I was ahead of schedule writing this month’s column when, on 8 October, Network Rail published its response to the Office of Rail Regulation’s Draft Determination of its income for the five years starting April 1 2009. Publication of the Final Determination is scheduled for 30 October, so several items had to be postponed to get readers up to speed on the confrontation to come.
Confrontation is not too strong a word. Network Rail has obviously had its Thesaurus out to provide some variety when criticising the studies of its efficiency produced by ORR’s consultants. ‘Fundamentally flawed’, ‘bias’, ‘inadequate’, ‘unrealistic’, ‘overstated’, ‘implausible’ and ‘inaccurate’ are some of the terms used.
Remembering that this Periodic Review started in August 2005, how, with just two month to go to the Final Determination, can Network Rail, ORR, not to mention DfT Rail, be so far apart? While some Informed Sources are playing down the tension, there seems to be little room for compromise on the key issue – Network Rail’s scope for further efficiency savings.
Network Rail can, of course, reject the final Determination and ask ORR to refer the matter to the Competition Commission. The risk here, as DfT Rail found out with the ROSCOs (see below), is that the Commission decides the scope of its investigation not the applicant. So Network Rail might get more, or less, than it bargained for. And while the Commission is considering the challenge, which would take about a year, Network Rail will have to work within ORR’s Determination.
While Network Rail has a list of concerns, which I analyse, two issues dominate. The first is ORR’s decision to require a continuation of the year-on-year cost savings in the current Control Period 3 into the first year of CP4. This knocks £290 million off the funding it claims to require in CP4. Savings in year 1 also mean less scope for efficiencies in years 2-5.
But Network Rail’s biggest gripe concerns ORR’s decision to benchmark the company’s efficiency against other European railways. ORR says that this shows a 35% efficiency gap which it wants closed over the next 10 years, with 21% reduction in CP4. All this hinges on analysis of the same data from the International Union of Railways and the analysis includes.
To illustrate how the gap in funding is made up I’ve prepared a handy table which shows how ORR gets from the £31.15 billion Network Rail says it wants to the £27.76 billion ORR says it really needs.
In last month’s column I published an annotated version of DfT Rail’s updated list of the ‘1300 net additional vehicles’ in the High Level Output Specification plus a revised Informed Sources master list of new vehicles. Unfortunately I didn’t make the relationship between the two tables clear, confusing a lot of readers. All is explained in this month’s column.
Various clarifications of the update, which were pending last month, have now been provided by DfT Rail. There is the definitive list of First Capital Connect’s Net Additional Vehicles which includes 126 vehicles from the new Thameslink fleet delivered before the end of CP4.
Didn’t Rail Minister Tom Harris say that the mythical 1300 didn’t include the 1100 Thameslink vehicles? Well they do now, leaving poor old Tom has been stitched up by his officials yet again.
So the 1300 additional vehicles in the HLOS is now officially 1174. Or it could be 1156 – but you’ll have to read the column to find out why.
Also in the column I try to get a handle on the cascade of the London Midland and London Overground Class 150s to first Great Western and Northern. And, with the help of Alan Williams, we provide a simple answer to SWTs 105 Net Additional Vehicles - which DfT Rail calls ‘a very difficult solution’.
Back in June 2006 DfT Rail asked the Office of Rail Regulation to consider referring the Rolling Stock Companies to the Competition Commission. And when, in November 2007, ORR came to an ‘on the one hand, on the other hand’ conclusion and decided to passed the parcel to the Commission, DfT Rail was jubilant, crowing, ‘today the ORR has concluded that ROSCOs are making "excess profits". We believe that a credible estimate of the scale of these would be up to £175m a year'.
Oh dear. Because when the Commission published its provisional findings on August 7, the ROSCOs emerged as the acceptable face of privatisation while DfT Rail was named and shamed as the cause of a breakdown in the rolling stock market. According to the Commission the ROSCOs ‘have tended not to increase capital rentals as far as they profitably could where rolling stock has been re-leased even in the absence of credible alternatives’.
As for DfT Rail’s calculations of ‘overcharging’ which led to the demand for a £100 million year reduction in lease rentals, the Commission did not consider the attempt to value the ROSCOs’ assets on their privatisation values ‘appropriate’. The alternative Depreciated Replacement Cost calculations, produced ‘misleading results’.
Given the difficulty of measuring the profitability of the ex-British Rail fleets, the inquiry focused instead on what is preventing market forces from working. And the answer is DfT Rail which is taken to task for a range of sins of omission and commission.
Its claims that it is does not interfere in traction and rolling stock allocation is demolished with some killer quotes. For example, TOCs perceived that DfT ‘often did not generally consider proposals for new rolling stock to constitute the best value for money’. And in some franchise replacement Invitations to Tender new rolling stock had been ‘explicitly ruled out’.
We also learn that in evaluating franchise bids DfT Rail limits its financial assessment of new rolling stock to the life of the franchise, say 5-10 years, when benefits will continue to accrue over the 30-35 year book life.
There’s a lot more of this in the column, hut the overall message is that rolling stock policy is in a mess. And the Commission is onto this too. Here’s a final killer quote: ‘We expect that the DfT’s Rolling Stock Plan will result in further limitations on the TOCs’ choices when negotiating with ROSCOs as the DfT seeks to influence the deployment of existing and new rolling stock to enhance capacity on the network’.
As the saying goes, be careful what you ask for! Not that I expect the Government to take a blind bit of notice of the recommendations.
Something I haven’t covered for a while is the Early Deployment Scheme (
Anyway, the date for the start of
EDS was originally intended to use the latest
And it’s not just the software causing problems. Retrofitting ETCS to the Class 158 DMUs on the Cambrian has run into problems with space and power supplies. The Class 158 simply doesn’t have sufficient auxiliary power to supply the extra electrical load represented by the ETCS equipment and a section of luggage rack will have to be commandeered to accommodate the extra kit.
Which brings us to the West Suffolk Line where ETCS is scheduled to replace Radio Electronic Token Block signalling in 2011. This has resulted in a strange OJEU notice published by National Express East Anglia, on 13 August. This invites tenders for a minimum of eight ETCS fitted new DMUs to enter service in May 2011, based at
This foxed me at first, because it is not in the Rolling Stock Plan, but the delivery date, combined with the ETCS requirement, provided the answer. Based on the
Read it on line
| Network Rail’s response to the draft Determination http://www.networkrail.co.uk/documents/5165_4393_Response%20to%20ORR's%20draft%20determinations%20(September%202008).pdf
Competition Commission provisional findings and remedies http://www.competition-commission.org.uk/inquiries/ref2007/roscos/pdf/prov_find_report.pdf
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Well, August was pretty quiet which allowed me to clear out a huge amount of paper littering the office, in the process finding useful information I’d forgotten about, plus the missing software disc for my scanner. A factory visit I organised was cancelled at the last moment, but ORR published the latest National Rail Review and Network Rail Monitor which resulted in a weird press conference.
After the presentation, I asked a question, Richard Hope asked a question and then we both shut up to allow the other journalists to have a go. Silence. ‘Well if that’s it…’ started the
On the first Saturday in September we went to
The following week it was the annual Siemens dinner for the railway press. This year it was held in a gastro-pub in Maida Vale. Siemens are really fired up for this year’s golden Spanners and are looking to overtake Bombardier in the spanners table.
The rest of September is pretty quiet until the 29th when the first Fourth Friday Club meeting of the new season is held on a Monday to avoid a clash with Inotrans. The 29th is also our wedding anniversary, but I don’t think there’s a gem stone associated with this year’s number!
October is filling up nicely, with the Railway Forum Annual conference on the 7th and a trip to Siemens’ test track the following day. And the week after that I am due to meet the new head man at ATOC.
But, of course, in this 180-odd years old industry you never know what is going to happen next week, let alone what I will be writing up in next month’s column!
Roger