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ORR publishes an update letter on the variable usage charge and infrastructure cost charges

  • United Kingdom
  • Transport - Rail

04-05-2018

Background

Periodic reviews are one of the principal mechanisms by which the Office of Rail and Road (“ORR”) holds Network Rail to account, and secures value for money for users and funders of the railway. The ORR’s periodic review in 2018 (“PR18”) will establish Network Rail’s output and funding for Control Period 6 (“CP6”) from 1 April 2019 – 31 March 2024. As part of PR18 the ORR has been reviewing how access charges and contractual incentives can be developed to improve decisions made by Network Rail, train operators and funders, which will produce better outcomes for passengers, freight customers and tax payers. The letter on charges and contractual incentives, dated 13 April 2018, outlines key updates on the ORR’s charges work as part of the PR18 review.

What does the letter contain?

Variable Usage Charge

  • The draft determination (to be published in June 2018) will include a proposal to cap/phase in Variable Usage Charge (“VUC”) for freight and charter services over a time limited period.
  • Stakeholders have raised concerns that the VUC could increase significantly in CP6 reflecting changes to Network Rail maintenance and renewal costs.
  • Legislation requires the ORR to set the VUC as a reflection of costs directly incurred, however, the ORR are satisfied that they have the flexibility to allow for the changes to be brought in over a limited period.

VUC and Open Access Passenger Operators

  • The ORR is considering whether the VUC proposal, as outlined above, is appropriate for “open access” non franchised passenger operators.
  • Open access passenger operators are also exposed to changes in charging rates, therefore the ORR are working to model their charging decisions for these operators.

Cancellation of ‘draft CP6 price list’

  • Due to the above VUC proposals, the ORR has asked Network Rail to cancel publication of its ‘draft CP6 price list’, scheduled for April 2018, in line with its Strategic Business Plan.
  • Following publication of the draft determination, Network Rail will publish a price list reflecting the ORR’s proposed approach to capping/phasing-in.

Infrastructure Cost Charges

  • The ORR also provides an update on the ongoing development of the Infrastructure Cost Charges (“ICC”) approach, including the following two decisions that have been taken in relation to proposals to be included for consultation:
    • As part of the draft determination, the ORR will propose to use the new Network Rail cost allocation methodology to set ICCs in CP6.
    • Based on feedback to the ORR’s September 2017 consultation, the ORR will propose in the draft determination that any ICCs levied on open access services in CP6 are levied as a rate per train mile. The ORR will also propose that Fixed Track Access Charges for franchised passenger operators vary in CP6 with changes in timetabled traffic.
  • In all other areas of the ICC policy, proposals will be set out as part of the draft determination.

What are the next steps?

PR18 will play an important role in determining what Network Rail should deliver in CP6. The ORR will look to discuss these issues further with industry groups, particularly following publication of its detailed proposals as part of the draft determination.

 

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