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2000-04-25 RTK-001
Railtrack

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Letter from Gerald Corbett


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Office of the Rail Regulator
ORR
Railtrack
WCML1999
West Coast Main Line



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Railtrack

Letter from Gerald Corbett
_______________________________________________________________


date
25 April 2000
source Railtrack
type Letter



SECOND LETTER

25 April 2000

Mr T Winsor
Rail Regulator
Office of the Regulator
I Waterhouse Square
138-142 Holborn
LONDON EC I N 2TQ


Dear Tom

West Coast Main Line

In respect of Annex Three of our representations and objections and the schedule to
that Annex, I would draw your attention to Railtrack's request that they be treated as
commercially sensitive information and that their contents be withheld from
publication on the grounds that publication would seriously and prejudicially affect
Railtrack's interests.

In Annex Three you will also note Railtrack's acceptance that the information given to
you to date regarding work which is unreasonable or uneconomic has not been
detailed enough. The schedule to Annex Three goes some way towards remedying
that omission. As Annex Three states, further information will be given to you on or
by 5th May.

Yours sincerely
Gerald M N Corbett


Representations and Objections to the Regulator's Modified
Draft Final Order

WEST COAST MAIN LINE

A. Introduction

1. This document contains the representations and objections made by Railtrack PLC
in accordance with s.56(4) of the Railways Act 1993 (the Act) to the Notice and
modified draft final order (MDFO) published by the Rail Regulator (Regulator) on 27
March 2000.

2. Railtrack welcomed the meetings between the Office of the Rail Regulator (ORR)
and Railtrack which were held to try and clarify issues arising from the 5 November
1999 draft final order (DFO), and the constructive approach adopted by the
Regulator in seeking to accommodate Railtrack's concerns. Railtrack also welcomes
the fact that some of the modifications to the DFO have met several of the concerns
expressed in its Representations and Objections (Original Representations) of 14
December 1999. A number of other misunderstandings on both sides have also
been resolved.

3. However, Railtrack remains of the view that a final order is unnecessary and that the
statutory conditions for the making of an order are not satisfied (see sections 55(1)
and 55(5)(b) of the Act). Railtrack is also concerned that the specification of some of
the requirements set out in the MDFO still remain unclear, and that others cannot
practically be achieved.

4. In addition, some of the requirements in the MDFO have already been completed.
Without prejudice to Railtrack's general submission that the statutory conditions for
the making of an order are not satisfied, those requirements could not be requisite
for the purpose of securing compliance with Railtrack's Licence within the meaning
of section 55(1) of the Act.

5. Following discussions with ORR, and based on Railtrack's understanding of the
MDFO, Railtrack has produced a further Project Plan and a copy is attached to
these representations and objections as Annex 1. In Railtrack's judgement the
Project Plan represents the best achievable process and timescale for the delivery
of the remaining requirements of the MDFO.

6. Railtrack urges the Regulator to reconsider this draft final order process, which has
lasted for almost six months. Throughout that time Railtrack has continued the
planning and implementation of the West Coast Main Line (WCML) project. It is in
the nature of such projects that over time the detailed methods of implementation
are developed and that customers' reasonable requirements become clearer, with
the result that frequent changes to the project are made. Changes are inevitable,
and yet the detailed timetabling, review and other requirements set out in the MDFO
(and previously the DFO) seek to freeze the project at a particular moment in time,
with the risk that nugatory work is required to be undertaken because the
requirements are out of date. Railtrack understands the concerns expressed by the
Regulator up to November last year, but it firmly believes that the WCML project is
being properly managed.

7. Save as stated, Railtrack has no objection to these representations and objections
being published on the ORR website. Railtrack intends to publish these
representations and objections on its website.

B. Railtrack's WCML project action since November 1999

8. As the Regulator is aware, Railtrack is continuing to devote significant resources to
the WCML project, and has recently published the second issue of detailed route
upgrade plans for each one-eighth mile section of track. More than £1.2 billion of
expenditure has already been authorised, and more than £800 million of contracts
are underway.

9. Throughout this enforcement order process Railtrack has pressed on with its Project
Plan. Railtrack completed on schedule:
· the freight routing strategy (issue 1) on 29 February;
· the costed specifications for the freight routing strategy (issue 1) on 29 February;
· phase 2 of the specimen timetable on 14 April;
· phase 2 draft Rules of the Plan on 14 April;
· phase 2 infrastructure specifications on 14 April;
· the freight routing strategy (issue 2) on 20 April; and
· the costed specifications for the freight routing strategy on 20 April.

10. Monthly reports on progress have been sent to ORR, as promised. A copy of the
Project Plan followed to produce that and other work is attached to these
representations and objections as Annex 2.

Baseline 2 Costs and Joint Working Group

11. On 31 January 2000, following the Black Diamond day review, Railtrack submitted
to the Regulator the Baseline 2 Cost Plan. About five weeks later ORR proposed the
formation of a Joint Working Party to spend eight weeks intensively reviewing that
cost plan, and then to discuss that review at a hearing on 11 May. ORR accepted
that such a review would involve difficult and complex issues. Railtrack pointed out
that if the review process took place key resources would have to be deployed in
order to make the review worthwhile, and that this would have an effect on its ability
to comply with its Project Plan. In the event the review started immediately.

12. As part of the review eight output options are being considered. Each of those
options is being costed. In the time available it is only possible to make assumptions
regarding the capacity that each option will provide. The Joint Steering Group
(which oversees the Joint Working Group; ORR is represented on both groups)
agreed that costed specifications would be prepared and that an option would be
selected before timetabling work was carried out to confirm the capacity which the
selected option could provide. This is because it would be impossible to complete
the timetabling work in time for the review. In addition, until the preferred option is
known, any timetabling work that is carried out is in danger of being nugatory.

13. The detailed timetabling requirements in the MDFO should be seen in that light. As
explained below, Railtrack is concerned that a requirement to carry out timetabling
requirements before the preferred option is known is unreasonable since it may
result in nugatory work.

WCML project progress

14. The Regulator visited the WCML project team on 26 January and was given a
detailed briefing on the project plans and progress of the WCML project. Following
that presentation the Regulator stated that he was impressed with the improvement
in project planning and management. The many steps taken by Railtrack in the last
year have also been recognised by West Coast Trains Limited (WCTL), whose
Chief Executive has recently been reported in the press as stating that he now
believes Railtrack can deliver in time. In giving these examples Railtrack does not
seek to argue that the WCML project is no longer free from problems. Given the size
and complexity of the project, that could hardly be the case. However, the WCML
project is being properly managed, and the enforcement order process is
unnecessary.

C. The modified draft final order: General

15. In paragraph 2.4.3 of the notice the Regulator states that:
"since late December 1999 ORR has striven to identify the changes which
could be made to the draft order which would meet Railtrack's concerns about
the practicability of doing the work required by the draft order, whilst ensuring
that the Regulator, train operators and funders received timely information they
could use".

16. Despite the fact that it served its Original Representations on 14 December 1999,
Railtrack received no reaction from ORR to those representations until the meeting
held on 19 January; a period of five weeks. That meeting was held only so that ORR
could clarify a few points regarding the Original Representations. Further, at that
meeting ORR said that within two weeks some indication would be given as to how
ORR intended to proceed: either to seek undertakings or to propose an amended
order. In fact, no such indication was given. At the meeting ORR also clearly stated
that it was in no one's interests for an order to be made which Railtrack could not
meet. Unfortunately, despite further meetings, the MDFO does contain requirements
which Railtrack is unable to meet.

17. It should be noted that by the time of the 19 January meeting, work in accordance
with the Project Plan was already well underway. Approximately two thirds of the
freight strategy review had been completed. Over 40% of the 2005 specimen
timetable had been prepared, and approximately 30% of the work required for the
strategic reviews had taken place. This demonstrates the difficulties involved in
applying an enforcement order process to such a complex project over a lengthy
period of time.

18. Railtrack believes that the five weeks it took for ORR to consider the Original
Representations is an indication of the complex interaction of the issues that are
involved. This is especially the case when the enforcement order process attempts
to 'freeze' the continuing project process at a particular moment in time. The longer
the enforcement order process lasts the more difficult and complicated that attempt
becomes, because the evolving aspects of the project have to be addressed in the
draft order, which may then be out of date as Railtrack will have already taken
further steps in respect of the Project Plan, and the proposed requirements in the
DFO and MDFO. That it took over three months from receipt of the Original
Representations to publication of the Regulator's proposals regarding a modified
order supports this view.

Dwell Times

19. One such issue relates to dwell times (the time a train is at rest at a station). ORR
was advised in December 1999 that as required by the DFO Railtrack proposed to
include in its timetables the dwell times specified in its track access agreement with
WCTL. ORR now maintains that if Railtrack feels that the dwell times are unrealistic,
they should not be included in the timetabling work. ORR contends that Railtrack
should use its best judgement to determine which dwell times should be included. In
ORR's view this would result in a realistic timetable, on which train operators may
with confidence rely. ORR is aware that WCTL has been asked for information
regarding likely dwell times, but that WCTL has said that its review is not yet
complete.

20. On 19 January, as promised in its Project Plan, Railtrack held a consultation
meeting with representatives of TOCs, FOCs, sSRA and the Regulator. At that
meeting Railtrack circulated draft Rules of the Plan, which included the contractual
dwell times which would be used when preparing the phase 2 specimen timetable.
Railtrack has yet to receive any substantive comments on the draft Rules of the
Plan from any of those who attended that meeting. It would be helpful if TOCs and
others were to respond to Railtrack in a timely fashion with their views.

21. Railtrack will use its judgement to estimate the likely WCTL dwell times, because
the Regulator has insisted that such an approach be taken. However, because of
the complex interaction of the issues, a change in the dwell times will necessarily
involve changes in assumptions about other factors, such as stopping patterns and
required infrastructure. Train operators will therefore not be able to rely with
confidence on the specimen timetable until WCTL has confirmed its requirements. If
WCTL then gives dwell times which differ from those assumed by Railtrack, the
timetabling work will have been nugatory and will have to start again.

Minutes

22. Because of the complexity of the issues contained in the DFO, and the scope for
misunderstanding, Railtrack provided minutes of meetings to ORR so that they
could be discussed and agreed. That process was followed in respect of a meeting
on 28 January but on 11 February ORR informed Railtrack that it was not prepared
to agree minutes, citing the fact that Railtrack was seeking legal advice. In response
(on 14 February) Railtrack made it clear that:

"in seeking to record the points which we discussed or agreed, I am simply
trying to follow the proper process. Both Railtrack's and ORR's actions may be
reviewed at some stage. However, far more important is the need to reduce
misunderstandings and ambiguity. The meeting we had on 09 February was
necessary because mutual misunderstandings arose on 28 January. These
meetings have been useful in identifying and resolving some of the
misunderstandings which have occurred, and in my view it is essential and
useful in agreeing a record of what we agreed ...."

23. It is regrettable that it has not been possible to agree the content of any further
minutes. A number of meetings and telephone conversations have taken place
between ORR and Railtrack. As it is, a number of misunderstandings have
remained. These are discussed in Section D.

D. Specific requirements of the modified draft final order

Paragraph 1(a): Production of Freight Routing Strategy

24. As worded, this obligation still involves the analysis of 18 periods of time from 1 May
2000 to 1 May 2009, based on two timetable changes per year. In paragraph 5.2 of
its Original Representations Railtrack explained this point and stated that in the time
available such an amount of work would not be practicable. During a meeting on 16
March ORR appeared to understand the problem, and said the issue would be
clarified in any future final order. In paragraph 3.3.4 of the Notice dated 27 March
the Regulator said:
"The Regulator accepts the assumptions in paragraphs 5.0, 5.2 and 5.4, and
has modified the draft final order accordingly” (emphasis added)

25. However, the Regulator has not modified the draft final order accordingly. The
relevant wording is the same as in the DFO. Railtrack must therefore object to
paragraph 1(a) in its present form, since the work is impossible to achieve in the
time allowed.

26. As discussed during meetings with ORR, Railtrack has proceeded with the
production of one freight routing strategy, which was provided to ORR on 20 April. If,
therefore, the draft final order had been modified, Railtrack would now have satisfied
the requirement, and paragraph 1(a) would not be requisite for the purpose of
securing compliance with Railtrack's Licence condition.

Paragraph 1(b): Freight Routing Strategy: costed specifications

27. The MDFO requires the costed specifications to be provided on or before seven
days after the making of the MDFO.

28. On 16 March Railtrack confirmed that as a result of the need to devote resources to
the joint review of costs (see paragraph 11 above) the planned date for the
production of the costed specifications had moved to 20 April. That date was met,
and Railtrack has provided the costed specifications. Railtrack has therefore
satisfied this requirement and paragraph 1(b) is not requisite for the purpose of
securing compliance with Railtrack's Licence condition.

Paragraph 1(c)(i): Specimen Timetable

29. In paragraph 2.4.15 of Chapter 2 of the Notice dated 27 March the Regulator has
noted Railtrack's statement that if the relevant timetabling work had to start afresh, it
would not be possible to achieve the 15 May deadline; but that Railtrack had agreed
to consider the basis on which it could complete the timetabling work either in draft
or final form by that deadline.

30. Railtrack agreed to do so during the meeting with ORR held on 16 March. At that
meeting Railtrack suggested producing a "rough cut" of the proposed timetable by
15 May, and completing that timetable by 24 July.

31. Railtrack remains able by 22 May (the date now specified in the MDFO) to produce
a ‘rough cut’ draft timetable with reduced geographical scope (Euston to Crewe,
Crewe to Manchester, Rugby to Birmingham New Street) for all trains providing for
all movements on a 24 hour basis, but not validated. The rough cut timetable will not
provide a statement explaining how in Railtrack's view the timetable provides a
standard of operational performance which meets the reasonable requirements of
train operators and funders.

32. By 24 July Railtrack will be able to produce a final version of the same specimen
timetable which will cover and include:
· the geographic scope specified in the MDFO;
· draft Rules of the Plan;
· full timetable validation; and
· the statement referred to in paragraph 31 above.

33. It is not possible to produce a final version of the timetable by the date specified in
the MDFO. In addition, the MDFO does not distinguish in substance or in time
between a ‘rough cut’ timetable, and a final version of the same timetable. As a
consequence, and as explained to ORR on 16 March, Railtrack is unable to comply
with this paragraph as it is presently worded. If therefore the Regulator proceeds
with the modified final order it will be necessary to extend the completion date, or to
modify the MDFO to require the timetable described in paragraph 31. If that does
not happen the Regulator will be making an order which he knows (and knew before
the MDFO was issued) that Railtrack would be unable to comply with.

Paragraph 1(c)(ii): Draft Rules of the Plan

34. Consistent with its position as regards paragraph 1(c)(i), Railtrack will be able to
produce interim draft Rules of the Plan by 22 May. By 24 July Railtrack will be able
to produce revised draft Rules of the Plan which it considers would be necessary to
propose in accordance with the Railtrack Track Access Conditions to enable the
specimen timetable to be operated to produce the capacity referred to in paragraph
1(c)(i). Those Rules of the Plan do not contain a statement regarding "the
assumptions and allowances for performance made by Railtrack" (see paragraph 53
below).

Paragraph 1(c)(iii): Statement of Capacity Difference

35. Railtrack welcomes this modification to the MDFO and assumes it was made
because it takes up to three months to produce a timetable. However, the details
required in such a statement (which term is not defined) are not clear. The
preparation of a statement would presumably have to:
· analyse the component parts of the timetable produced under 1(c)(i);
· analyse, using the same methodology, the component parts of the modified
"capacity commitments", as defined; and
· identify and state the difference between the two.

36. A statement might include the following information for each train path or group of
train paths:
origins and destinations, number of trains per day (in each direction); stopping
patterns; first and last trains; tolerance on intervals; dwell times; turnaround times;
journey times; and timing load.

37. However, Railtrack does not know whether the requirement that a statement is
produced would be met by the provision of such information. Railtrack must
therefore object to this part of the MDFO.

38. It would not be possible to produce a ‘rough cut’ statement by 22 May, because
there would be insufficient information available by that date. Assuming that the
information referred to in paragraph 36 is broadly what is required, Railtrack would
be able to produce a statement by 24 July. (This assumption also holds good in
respect of paragraphs 1(c)(iv) and (v), discussed below).

Paragraph 1(c)(iv)

39. For the same reasons as stated in paragraph 38 above, Railtrack is not able to
produce the statement required in paragraph 1(c)(iv) until 24 July 2000.
Paragraph 1(c)(v)

40. Railtrack is able to produce the statement required in paragraph 1(c)(v) on or by 24
July 2000.

Paragraph 1(d): Strategic Reviews

41. Railtrack will endeavour to provide strategic reviews by 22 May 2000 (although
Railtrack's Project Plan specified 31 May), subject to the following issue.

42. During a meeting on 04 April ORR asked Railtrack to explain what assumptions it
intended to make with regard to the base for the strategic reviews. Railtrack stated
that the basis was the infrastructure comprising the Specified Works, as defined in
the MDFO (although see paragraph 44 below). In response, ORR stated that in
complying with this part of the MDFO Railtrack should also have regard to
paragraph 3.3.21 of the Notice dated 27 March. By this ORR apparently meant that
in order to comply with paragraph 1(d), Railtrack had to use as one of its
assumptions not only that the infrastructure should be the Specified Works, but that
it should also include as a base the infrastructure required for the PUG 2 contractual
commitments and Railtrack's undertakings. Railtrack believes that it would be
unreasonable and unrealistic to produce strategy reviews with those assumptions as
a base. It is unreasonable because:
· the timetabling assumptions accepted by the Regulator are based on the
Specified Works and not on an infrastructure specification which would meet
the capacity commitments in full. It would be unreasonable to produce strategic
reviews under a different assumption; and
· the Joint Review has always assumed that Option 7 (see paragraph 12 above)
provides the maximum infrastructure to be built. It would be inconsistent to
produce a strategic review based on anything greater.

43. In any event, if it was necessary to produce strategic reviews using the assumptions
the Regulator requires, Railtrack would first have to complete the work
contemplated in paragraph 1(c). Since the statements and the review are both
required by 22 May, it follows that the statements would have to be produced well
before 22 May. That timescale is not possible.

44. Railtrack notes that the Regulator's definition of Specified Works refers to the
'Functional Specification....(Issue Formal 2)'. Railtrack issued a new functional
specification on 10 March, which was sent to ORR and others shortly afterwards.
Railtrack believes that the latest version (Formal 2.3) should be the basis for the
work, save for the exceptions referred to in Railtrack's letter to ORR dated 21
March. Railtrack could work to the specification referred to in the MDFO but it would
be unrealistic to do so. This is an example of the point made in paragraph 6 above:
as time moves on the project progresses, and the risk increases that necessary
changes are not all reflected in the enforcement process. Any final order should
refer to the current functional specification.
Paragraph 1(e): Identity of risk assessor

45. As the Regulator is aware, the identity and address of the independent risk assessor
has already been notified to him. This part of the MDFO is therefore not requisite for
the purposes of securing compliance with Railtrack's Licence condition.
Paragraph 1(f): Unqualified certificate

46. Railtrack notes this part of the MDFO. A certificate in respect of the costed
specifications required under paragraph 1(b) of the MDFO has already been
provided to the Regulator.

Paragraph 2(1): Modification treated as agreed

47. Railtrack notes this part of the MDFO.

Paragraph 2(2): Use of stated requirements of operator

48. Railtrack notes this part of the MDFO.Paragraph 2(3): Statement accompanying timetable

49. At the meeting with ORR held on 16 March it was accepted that a statement
explaining how a timetable provides for a standard of operational performance had
never been prepared before, whether by Railtrack or its predecessors. There are
therefore no accepted methods or standards to follow. Railtrack has also raised this
point with TOCs and FOCs, and asked for views as to what such a statement should
contain. No responses have been received. It would be unreasonable for an order to
require a statement before there is any agreement about what such a statement
should contain. It would be more realistic to agree the content of such a statement
before the imposition of an order. Railtrack welcomes ORR's agreement, given on
16 March, to discuss this further.

Paragraph 3: Publication of information

50. Railtrack notes this part of the MDFO. Since May 1999 it has been Railtrack's
standard practice to publish widely timetables and strategic reviews (including the
freight routing strategy). However, Railtrack has found that despite publication, it is
rare to receive feedback from TOCs, FOCs and others.
Paragraph 4(a): Provision of information to assessor

51. Railtrack notes this part of the MDFO. The independent risk assessor has been
informed in writing that as soon as he requires information to enable him to give the
required certification, he should ask for it. To the extent that the independent
assessor makes known his requirements, Railtrack will timeously satisfy them.
Paragraph 4(b): Contract of appointment of assessor

52. A copy of the contract was sent to ORR on 30 March. This part of the order is
therefore not requisite for the purposes of securing compliance with Railtrack's
Licence condition.
Definitions
Railtrack believes that the following definitions require clarification:
'Rules of the Plan'

53. Rules of the Plan produced in accordance with "the Railtrack Track Access
Conditions" do not contain an explicit statement regarding "the assumptions and
allowances for performance made by Railtrack". This definition and paragraph
1(c)(ii) of the MDFO are therefore inconsistent.

'Specified Works'

54. Railtrack has already noted (see paragraph 44) that the functional specification
referred to in this definition is now out of date. Further changes will be made to the
current functional specification as the WCML project develops.
'Specimen Timetable'

55. Railtrack notes this definition but draws the Regulator's attention to the phrase
‘'and demonstrating in all cases that services which do not run on each weekday
can be accommodated on the days on which they run’.
Railtrack understood that the definition of ‘Specimen Timetable’ had been modified
to avoid the need to produce five timetables. For the avoidance of doubt, Railtrack
understands that this requirement would be satisfied by the provision of one typical
timetable, and a statement demonstrating how that timetable would vary to
accommodate trains which do not run on each weekday.

56. Further, a standard hour timetable is required for all off peak hours for certain route
sections. Railtrack needs to know whether the timetabling work should cover all
trains arriving and departing during off peak hours. If so, because of the length of
the sections in question, the timetabling work will have to extend beyond off peak
hours.

E. The Content of a Final Order

57. In its Original Representations Railtrack stated its belief that if the Regulator
nevertheless made a final order, it should differ from the DFO so that the
requirements were clear; the timescales practicable; the technological solutions
feasible and that it should relate to economically practicable infrastructure which
reflects train operators' and funders' reasonable requirements. In support of its belief
Railtrack referred to the requirements of reasonableness, certainty, and
compatibility with the principles of The European Convention on Human Rights.

58. Railtrack repeats these submissions, including that concerning the European
Convention on Human Rights and submits that the making of an order in the terms
of the MDFO would not be compatible with those principles.

F. Railtrack's decision not to consent to the modifications

59. Railtrack's reasons for deciding not to consent to the modifications proposed by the
Regulator on 10 March can be summarised as follows. First, Railtrack did not accept
that the statutory conditions for the making of a final order were satisfied. In
particular, Railtrack did not accept that an order had to be made in order to secure
compliance with its Network Licence. Railtrack continues to believe that the
imposition of a final order is unnecessary. Second, Railtrack has a duty to minimise
its exposure to any civil liability. Last, Railtrack was of the view that parts of the
proposed order were unclear or not practicable. In Railtrack's view those reasons
remain applicable to the MDFO.

Consequences of not consenting to the modifications

60. During the meeting with ORR on 22 March, Railtrack made the point that:

· if it consented to the modifications, then the information specified in the
modified draft final order would have to be provided by the stated dates;
whereas

· if it did not consent to the modifications, and after considering any
representations and objections the Regulator proceeded to make the modified
draft final order without further modifications, then the same information would
have to be supplied, by the same dates.

61. With those circumstances in mind, Railtrack said it would be helpful if ORR could
explain why it was in Railtrack's interests to consent to the modifications. ORR
responded by saying that if Railtrack consented to the modifications, better public
relations would ensue. It is a matter of regret that the exercise of quasi judicial
enforcement powers which expose Railtrack to the risk of civil liability is apparently
linked to the issue of public relations.



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