2016-11-04 New era for the West Coast mainline as government confirms future operator will also run HS2 services (Department for Transport)

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date 28 July 1998
source Office of the Rail Regulator
type Press release

note ORR/98/28

The Rail Regulator, John Swift QC, today published two documents which together map out the future regulation of Railtrack PLC, the owner and operator of the national rail network. The first is a further consultation paper on the periodic review of Railtrack's access charges. This document confirms the overall framework and timetable for the review, and seeks views on possible approaches to determining the future return on Railtrack's assets. The second is the detailed report of his review of Railtrack's 1998 Network Management Statement, together with the full text of the commitments given to the Regulator by Railtrack and announced on 16 July.

The first document - The Periodic Review of Railtrack's Access Charges: The Framework and Timetable and Further Consultation on Financial Issues - confirms the overall framework for the periodic review, following the initial consultation paper issued last December. In particular, the proposal to apply precedents from other regulated network industries has been endorsed. The Regulator's aim in carrying out the review is to identify the minimum sums necessary to finance the functions of an efficient operator. Consistent with this aim the second consultation paper also sets out further proposals on establishing Railtrack's regulatory asset base and cost of capital - and thus a fair return for investors - and in particular the basis for remunerating investment by Railtrack in the enhancement of the network.

Mr Swift said : "My aim in carrying out the review of Railtrack's charges is to obtain for passenger and freight train operators, and funders of the railway, fair prices for high standards of performance. The responses to the initial consultation paper indicated strong support for the overall framework for the review which I proposed and have now decided to adopt. The processes which are now in place will ensure prices justified by real incentives to produce improvements in network capability and performance that users and funders expect and are prepared to finance. The second consultation paper moves this process forward and, in particular, seeks to provide a better defined framework for remunerating investment by Railtrack in network enhancement. Clarity on these matters is critical if Railtrack is to have the right incentives to deliver ongoing improvements in the network.

"There is much work still to be done to bring the periodic review to a satisfactory conclusion. The framework and detailed work plans which are now in place are necessary to enable me to put forward robust proposals in about 18 months time. They will build on the short term improvements to which Railtrack is now committed and offer the prospect of even greater improvements in the performance and capability of the network, and better value for money for passengers, freight users and taxpayers."

The second document - The Review of the 1998 Network Management Statement - sets out the Regulator's detailed assessment of Railtrack's plans for the future capability and quality of the network and the formal commitments Railtrack has given to secure compliance with its Network Licence in four key areas:

o performance: much more demanding targets to reduce delay than were provided in the 1998 Network Management Statement;

o track quality: the elimination of poor quality track within a defined timescale and without any reduction in the overall levels of track quality;

o network capacity: the timely development of options to address all of the current and foreseen capacity problems identified in the 1998 Network Management Statement;

o requirements of operators and funders: better processes for establishing their reasonable requirements in drawing up plans for maintaining, renewing and developing the network.

Mr Swift said: "My consultation with train operators, the Franchising Director and the Passenger Transport Executives showed that they share my concern at the lack of commitments to real improvements. It identified the need for immediate and positive action to ensure continued improvement in the performance of the network, and to avoid Railtrack being in breach of the requirements placed on it by its network licence. Railtrack has responded constructively, recognising its accountability to operators and funders, and has given commitments to secure compliance with the requirements of its Network Licence. The 1999 NMS must contain plans and commitments which properly address the needs of train operators and funders if it is to provide a sound basis for my decisions on the periodic review of future levels of charges".

Copies of both documents : Review of the 1998 Network Management Statement and The Periodic Review of Railtrack's Access Charges: The Framework and Timetable and Further Consultation on Financial Issues are available from Sue MacSwan, ORR Library, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2ST. Tel: 0171 282 2001, Fax: 0171 282 2045, e-mail : orr@dial.pipex.com.

Background:

On 16 July 1998, the Regulator issued a Press Notice (ORR/98/25) which announced the further commitments which Railtrack had given to the Regulator following his assessment of the 1998 Network Management Statement. The document which is published today sets out the Regulator's assessment of the NMS, the reasons why the Regulator sought additional commitments from Railtrack and the full text of the commitments.

On 10 December 1997, the Regulator published his first consultation paper launching the periodic review of Railtrack's access charges and seeking views on his proposed framework, timetable and the key issues which he intended to consider as part of the review.

Under the terms of track access agreements between Railtrack and franchised passenger train operators, the Regulator has to publish conclusions of his review on future charges by 31 July 2000. Unlike other regulated utilities, there is no process of appeal to the Monopolies and Mergers Commission.

Railhub Archive ::: 1998-07-28 ORR-001