INFORMED SOURCES e-Preview February 2011
Having got the January Informed Sources off to the Editor there was one more thing to do before shutting down for Christmas, and that was write my formal response to the consultation document on the next Rail Technical Strategy. More about that later.
Then with Christmas over it was back to the fray refreshed, with the Interim submission of Sir Roy McNulty’s Rail Value for Money Study to read, mark, learn and inwardly digest so that I could explain to readers what is going on.
And immersion in these two documents was an unwelcome reminder just how Lego Brick Language (LBL) has become the Japanese anemone in the garden of official-speak. In LBL, little four stud bricks are the equivalement of words like ‘stakeholder’ and ‘sustainable’. Longer blocks are stock phrases like ‘challenging but achievable’.
Click the blocks together and you have pages of text which sounds wonderful but can be free of meaningful content. So in addition to getting my head round numbers, I now have to divine what people are saying and turn it into something the real world can understand.
And it is so invasive. When I go through what I have written I keep treading on residual bits of LBL. And I’m not sure that it has been eradicated from this month’s column.
McNulty 1 £2 billion off subsidy by 2019?
McNulty 2 – Costs under scrutiny
Technical Strategy – does rail need one?
Bidding starts for next round of signalling contracts
Anyway, at least Sir Roy McNulty’s Interim Submission, delivered in September 2010 but not published until 7 December, contained some hard numbers. Sir Roy estimates that radical changes throughout the railway industry could generate additional savings of up to £1 billion a year by the end of Control Period 5 in 2019.
To start with, the Study team calculated what the
Sir Roy puts the gap at between £2.5 billion and £3.5 billion. This is before savings of £1.9 billion a year ORR already believes it can squeeze out of Network Rail between now and 2019. So we are looking at further savings of between £0.7 billion and £1.7 billion a year to close the efficiency gap completely.
Closing the gap would cut subsidy to £3 billion to £4 billion at today’s revenue levels. In practice, revenue is likely to rise faster than inflation putting subsidy towards the bottom of the range.
Sir Roy tends to compare current costs with either 1993-94 (BR’s last year as an integrated railway) of 1997-98. As ever, I have added 1989-90 and some interesting numbers emerge, not least that support was 3p per passenger km in 1989-90 and is now 10p even though annual passenger km has risen from 33 billion to 51 billion over this time.
So obviously scope for savings, but Sir Roy adds one chilling observation. He warns that while the potential cost savings identified represent reductions in expenditure, they would not necessarily be reflected in similar reductions in Government support for the railway.
At each Periodic Review ORR determines the return on the Regulatory Asset Base (RAB) which Network Rail will need to cover the interest on its debt. According to Sir Roy, warns that the relentless increase in the RAB to £42bn by the end of CP4 will incur ‘significant financing costs over asset lives’. I have a scary graph to illustrate the point
Rural services scrutinised
At the heart of Sir Roy’s Interim submission is the abiding conundrum of the privatised railway. An industry with relatively high fixed costs has required an increase in taxpayer funding between 1993/94 and 2008/09 of £2.9 billion despite a real increase in passenger revenue of £2bn over the same period. Worse, despite a 59% increase in passenger-km since 1996-97, the total cost per passenger-km is back to where it was, described as ‘remarkable in an industry with relatively high fixed costs’.
As with Lord Beeching and Sir David Serpell before him, the RVfM Study lights on the high cost of Regional train services compared with franchises in the Intercity and London & South East sectors. Highlighted as an important value-for-money issue, this is being investigated further in the current phase of the Study.
However, the overall conclusion, that regional franchises are much more heavily subsidised than the rest of the network, ‘seems inescapable’. Sir Roy warns that the final phase of the Study is placing ‘particular emphasis’ on measures which can improve this situation. There is also a reference to higher service levels and lower fairs ‘than may be economically justified in some parts of the country’.
My chums at the Integrated Transport Authorities are already on a war footing.
Technical Strategy consultation
Back in 2007 we had our first Rail Technical Strategy (RTS) as part of the supporting documentation for the White Paper containing the first High Level Output Specification (HLOS) and Statement of Funds Available (SoFA). These established what sort of railway the Government wanted in the Control Period starting on
In July 2007 Nigel Harris and I were invited to a presentation on the new RTS and we made it clear that we didn’t think much of it. My criticism was that the RTS was technically illiterate; Nigel’s that it was strategy-free.
Try again
In October 2010 I received an invitation to take part in the consultation on an updated RTS to support the new HLOS in 2012. Responsibility for the RTS now rests with Technical Strategy Advisory Group (TSAG), the membership of which includes many long standing chums whose willingness to share their wisdom and experience has contributed greatly to this column over the years.
Sadly, their latest effort does not inspire confidence that RTS 2012 is going to be any better than the pernicious RTS 2007. Technically it is still naïve.
For example, motor racing is quoted as the prime application of composite construction, when the sky is full of aircraft with carbon fibre components and composites represent 50% of the structural weight of the latest airliners from Boeing and Airbus.
Given that an aeroplane is a long tube full of passenger supported on wings and a railway vehicle is a long tube full of passengers supported on bogies, the parallel seems obvious.
There is also some worrying stuff about a Next Generation Traffic Management (NGTM) system, one of the four ‘areas of improvement’ identified by TSAG. This doesn’t seem to recognise what has already been achieved.
As with the 2007 RTS, which assumed that hydrogen fuels cells and bio-fuels would make electrification obsolete by 2022, the new version has its own electrification idée fixe in the form of ‘discontinuous electrification’.
To avoid expensive civils work providing electrical clearance for overhead line equipment in tunnels and under low bridges, these locations would not be wired. Instead, traction units would be fitted with energy storage systems. When an electric train approached a discontinuity, it would drop its pantograph and continue under its own power until electrification resumed.
But the RTS is also very keen on improving whole system reliability. Think about it. If you are serious about reliability would you go for a tunnel, enlarged once and for all, or electric trains in perpetuity raising and lowering their pantographs, switching power to and from energy storage systems which will increase train mass and track wear. Not to mention track mounted balises to tell the pantographs what to do.
Needed?
Anyway, could a fragmented industry implement a 30 year technical strategy – almost certainly not? Does the railway need one. Not in a hurry.
What we need are not strategies but coherent policies. DfT Rail’s White Paper was based on the four ‘C’s – halving Cost and Carbon emissions, doubling Capacity and increasing Customer satisfaction to 99%. TSAG has built the new RTS around this mixture of aspirations and targets which are not policies.
A rolling programme of electrification or replacing the Pacer fleet a policy. Doubling capacity and halving cost are LBL aspirations which may even be incompatible when turned into policies.
I realise that readers will get only my robust take on the RTS consultation. If you would like electronic copies of the consultation document and my response so that you can make up your own mind, and join in the debate through our letters column, e-mail me at roger@alycidon.com
Signalling out to tender
In 2006 Network Rail introduced five-year framework contracts for its signalling renewals. This gave the signalling contractors the stability they needed.
These contracts expire this year and Invitations to Tender for the next round, this time running for 10 years, are due out any day now. There are a number of changes, including the addition of some line of route contracts to the previous geographical areas.
Under the new approach, Type 1 framework contracts will cover both the former Type A and most of the Type B work. Each contract will be worth around £30m per year over its 10 year life.
Bids will be based on the price per Signalling Equivalent Unit (SEU) at the mid-point of the 10 year contract period based on a generic specification. Over the framework contract period, prices will also have to track Network Rail’s regulatory efficiency curve.
To keep the bids lean and keen Network Rail will retain the right to put 20% of the work within each framework out to competitive tender. A Number 1 and Number 2 supplier will also be appointed for each framework contract. Should the No 1 contractor fail to perform, the No 2 will be ready to step in.
Inevitably hard lessons are forgotten. Having finally twigged, after £10s of millions of disappointment, that the
Finally, an apology. As several readers pointed out, the Merseyrail fleet was missing from last month’s annual rolling stock reliability review. I’m afraid they dropped off the bottom of my spreadsheet. The omission is rectified this month. Luckily it did not affect the results.
Roger’s Blog
Heavy snow falls in the south west meant that our planned trip to
This was good news for me, in particular as I often worry that the heavy duty policy analysis which I feel it necessary to inflict upon Informed Sources readers from time to time might be driving people away. Apparently not, although I promise not to take this as an invitation to step up the boring but essential stuff.
January has been quiet, intentionally, because elder granddaughter is competing in the local dance festival and I am transport manager. But February will see the smell of the greasepaint and the roar of the crowd replaced by, well, I’m not sure how you would typify interviews and technical conferences.
I’m hoping to interview my old chum Eddy Searancke next week. Eddy is the bogie expert’s bogie expert and he is going to give me an update on what is now Bombardier’s Flexx ECO bogie. This started as the BR Research Advanced Suburban Bogie in the 1980s as part of Chris Green’s Networker programme. Now it’s an international product.
Yet again the IMechE Railway Division has come up with a topical seminar – this time on Trains and systems for sustainable railways, It’s on 17 February and could be lively.
However, before then we have the fourth Friday Club meeting this week which includes Mr Miles’ Golden Whistles awards. The Whistles are to operating performance what the Spanners are to fleet reliability. Tony tells me that for 2011 there are new and improved categories including recognition for freight for the first time.
Now to get into those franchise Invitations to Tender for Greater Anglia and West Coast. I’ll try to make it interesting to keep the circulation rising!
Roger