Office of Rail Regulation consults on freight access charges and implementation of a reservation charge
5 December 2006
ORR/35/06
ORR today consulted on two important aspects of future track access charges payable by train operators to Network Rail. The proposals, to take effect from April 2009, concern caps for freight charges and the implementation of a reservation charge on the network.
The 2008 periodic review will set Network Rail’s outputs and access charges for the next control period (CP4) from 2009 to 2014. Establishing caps now will provide greater certainty to freight operators, and support them in planning their businesses. It will also help the Government make decisions about the level of public funding for the railway in CP4.
Because final charges cannot be established until the end of the periodic review in 2008, this consultation will seek to establish caps for the maximum levels of two charges:
- the variable usage charge paid by freight operators to Network Rail for use of the infrastructure;
- a new charge payable by freight operators to recover the full costs for the use of lines that are used exclusively by freight trains.
ORR’s consultation proposes that the overall level of variable usage charges payable by freight operators in CP4 does not exceed £105 million per annum (in 2005-06 prices and based on current traffic levels). This compares with the current level of charges of £88 million per annum (in 2005-06). The cap is based on ORR’s assessment of work by Network Rail to assess the variable costs of additional freight trains on the network. If, following further work by Network Rail to improve its cost estimates charges need to rise, ORR would phase in any increases over the period 2009 to 2014. Any reduction would be implemented in 2009.
In accordance with government policy and European law, ORR proposes that the new charge for lines carrying only freight is levied on only freight trains carrying coal for the energy supply industry (ESI) and spent nuclear fuel. ORR is further investigating the scope for trains carrying iron ore to pay this charge, and how much such a charge would be. Government currently pays the costs of freight only lines directly to Network Rail. The proposed maximum cap for charges for ESI coal is approximately £19 million per year and for spent nuclear fuel is approximately £2 million per year. There remains significant uncertainty around these costs and the final level of the caps could be lower than these levels.
ORR has asked Network Rail to undertake further work to improve its cost estimates ahead of February 2007, when ORR will publish its final decisions on caps for these charges.
Bill Emery, Chief Executive of ORR, said: “We want to establish the right charging structure for rail freight. We also want to promote the use of the railway to carry freight, in line with our duty to promote sustainable development. Since some freight market segments are very sensitive to relative price changes with road haulage, and traffic could be lost to rail with adverse environmental impacts, we are only proposing to implement the charge for freight-only lines on market segments that can bear the increase in costs.
“We are also consulting on the possible introduction of a reservation charge, levied on unused capacity reserved by operators. This would provide a financial incentive for operators to not to hold unnecessary track access rights, and incentivise efficient use of the increasingly scarce capacity on the network. We are seeking the industry’s views on a range of issues relating to the practical implementation of the charge and are interested to hear views on whether it should be applied to freight operators only, or to both passenger and freight operators.”
Notes for editors
- Copies of the consultation documents can be obtained from the ORR website. The freight charges consultation document is at http://www.rail-reg.gov.uk/upload/pdf/310.pdf and the reservation charges document is at http://www.rail-reg.gov.uk/upload/pdf/311.pdf.
- The closing date for responses for both documents is 30 January 2007.
- ORR intends to provide its final decisions on the cap in its Advice to Ministers and framework for setting access charges document, to be published in February 2007.
- The 2008 periodic review began in August 2005 with the publication of ORR’s ‘Periodic Review 2008: first consultation document’. Final determinations on Network Rail’s overall access charges and revenue requirement and outputs are planned for October 2008. Following this, the specific levels of each track access charge will be determined in December 2008.
Press enquiries
ORR Press Office - 020 7282 2188/2007
