FTA shipper members. While FTA welcomed the publication of the Draft Determination on 13th
June
as giving a degree of re-assurance and certainty for this control period, this is a
cautious welcome in that the proposed increases are not as bad as could have been. It remains the case that total freight charges will increase by 21 per cent over the control period, 4 per cent per year. It is welcomed that intermodal freight (now the biggest sector on rail and with the largest growth profile) charges will be kept in line with earlier determinations, but the process of targeting certain sectors with increased charges (even if only in principle and with the implementation delayed and back-ended toward end CP5) represents a fundamental shift away from promoting rail freight and is worrying for market segments that may fear they would become deemed ‘captive’. The decision
Longer-term effects FTA welcomes that ORR has to its credit clearly listened to and responded to FTA and industry’s serious concerns articulated during the consultation process and have capped the proposed increases below that initially intended, thereby reducing the impact of the new charging regime. However, the fact remains that there has been a radical shift away from charging marginal costs and towards pricing industries because of their reliance on rail. Additionally, the process itself has caused huge uncertainty and we remain concerned about the longer-term effects of the new charging regime on existing and potential customers. We therefore believe that much of the genuine confusion caused particularly to shippers during this process could have been avoided by better communication and consultation on the proposed changes.
•
Chris MacRae is rail freight policy manager at the Freight Transport Association
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October 2013 Page 39
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