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Rail regulation: ORR concludes its initial consultation on the 2018 Periodic Review of Network Rail

  • United Kingdom
  • Transport
  • Transport - Rail

01-12-2016

Background - The 2018 Periodic Review

The Office of Rail and Road (“ORR”) has recently published its conclusions (the “Conclusions”) following its initial consultation in relation to the creation of the 2018 Periodic Review of Network Rail’s operations (“PR18”). PR18 will determine what Network Rail is required to deliver in Control Period 6 (April 2019 to March 2024). The Conclusions can be found here.

Prior to the initial consultation stage, the ORR had made clear that it intends to focus PR18 on the following areas:

(1) a focus on regulating at a route-level – which would result in an increased devolution of certain responsibilities from the centre of Network Rail towards the route level allowing comparison between routes;

(2) the introduction of specific regulation and monitoring of Network Rail’s system operation by the ORR;

(3) a review of the outputs framework (which is used to measure Network Rail’s performance in key areas) and consideration of how the framework could be refined in order to reflect the greater focus on Network Rail’s routes and system operator role;

(4) an examination of costs (such as access charges) and incentives around performance and possessions; and

(5) looking at new ways to manage enhancements to the rail network.

The focus areas listed above are intended to directly support the ORR’s key objective for PR18 to establish a framework that encourages Network Rail to:

(i) ensure the ongoing safety of the network;

(ii) improve the efficiency of operating, maintaining, renewing and enhancing each of the routes in Control Period 6 and beyond; and

(iii) improve its understanding of the capacity and performance of the network.

What do the Conclusions say?

The ORR has stated in the Conclusions that there was “strong overall support from stakeholders for our proposed focus on route-level regulation and improving regulation of system operation” (both of which the ORR considers to be priorities for PR18), although potential risks inherent in such a method of regulation were also identified through the consultation and the ORR has acknowledged that such risks must be mitigated and managed.

The Conclusions go on to note that the focus on route-level devolved regulation will likely lead to a much closer relationship between each route, the passenger and freight operating companies and relevant stakeholders.

The Conclusions also highlight that the ORR:

is still confirming its approach to the refinement of the outputs framework (see paragraph (3) of the introductory section above) and the monitoring of those outputs;

the focus on the proposed move to route-level regulation may mean that the envisaged reform of the charging framework (see paragraph (4) of the introductory section above) should take an incremental approach so as to manage the capacity of all parties to implementing further change; and

will continue to develop proposals for the regulatory treatment of enhancements taking into account the need to encourage and maintain third party investment in the network.

What are the next steps?

The Conclusions further develop and clarify the ORR’s key priorities for PR18, and by extension identify the potential areas of change which Network Rail will need to consider in connection with its strategy for Control Period 6. Further consultations will take place in December 2016 which will examine charges and incentives and on Network Rail’s financial framework including the revenue and financing requirements upon which Network Rail will operate. The feedback derived from these various consultations will play a key role in supporting the ORR to further refine and develop its approach to delivering PR18 and ultimately determine what Network Rail will be required to deliver in Control Period 6.


Source:

Our conclusions on the initial consultation on the 2018 periodic review of Network Rail (17 November 2016)

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