Changes to charges and contractual incentives - Consultations
Consultation on charges recovering fixed network costs
Date published: 28 September 2017
Closing date: 30 November 2017
As part of the 2018 periodic review (PR18) of Network Rail, we are reviewing the way in which the charges operators pay to access the rail network are calculated.
We have decided to prioritise reforms to charges that recover some of the fixed costs of running the rail network, i.e. those costs that do not vary with use in the short term.
In our June 2017 charges and incentives conclusions letter, we confirmed that we would continue to work towards levying charges to recover fixed network costs on all operators, subject to a market-can-bear test.
The purpose of this consultation is to continue progress on developing our approach to levying these charges, which we have called infrastructure cost charges. This approach involves identifying a number of different market segments and then assessing the extent to which each segment can bear infrastructure cost charges. We are setting out emerging proposals on the market segmentation for freight and passenger services, and an initial view on the ability to bear infrastructure cost charge for the freight market segments we have defined, based on technical analysis undertaken by our consultants. We are also setting out proposals around the approach to levying infrastructure cost charges on passenger operators.
In addition to the above consultation documents, we commissioned CEPA and Systra to produce analysis on the market segmentation and ability to bear mark-ups for different types of freight and passenger rail services. Both documents are available.
Market-can-bear analysis: Freight services, report by CEPA, published 9 October 2017
Market-can-bear analysis: Passenger services report by CEPA and Systra, published 13 October 2017 [We have temporarily removed the CEPA & Systra passenger report from the website whilst the consultants investigate a possible issue which has been identified by a stakeholder.]
How to respond
We would welcome your views on this consultation by 30 November 2017. Please send your response to PR18@orr.gsi.gov.uk. We have prepared this pro-forma, should you wish to use it when submitting your response.
For other information on upcoming PR18 publications, please see our PR18 timetable.
Publishing your response
Information provided in response to this consultation, including personal information, may be subject to publication or disclosure in accordance with the Freedom of Information Act 2000 (FOIA) or the Environmental Information Regulations 2004.
If you want information that you provide to be treated as confidential, please be aware that, under the FOIA, there is a statutory Code of Practice with which public authorities must comply and which deals, amongst other things, with obligations of confidence.
In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information, we will take full account of your explanation, but cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on ORR.
We will process your personal data in accordance with the Data Protection Act (DPA) and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties.
Format of responses
So that we are able to apply web standards to content on our website, we would prefer that you email us your response either in Microsoft Word format or OpenDocument Text (.odt) format.
If you do send us a PDF document, please:
- create it from the electronic Word file (preferably using Adobe Acrobat), as opposed to an image scan, where possible; and
- ensure that the PDF's security method is set to no security in the document properties.
PR18 charges & incentives impacts model
In our June 2017 conclusions to our consultation on charges and incentives, we committed to publishing an explanatory note introducing the model we have developed to assess the financial impact on train operators of changes in charges and incentives in PR18. This note is set out below. While we are continuing to refine and improve the model, we are making available a version of the current model. Our intention in doing so is to provide transparency on the limitations of the model and, reflecting this, the types of additional information that would be useful for stakeholders to share with us to supplement the evidence that the model will provide.
Please read the explanatory note before looking at the model as this sets out the scope and limitations of the model. For example, as the input data used in this analysis is not publicly available, this version of the model uses only dummy data. The link to the July 2017 version of the model is in the note.
Conclusions on changes to charges and contractual incentives
Date published: 15 December 2016
Consultation closing date: 9 March 2017
Conclusions published: 29 June 2017
In December 2016, we published a consultation on changes to charges and contractual incentives. This built on previous work undertaken as part of the 2018 periodic review (PR18) of Network Rail’s outputs and funding – for example, our December 2015 consultation and November 2015 stakeholder letter on Schedules 4 and 8.
We received 37 responses from a range of stakeholders. We are grateful to all those who responded. The responses are redacted where appropriate and are available (see the link below).
Following careful review of stakeholder responses, we have made our conclusions to the consultation. Where appropriate we have also updated the supporting documents that accompanied the proposals in our December 2016 consultation, to take account of stakeholder comments. Both our conclusions and these updated supporting documents are available below. The conclusions document contains an annex outlining next steps, including details of further consultations in autumn 2017.
Conclusions on consultation on charges and contractual incentives
Published 29 June 2017
Responses to PR18 consultation on changes to charges and contractual incentives
Published 29 June 2017
Please see the drop down menus below for the impact assessments and supporting documents to the consultation and conclusions.
Documents supporting conclusions
Final impact assessments
- PR18: Electric Current for Traction (EC4T) – Final impact assessment on keeping the loss incentive mechanism – June 2017
- PR18: Fixed costs - Final impact assessment on options for fixed costs
- PR18: Freight mark up charges - Final impact assessment on simplification option and methodology change
- PR18: Station long term charge - Final impact assessment on the methodology at managed stations
- PR18: Qualifying expenditure (QX) - Final impact assessment on QX transparency
- PR18: Capacity charge - Final impact assessment on options for the capacity charge
- PR18: Coal spillage charge - Final impact assessment on abolishing the charge
- PR18: Schedule 8 - Final impact assessment on Schedule 8 and passenger compensation
- PR18: Schedule 8 - Final impact assessment on approach to setting benchmarks
- PR18: Schedule 8 - Final impact assessment on the measure of passenger operator performance
- PR18: Schedule 8 - Final impact assessment on effectiveness of the SPP regime
Schedule 4 supporting documents
- PR18: Schedule 4 - Decision not to pursue a range of schedule 4 issues in PR18 (updated June 2017)
- PR18: Schedule 4 - Initial thinking on incentives created by notification discount factors (updated June 2017)
- PR18: Schedule 4 - Initial thinking on the approach to calculating the access charge supplement (updated June 2017)
- PR18: Schedule 4 - Initial thinking on negotiated compensation arrangements for planned disruption (updated June 2017)
Consultation and initial supporting documents
We set out below the material that we published at the time of consultation. This includes the consultation document and supporting materials. Where appropriate, these supporting documents have been updated or finalised and are published above.
- Annex A: Summary of control period 5 charges and contractual incentives framework
- Annex B: Glossary
- Annex C: Assessment framework
Draft impact assessments:
- PR18: Fixed costs - Draft impact assessment on options for fixed costs
- PR18: Freight mark up charges - Draft impact assessment on simplification option and methodology change
- PR18: Station long term charge - Draft impact assessment on the methodology at managed stations
- PR18: Qualifying expenditure (QX) - Draft impact assessment on QX transparency
- PR18: Capacity charge - Draft impact assessment on options for the capacity charge
- PR18: Coal spillage charge - Draft impact assessment on abolishing the charge
- PR18: Schedule 8 - Draft impact assessment on Schedule 8 and passenger compensation
- PR18: Schedule 8 - Draft impact assessment on approach to setting benchmarks
- PR18: Schedule 8 - Draft impact assessment on the measure of passenger operator performance
- PR18: Schedule 8 - Draft impact assessment on effectiveness of the SPP regime
Initial thinking and proposals:
- PR18: Schedule 4 - Proposal not to pursue a range of schedule 4 issues in PR18
- PR18: Schedule 4 - Initial thinking on incentives created by notification discount factors
- PR18: Schedule 4 - Initial thinking on the approach to calculating the access charge supplement
- PR18: Schedule 4 - Initial thinking on negotiated compensation arrangements for planned disruption
In February 2017, we held two stakeholder events in London and Glasgow to help support attendees in the developing their responses to this consultation. Slides used at these stakeholder events are available.