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20 March 2000
ORR/00/07
Rail Regulator rejects Railtrack performance targets for 2000-01
The Rail Regulator, Tom Winsor, today outlined intendedperformance targets for Railtrack for the year 2000-01.
He gives notice that in the period 2000-01 Railtrack isexpected to achieve a 5% performance improvement in minutes delayattributable to causes for which Railtrack is responsible in addition tocatching up any shortfall for the period 1999-2000 and rejects Railtracksproposal of 5% alone.
Commenting on this, Tom Winsor said:
"I welcome Railtracks efforts to meet the 1999-2000target of 12.7% (which is 7.5% plus the shortfall from the previous year). Thecompany has worked hard to achieve it and is doing well. However, the finalfigure will not be known until next month.
"The 2000-01 target of 5% plus catching up any shortfallin the current year is fair and achievable. This figure has been recommended bymy experts and independent consultants appointed by me for this purpose.
"Railtrack needs to take this target as seriously as itis taking the current one. For 2001-02 onwards, I hope to rely primarily onimproved contractual incentives rather than enforceable targets, and next monthI will be publishing my provisional conclusions on the incentiveframework."
Copy of the Rail Regulator's letter to Railtrack attached as an Acrobat PDF file. Should you not have Acrobat Reader a copy may be downloaded free from the Adobe website by using the link below.
NOTES FOR EDITORS -
Railtrack has been told that the Regulator expects toestablish separate targets of 5% improvement in delays and cancellations ofpassenger and freight trains for which Railtrack is responsible. This is on thebasis that Railtrack achieves all of the 12.7% target for the year 1999-2000. IfRailtrack does not do so, the Regulator expects to require it to achieve all ofthe 1999-2000 shortfall as part of its target for 2000-01. -
Railtrack proposed to the Regulator that the 2000-01target should be a 5% improvement on whatever is achieved in the currentyear. If Railtrack fails fully to achieve the existing 12.7% target, itsproposal would have meant that some of the 2000-01 5% target would havebeen eaten up by the shortfall in 1999-2000. The Regulator has thereforerejected that proposal. -
The Regulator will finally establish the 2000-01 targetwhen he has considered how well Railtrack performs in the current year and thereasons for any shortfall. -
In August 1999 the Regulator commenced enforcement actionagainst Railtrack to incentivise it to achieve the 1999-2000 target of 12.7%reduction in delays to passenger trains attributable to Railtrack fault. Thepenalty imposed in that enforcement action was £4 million for everypercentage point by which Railtrack failed to meet the 12.7% target. -
The penalty of £4 million per percentage point ofany shortfall was necessary to incentivise the company to achieve the 1999-2000target because it had failed to take appropriate remedial action until late inthe year. -
In relation to the 2000-01 target, if there is a shortfallthe Regulator expects to impose a penalty of £2 million per percentagepoint. But if the company fails timeously to take the necessary managementaction to meet it, the penalty could be up to £4 million per percentagepoint. This is explained in the attached letter from the Regulator to the ChiefExecutive of Railtrack dated 17 March 2000.
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