- Access charges review 2003
Access charges review 2003
This page contains the final decisions and background relating to the Access charges review 2003:
On 12 December 2003, the Regulator published his final conclusions on Network Rail’s funding requirements. In his conclusions he decided that the company will receive £22.2bn – substantially less than the company had originally asked for – for the operation, maintenance and renewal of the rail network in Great Britain over the five years starting in April 2004.
Among his other conclusions the Regulator established:
- the income Network Rail would need to cover this expenditure;
- the outputs Network Rail must deliver (in terms of cutting delays and improving asset condition);
- the outputs from and funding for the West Coast Main Line route modernisation;
- performance incentives that would apply; and
- tightly defined provision for future access charges reviews within the following five years.
On 23 December 2003, the Regulator began the process of implementing his final conclusions by serving a review notice on Network Rail and the relevant train operators. Having received no objection to this review notice from Network Rail, he issued a notice of agreement on 5 February 2004.
On 10 March 2004, the Regulator issued the review implementation notice, which confirmed the conclusions were to be implemented on the proposed timescales in the review notice.
Also on 10 March 2004, the Regulator approved Network Rail’s proposed financing arrangements. This had the effect of increasing the amount of income to be received in direct grants from the SRA and reducing the amount to be received in the form of track access charges from train operators. It also involved some allowed revenue being reprofiled from 2004/05 and 2005/06 to later years.
The Regulator’s approval was effected through the issuing of a notice specifying values of “RI” and “AG” in track access contracts.
In his statement on 27 June 2002, the Regulator set out his proposed approach to the regulation of Network Rail as well as his proposed approach to a review of access charges following the proposed acquisition of Railtrack PLC by Network Rail.
In taking this forward, on 15 July 2002 the Regulator sent out a letter of consultation to the railway industry and other interested parties, asking for their views on the need for a possible access charges review as well as the scope and timing of it.
Following this industry-wide consultation, on 25 September 2002 the Regulator published a statement in relation to his intention to carry out a review of Network Rail's franchised passenger access charges.
Work was then carried out to develop the process for the review focusing on three main workstreams: expenditure assessment, incentives and financing. The work underpinning these three workstreams identified what Network Rail needed to run the network efficiently and effectively.
On 15 November 2002, the Regulator published his initial consultation document on the review, in order to provide the railway industry and those who use, fund and depend on it, with an update of the work that he had been doing since announcing the review in September 2002. The document also put forward a timetable for the remainder of the review, and consulted on the issues that he intended to address in his work on the incentive framework.
On 13 February 2003, the Regulator published his second consultation document on the review. This document covered the progress on the development of Network Rail's financing and incentive framework, as well as an update on the work on the expenditure assessment.
On 24 July 2003, the Regulator published his third consultation document in this review. The document set out the Regulator's emerging conclusions from the work he had undertaken in assessing Network Rail's expenditure projections, on incentives and on certain refinements to the existing financial framework. He also published his provisional conclusions from his assessment of the cost of the West Coast route modernisation project.
On 17 October 2003 the Regulator published his draft final conclusions. The draft conclusions were that the access charges that franchised passenger train operators pay to Network Rail would need to increase, but by substantially less than the company had originally requested. In the draft conclusions the Regulator stated that in total, Network Rail would be allowed to spend £22.7 billion on the operation, maintenance and renewal of the network over a five-year period.
Shortly before the publication of his final conclusions, the Regulator received a joint submission from the DfT and the SRA in which they explained that it would be desirable for the SRA to increase the proportion of money that it pays in grants to Network Rail, allowing access charges to be set at a lower level than those contained in the Regulator’s final conclusions.
In his final conclusions, the Regulator therefore allowed a provision for the government and Network Rail to submit a proposal for an alternative grant schedule. He received such a proposal on 27 February 2004. On 10 March 2004, the Regulator published a notice and a decision paper approving the proposal. The decision paper set out the Regulator’s reasons for approval and finalised Network Rail’s revenue profile for the five-year control period.