Adapting how ORR regulates Network Rail

17 June 2016

By Chris Hemsley, Deputy Director of Railway Markets and Economics, ORR.

Chris HemsleyIn ORR, we have recently launched a process known as the ‘Periodic Review’ (PR18). This will determine what Network Rail is required to deliver, and the resources that it needs to do this, for the years known as ‘Control Period 6’, which we expect to be from 2019 to 2024.

Our aim is that the review will support a more efficient, safer and better used railway, delivering value for passengers, freight customers and taxpayers to 2024 and beyond.

To achieve this, we need to focus on areas where the review can make a significant impact on outcomes for those passengers, freight customers and taxpayers.

And to deliver this, we are proposing two key changes to how ORR regulates Network Rail.

The first change is to regulate Network Rail much more at route level. This will support the changes Network Rail is itself making to move more responsibility to its route businesses, allowing it to be closer to and more responsive to its customers and passengers, and giving routes freedom to innovate and drive efficiency.

Our regulation would support these changes. We would also make greater use of incentives to boost the reputation of the route management teams by formally and transparently recognising their achievements in delivering improvements.

We have already been making changes in how we regulate, using route-level data to understand the relative performance of each of Network Rail’s routes. For the next review, this could go further. For example, we could set each route a separate set of targets for what it should deliver (referred to as ‘outputs’), together with a target for how much it should cost to deliver.

Network Rail has started working with passenger and freight operators to develop scorecards, monitoring how it is progressing against a set of measures agreed with its customers.

We see value in extending this collaboration in the way we regulate Network Rail longer term, by drawing on evidence on what passengers and freight and other customers want from each route when priorities are set.

Transparency over how each route is performing would also encourage customers, end users and funders to play a role in holding each of the route teams to account for their performance.

The second change is to adopt a tailored approach to the regulation of Network Rail’s ‘system operator’ role: its timetabling, capacity management, analysis and long-term planning functions.

This would support Network Rail to make improvements to punctuality, encourage better use of the network and also protect the ability of the individual train operators to move passengers and freight across route boundaries.

This could work by setting Network Rail’s national system operator its own set of targets and incentives that better reflect the activities that it undertakes.

For example, Network Rail is responsible for the timetable, and there could be ways of measuring how well a timetable performs and rewarding the company for producing high-quality, error-free timetables.

This would help train operators to run more services on-time, benefitting passengers and freight customers.

Similarly, we would like to find ways of recognising when Network Rail has identified the potential for additional services to be accommodated on the network, helping to meet the growing demand to use the network.

We would also want to support Network Rail’s important role in providing analysis to inform long-term planning, which in turn informs decisions by governments on the services it would like operated in future, and where it should spend money to expand and improve the network.

There is a lot of work to do to make these changes, and we would really value suggestions and ideas from stakeholders.

To support more detailed thinking on these, we have just published some ‘working papers’ that start to explore the issues that we need to work through and describe our current thinking on how this could work.

These are available from http://orr.gov.uk/news-and-media/press-releases/2016/a-safer-more-efficient-and-better-performing-railway.