Back in the December 2007 column my best guess put the gap between Network Rail’s estimate of its funding requirement for CP4 and the Office of Rail Regulations counter offer was in the range £3-5bn.

Network Rail played this down, telling me that it would all come right in the end.  Well, now the end is near and after second thoughts on both sides the Regulator’s draft Determination (published on 5 June) leaves a gap of £2.58 billion.

Everything now hinges on the scope for further efficiency savings. The 2003 Access Review, which set Network Rail’s income for the five years from April 2004, provided a generous increase in funding which then fell year-on-year due to efficiency savings totalling around 30% over the Control Period. 

For CP4 ORR expects Network Rail’s income to stay pretty well constant at a little less than the current year.  Unfortunately for Network Rail ORR also expects continuing efficiency gains to allow spending on renewals and enhancements to be stepped up considerably at the same time.

In other words ORR wants more railway, as specified in the High Level Output Specification, for the same money: Network Rail wants more money to pay for more railway.  Faced with this mismatch Network Rail says it is ready to ‘use everything in its power to secure the funding necessary to build a bigger and better railway’. 

As Network Rail’s Iain Coucher told the Fourth Friday Club at the end of June ‘at this point in time we do not believe we can meet the expectations placed on the rail industry in terms of growth, capacity and performance with the funds we’ve got’.   He described ORR’s views on further efficiency gains as ‘somewhat unrealistic’.

ORR is due to publish its Final Determination on 30 October.  Network Rail will then have to decide whether to reject it – something Iain described as a ‘difficult decision we will have to take towards the back end of this year’.  If the man from Melton House says ‘no’, ORR refers the determination to the Competition Commission.

£1 billion wiggle room

One for the more confusing tables in the ORR’s Draft Determination compares the money it thinks Network Rail needs to the Governments’ Statements of Funds Available (SoFA).  For England & Wales there is a growing annual surplus across the five years of CP4.  Scotland runs a deficit in the final three years but achieves a net surplus over CP4 as a whole.

Overall, the SoFAs provide just over £1billion more than ORR’s estimate of the funding needed by the national network.  This could be crucial in closing the funding gap.

A much simpler table shows the sources on Network Rail’s income. And of the £26.5bn ORR proposes for CP4 £16.4 billion will come as direct grant from Government. So much for Network Rail’s independence.

At the same time variable track access charges, which are supposed to reflect wear and tear on the track, have been scaled back.  Just for fun I publish a table of the old and new vehicle rates per mile on which Variable Track Access charges are calculated.

For example Network Rail thinks that a Class 390 Pendolino should pay 19.02p per vehicle mile.  ‘No’, says ORR, ‘not a penny more than 17.04p’.  Forget micromanagement we are now into ‘nanomanagement (©Informed Sources 2008).

Consultants in conflict

In the 377 pages of the Draft Determination, Network Rail’s efficiency, actual and potential, is much wrangled over by rival teams of consultants.  Depending on the activity ORR claims that Network Rail is between 31-35% behind the efficiencies of its European peer group.

ORR is giving Network Rail 10 years (two Control Periods) from April 2009 to close these gaps, with two thirds of the improvement required in CP4.  If Network Rail beats the expected efficiency gains it will share 25% of the saving with train operators.  The 25% will divided between all operators in proportion to their variable track access charges.

But it won’t be easy, because Network Rail will start CP4 with an efficiency backlog from CP3.  Tom Winsor’s 2003 Determination required a 31% efficiency gain: Network Rail is now forecasting a 28% improvement.

Enhancements

There’s a detailed breakdown of enhancement schemes in the draft Determination drawn from Network Rail’s Strategic Business Plan.  These are broadly divided into those needed to deliver the HLOS plus other schemes proposed by Network Rail.

Not all these additional schemes have survived ORR’s scrutiny.  For example Network Rail’s claim for £320m to be spent on unidentified projects to support the ‘move towards a seven day railway’ has been cut back to £160 million. And the proposed development fund for schemes to be implemented in CP5 has been slashed from £240 million to £50 million.  But ORR made a point of telling   me that it expects some of this fund to be spent on electrification projects.

And 20 of Network Rail’s schemes have been rejected. The largest of these is the Crewe remodelling at £58 million

Performance

Back in the December 2007 column I reported that Network Rail was arguing that that meeting the Public Performance Measure (PPM) targets in the HLOS was not cost effect.  It claimed that meeting the 92.6% average PPM across all operators would cost an extra £400 million on top the £368 million already allocated to performance schemes.  Why not drop targets and focus on raising all routes to at least 90% ‘as soon as reasonable practical’?

No dice.  The draft Determination, not only retains the HLOS PPM targets and specifies the year-on-year improvement trajectory, it also sets maximum annual levels for both passenger and freight train delay minutes.  And the trajectories have the status of ‘top level regulated outputs’. 

ORR is also developing ‘specific measures’ for the disruption to passenger and freight traffic caused by possessions.  Improvement targets will be set.

Reading the meter

Meanwhile, back in the real railway, you may remember I had a day out with Alstom at Longsight Depot.  One of the things we discussed was the experience of fitting electricity meters to the two transformer cars of a Class 390 Pendolino.

These meters were set to record the energy consumed and regenerated in five minute blocks throughout the journey and also during terminal layovers and when the train is on-depot.  Because 390.049 was running as part of a large fleet actual load factors could be calculated.

As a result of 24/7 recording, we have a uniquely accurate picture of an intercity train’s energy consumption.  And some very interesting facts emerge.  For a start over five months regenerative braking averaged a 16.8% saving.

About 90% of total energy consumption is incurred during revenue earning service with about 6% consumed on depot.  And about 10% of the energy consumed in service is used on heating and ventilation and other auxiliaries.

Obviously these data help with rail’s green credentials.  At current load factors the Pendolino generates 35gm of CO₂ per passenger km on the current electricity generation mix.  If you ignore load factors and go for per seat km the Pendolino is responsible for 16.6 gm CO₂, half that produced by 47 mpg Honda Jazz.

Traction and rolling stock

Finally, the long fight to make sense of traction and rolling stock cascades continues.  On Thameslink, the 1,100 new carriages will add 380 to the current combined fleets.   I could only get 1024.  Miriam the head gricer in the DfT Rail press office solved the shortfall, 19 four car Class 465s are to be transferred from South Eastern to South Central to free up more Class 377s for Thameslink KO1.

Meanwhile Alstom is deadly serious about going for the Thameslink fleet with a new EMU drawing on the company’s AGV high speed train technology.  Of course this depends on DfT Rail dropping its ludicrously short delivery schedule. Otherwise it’s Bombardier or Siemens with Electrostar/Desiro evolutions.

IEP

Sadly I couldn’t find the time to resurrect the car park watchers and count the boxes as the two consortia delivered their tenders to New Minster House.  But someone who was there tells me that the box counts were bigger than anything ever seen before. 

At the last minute Hitachi’s nerve broke and the company went for safety in numbers, creating a consortium with Barclays Private Equity and Laing.

According to Barclays, Hitachi has produced a design ‘fully compliant with the DfT’s requirements’. Cue John McEnroe.

Waste

All these new trains are costing us a fortune in consultancy.  IEP consultancy costs have now reached £9.4 million. Thameslink is just starting but has already clocked up £1.1 million while Pendolino lengthening is in Network Rail director bonus territory at a mere £518,000.  That £12million total would see you well on your way to wiring Gospel Oak-Barking.

Roger’s Blog.

Well, I’m still waiting for the customary rejection of my annual application to become a Network Rail Public Member, promised by the end of the month.

Meanwhile June ended with the final Fourth Friday Club meeting of the 2007-08 Session.  Iain Coucher gave a cracking presentation and didn’t duck the hard question of what happens if Network Rail can’t live with the final Determination.

July began with the Modern Railways/Railway Forum Innovation awards.  One of the winners was a system Alstom showed me at Longsight.  It was a thoroughly deserved win and is next on my feature article list. 

A week later I gave my paper on the case for electrification to the conference on Rail’s carbon footprint.  I largely ignored environmental issues and hammered home the point that you electrify to get a better railway which is then also greener.