Background
Alongside our revised open access guidance we are today publishing the results of some external research that we commissioned earlier this year.
We announced that we had commissioned this research in our April 2024 publication Assessing the costs and benefits of new open access services, which followed a December 2023 request from the government at that time asking for DfT, ORR, and Network Rail to undertake several areas of work related to open access.
This new research estimates historic levels of generation and abstraction on the GB mainline railway and uses these estimates to calculate the ‘Not Primarily Abstractive’ (NPA) ratios historically achieved by open access.
We make access decisions in accordance with our duties under the Railways Act 1993. We developed the NPA test in 2004 to help us weigh these duties, in particular to consider the Secretary of State’s funds and to promote competition.
As explained in our revised open access guidance, we would not expect to approve applications that we did not forecast to generate at least 30p of new revenue for every £1 abstracted from existing operators, i.e. achieve a ratio of at least 0.3 to 1.
Focus of the new research
The new research, which we commissioned from Systra/ITS, uses a dataset spanning from 2000 to 2023, covering the four case studies provided by the intercity open access services that are currently in operation, namely:
- Hull Trains (launched in 2000);
- Grand Central – Sunderland (launched 2007);
- Grand Central – Bradford (launched 2010); and
- Lumo (launched 2021).
Considering the period from the launch of each of these individual open access services to 2018/19 (pre-Covid), and in the case of Lumo to 2023/24, the research:
- Generates forecasts of franchise revenues as they would have been in the absence of open access entry;
- Compares these with actual franchised revenues; and
- Estimates ratios of generation to abstraction using the previous two steps and data on actual open access revenues.
Findings and conclusions
The Systra/ITS research estimates historic generation and abstraction levels, and did not evaluate the impact of open access in terms of wider costs and benefits. The research only provides insights into the accuracy of previous forecasting, and not, for example, the appropriateness of our indicative threshold of 0.3, or of other aspects of our approach.
The analysis generated a wide range of results. Those results to which Systra/ITS attached the most weight produced NPA ratios which provide us with confidence that generation to abstraction ratios are within or above the range of 0.3 to 0.45 which has typically informed past decisions.