«Valentina Licata. Office of Rail Regulation, 1 Kemble Street, London, WC2B 4AN 4th September 2013 Dear Ms. Licata, GB Railfreight Ltd. response to ...»
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Office of Rail Regulation,
1 Kemble Street,
London, WC2B 4AN
4th September 2013
Dear Ms. Licata,
GB Railfreight Ltd. response to the ORR Periodic Review 2013: Draft Determination
of Network Rail’s Outputs and Funding for 2014-19:
GB Railfreight (GBRf) welcomes the significant changes made from the proposals in the PR13 consultation document to what has been proposed in this Draft Determination. GBRf believes that further work is required in CP5 to ensure that rail freight remains the backbone for freight transport in the UK by CP6 and beyond.
As incentivising efficient behaviour is at the core of PR13, GBRf would like ORR, for the Final Determination, to ensure it sets appropriate targets and benchmarks for Network Rail that rewards it for improving its performance on the network however the ORR must ensure that if Network Rail fails to achieve its required efficiencies, the operators should not left to pick up the additional costs.
The Draft Determination and agreed freight forecasts predict freight growth of 22% over the next 5 years and, indeed, beyond this timescale. To realise this growth, the DfT, ORR, Network Rail and the FOCs need to work closely through CP5 to ensure that we can jointly agree a sustainable longer term pricing mechanism into CP6 and beyond.
The Strategic Freight Network (SFN) funding and expenditure should be decided strategically and aligned to compliment similar private sector investments in said areas. All SFN spending must establish an appropriate network with sufficient capacity for the growing freight market.
GBRF welcomes the named major CP5 investment schemes and will continue to be involved with the
detail of how the money is best spent:
1) Committed HLOS projects – Midland Main Line Electrification, Great Western Electrification, East Coast Main Line Upgrade (£240M ECML Connectivity Fund).
2) £200M Strategic Freight Network Fund (England & Wales) + £30M SFN Fund (Scotland).
3) £300M Journey Improvement Fund.
GBRf does question the value of the schemes in the Electric Spine concept and believes that CP5 investment could be targeted more wisely in projects such as the electrification of the route from the Port of Felixstowe through Peterborough and Leicester to the West Midlands and West Coast Main Line rather than from Southampton. Although being discussed for CP6 investment, were Felixstowe electrification to be brought forward to CP5, the expanding Intermodal traffic from Felixstowe port (as opposed to Southampton traffic levels) is just the sort of quantum required to push some freight operators into using electric traction, especially if inland terminals are also electrified in CP5.
CHAPTER 3 – OUTPUT FRAMEWORK:
Decisions on Network Availability:
GBRf is pleased to see that, compared to the CP4 figure, the CP5 network availability metric is more focussed on freight operators and their customers. We would urge ORR to keep the proposed reduction of 33% for freight disruption, from the start of CP5 to the end of it, in its Final Determination not least to incentivise Network Rail to take into account all of its customers’ requirements to continue to run its services whilst programming maintenance, renewal and enhancement works during CP5.
Decisions on Network Capability:
GBRf notes that ORR states that the baseline capability of the network will be that in place as at 1st April 2014 described in the Sectional Appendices, GEORGIS database and National Gauging database.
There are, currently, instances where the Sectional Appendices show incorrect infrastructure (e.g. Clay Cross Down Goods Loop currently showing 352m when it is over 640m) and capability which will need to be corrected before being acceptable as the definitive CP5 baseline infrastructure.
The baseline infrastructure must also still contain those pieces of infrastructure that have not been formally altered by an established Network Change. This must be rigorously enforced before the start of CP5 as there is already infrastructure that has been removed without an agreed and established Network Change. GBRf would want these specific items to still be part of the baseline infrastructure.
Freight Operating Companies are now the very few that try to ensure that useful network capacity is not unnecessarily eroded and GBRf fully agrees that, with devolution now in place, Network Rail must consistently maintain, on a timely basis, the collection and provision of capability data. Given the above concerns, GBRf would like more clarity on how ORR will ensure that Network Rail declares the correct network capability at the beginning of CP5.
CHAPTER 8 – ASSET MANAGEMENT – MAINTENANCE & RENEWALS EXPENDITURE:
Maintenance – Route Specific Issues:
Having read the various maintenance plans for the routes and having already discussed the topic at Network Rail route meetings, it is clear that, through the whole of CP5, there are a large number of lines, nationally, that will require skilled personnel for working on overhead line (OHL) equipment to keep the asset in optimum condition. This not only applies to those routes currently electrified but to the large number of route miles that will be newly electrified over the next 5-6 years.
GBRf believes there is already a real shortage of good quality OHL engineers and that, with the amount of new OHL being erected during CP5, there is a real and immediate requirement, right now, for more skilled staff. Without this expertise, GBRf believes the electrified network will not be as robust as it needs to be to support the increasing number of passenger and freight services.
Maintenance and Renewal Efficiency:
As ORR states in paragraphs 8.292 a-f, probably the least efficient and most controversial aspect of Network Rail planning its maintenance and renewal activities is the mismatch between a possession being applied for in an Engineering Access Statement and the actual work content not being known in any real detail at that point. This leads to more trains being removed from the plan than might really be necessary.
Far greater efficiencies will be gained if contracts for work are let much earlier, the work content understood correspondingly earlier then the possessions applied for being of the correct length, not a best guess at the time of application. To gain these real efficiencies, a whole new way of contract and possession management will be required and GB Railfreight has and will fully support this changing of practice.
CHAPTER 9 – ENHANCEMENTS EXPENDITURE:
European Rail Traffic Management System (ERTMS):
GBRf welcomes ERTMS train fitment costs being treated as an enhancement ring-fenced fund with the Network Rail allocation of £206M in CP5 renewals expenditure. The procurement process must ensure that reliability levels are as high as practicable and that current network operational flexibility is at the least, maintained, and ideally greatly enhanced as much of the risk of performance and reliability will transfer from Network Rail to the TOCs and FOCs.
ERTMS brings significant savings to Network Rail and GBRf welcomes Network Rail sharing the benefits from the reduced costs of signalling when ERTMS returns the benefits from the initial investment.
CHAPTER 10 – DELIVERABILITY OF ENGINEERING WORK:
GB Railfreight is very concerned that one of the most significant increases in renewals is within the signalling asset, which will nearly double in volume in CP5. Network Rail’s national signalling testing resources are, currently, very scarce and likely to become even more so in CP5, not least because of competing demands for various London Underground re-signallings and the many other signalling projects in the Far East and throughout the world.
GBRf is not convinced that Network Rail has sufficient competent testing resource to cater for the large CP5 increase in highly specialised work. Very recent re-signalling over-runs (by a day or more) on the south end of the East Coast Main Line and the Ash Vale to Alton route highlight the big risk in delivering this quantum change of signalling work. The geographical spread of these skilled personnel, compared to current and future signalling work banks, does nothing to increase the productivity and robust delivery of these safety-critical works.
As a sizeable amount of the CP5 re-signalling programme will be ERTMS related, and the operational requirements of this system are still as yet unconfirmed, it isn’t clear if Network Rail yet knows its requirements for the operational roll-out and therefore how well resourced it is for delivering its CP5 re-signalling programme.
CHAPTER 12 – FINANCIAL FRAMEWORK:
Approach to Risk and Uncertainty:
Network Rail’s approach in managing its own risk should not bring additional risk on to its customers.
Network Rail should consider how the freight industry has historically applied inflationary prices rises to its customers while also increasing the volume of freight moved by rail.
GBRf believes the “true up” calculation for RPI price increases is unworkable. This gives operators no certainty in their costs through a control period, brings unacceptable risk to the customer, and is too complicated to work. The proposal also gives Network Rail no incentive to control costs from its suppliers, as it can simply pass the costs on the operators in the following year. Network Rail should manage its own inflationary prices with good contract management and encourage efficiencies from its suppliers to reduce costs. Simply passing increased costs through to the customer is not an acceptable way to improve its efficiencies.
The “true up” calculation method also goes against the principle of periodic reviews giving as much certainty as possible to operators and their customers over a five year period and, for that reason, cannot be supported by GB Railfreight.
CHAPTER 16 – ACCESS CHARGES:
Variable Usage Charge (VUC):
GBRf is concerned that the revised VUC price list doesn’t sufficiently incentivise either passenger or freight operators to invest in track-friendly bogies because the differential in charges for track-friendly bogies, and vehicles that damage the track, are insufficient to incentivise the required changes to operators’ behaviours.
The VUC Cap also protects operators who have a fleet of vehicles that are not track-friendly with the revised rates sending the wrong signals to operators. It’s perverse that damaging vehicles are capped and protecting operators who use them and dis-incentivising operators to invest in newly trackfriendly vehicles. The ORR should consider, carefully, how to really encourage operators to invest in track-friendly vehicles.
Treatment of the Serco analysis in allocating variable usage costs to individual vehicles:
GBRf wants the first SERCO report investigated in detail and would like to engage expert opinions to decide if both the input data for specific wagons and the output data of this first report was indeed correct and accurate. GBRf believes that the current VTISM model over-predicts damage from freight vehicles.
To more accurately model the true impact of freight vehicles, the data that’s input into VTISM needs to have been accurately modelled against the wagon VAMPIRE® vehicle runs so that the study deals with as true and accurate a picture as possible.
Without this taking place the wheel/rail force input data will be inaccurate and the predicted costs for how a wagon impacts on maintenance and renewal costs will be wrong. Given the potential large sums of money involved with this project, there is no room for estimation or not modelling the actual benefits of the specific bogies involved.
If it is correct, the ORR needs to be careful how any additional costs are applied, as competition to railfreight is subsidised and does not have transparency of costs. In GBRf’s view, it would not be right to impose transparency of costs to rail freight, when it doesn’t apply the same mechanism to other modes of freight transport.
The capacity charge is in place to hold Network Rail cost-neutral against its Schedule 8 payments to operators for increased train miles over and above the agreed baseline figures at the start of the Control Period. The important point to note here is that the capacity charge is applicable to additional train miles over and above the baseline figure, not all services, i.e. the charge is about the financial risk of increased activity not the actual cost of congestion.
During this access charging review process, there has been extensive industry engagement on this charge and GB Railfreight is clear that, taking into account the above points, Network Rail has significantly over-recovered its Schedule 8 costs, to the tune of approximately £360M over the first three years of CP4 and is continuing to do so.
It is also clear that, from 2008/09 onwards, Freight Operating Companies’ (FOCs) train miles have been below the CP4 baseline figure and yet FOCs have still been paying a capacity charge on all trains. Importantly, over at least the last five years, FOCs have also contributed to easing congestion on the network by running longer and heavier trains but pays no less in capacity charge.
In April 2013, the Rail Freight Operator’s Association (RFOA) proposed an alternative capacity charging mechanism which has since been discussed in detail among a cross-industry working group.