Office of the Rail Regulator

Rail Regulator publishes consultation document on incentives
_______________________________________________________________

date 15 October 1999
source Office of the Rail Regulator
type Press release

note ORR/99/45

In a consultation document published today as part of his periodic review of Railtrack’s access charges, the Rail Regulator, Tom Winsor, has invited views on possible changes to the incentive framework to ensure that Railtrack improves the capability, quality and performance of its network.

Commenting on the new consultation document, Tom Winsor said: "Railtrack’s network is an asset of strategic national importance. Its condition and capacity, and the ways in which it is operated, are matters of public importance. These are not matters of only private commercial significance. Safety must always be paramount in the plans and operations of every railway company. Commercial ambitions and priorities are secondary.

"In August 1999 I initiated enforcement action against Railtrack concerning its failure to meet its annual performance standards. While enforcement action will always be available to me, there is a better way of improving the railway, a way that is based on a robust long-term incentive framework. The proposals which I have set out today will establish a regime for Railtrack in which the company is given the means and the motivation to implement decisions which promote and protect the public interest.

"Incentive regulation is not only about providing the company with opportunities to increase its income. If the company exceeds its targets, it benefits financially. If it falls short of them, it will suffer financially, and may incur regulatory penalties as well. The company has the chance of doing better only if it exceeds expectations. If it turns in a poor performance, its shareholders will pay the price, and it could be a heavy one. The focus is therefore on the management and the competence of the company to ensure that regulatory targets are met and beaten. It is a simple relationship.

"The alternative model – of command and enforcement - is still possible. But it is a very poor second best. That is not to say that enforcement instruments should be discarded. They are a necessary part of the regulatory regime, and in appropriate cases they will need to be used. But where the company behaves – and is incentivised to behave – in a way which reduces or even eliminates the need to use enforcement action, the passenger and the freight user will be getting what they have the right to expect and demand."

"This consultation document raises important issues for Railtrack, operators, freight users and passengers. It also has important implications for government and the Shadow Strategic Rail Authority and the Passenger Transport Executives. I am therefore inviting comments from all interested parties on the best way of ensuring that Railtrack does deliver on its public interest obligations."


Copies of the consultation document, "The periodic review of Railtrack’s access charges: the incentive framework – a consultation document" are available from Sue MacSwan, ORR Library, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2TQ, Tel: 0171 282 2001; fax: 0171 282 2045; e-mail: orr@dial.pipex.com. The document is also available on the ORR website at http://www.rail-reg.gov.uk/

Railhub Archive ::: 1999-10-15 ORR-001