Monitoring and treatment of underspend and efficiency
The access charges review 2003 (ACR2003) established a set of outputs covering performance, network capability, asset condition and stewardship.
ORR seeks to ensure that Network Rail is incentivised to meet and outperform the expenditure assumptions underpinning the ACR2003 determination, and therefore achieve the maximum level of efficiency whilst not compromising the delivery of outputs in either the short or long term.
The framework for the monitoring and treatment of underspend and efficiency should facilitate this. In particular, it encompasses our approach to:
- Monitoring the extent and cause of any underspend by Network Rail versus the expenditure assumptions made by us in determining its allowed revenues, focussing in particular on the classification of underspend as either ‘outperformance’ or ‘underperformance’ of regulatory assumptions.
- The treatment of any underspend by Network Rail, differentiating between that pertaining to ‘outperformance’ and that to ‘underperformance’ of regulatory assumptions.
- Monitoring Network Rail’s unit costs and, in particular, the extent to which it is meeting the unit cost targets set by us at the Access Charges Review 2003.
We initiated the consultation on the proposed framework in June 2005.
