Electricity for traction charges for control period 5

This was a consultation on charges for electric current for traction (EC4T). 

We consulted on assumed levels of transmission losses for control period 5 (CP5) and how we propose to reform the volume wash-up.

On behalf of its customers, Network Rail is already the single biggest user of electricity in the UK. By the end of CP5, it expects electricity consumption to have increased by around 25% on current levels, which (applying government forecast electricity prices) implies a doubling of expenditure on EC4T. The effect of rising electricity prices increases the need for the rail industry to use electricity efficiently. Promoting more efficient energy use in the railways supports our statutory due to contribute to the achievement of sustainable development. Therefore, it is critical that we have a charging framework in place for electricity usage that incentivises Network Rail and operators to manage electricity as efficiently as possible. We continue to see on-train metering of EC4T as a key enabler of this.

We consulted on a framework for charging for EC4T that:

• exposes Network Rail to a proportion of the volume wash-up, this is consistent with our view that transmission losses can be efficiently managed by Network Rail, which means that it should be incentivised to manage these costs efficiently in the same way as the other costs that are controllable by Network Rail. This change would also mitigate risks to unmetered operators of inaccuracies in the estimate of transmission losses; and
• gives operators greater certainty to invest in on-train metering, by fixing particular charges for transmission losses for the whole of CP5 and exempting metered services from the year-end reconciliation of consumption ("the volume wash-up"), irrespective of the proportion of consumption that is metered.

Consultation letter

• Consultation on electricity for traction charges for control period 5

Main issues arising from responses

We received 12 submissions in response to our consultation which we have published below. We are grateful to those who responded. Whilst we are not going to comment on the individual responses provided to us, we fully considered them in coming to our conclusions which are available in our draft determination published on Wednesday 12 June.

Key themes that arose from the responses are described below.

Setting the distribution system losses factor (DSLF)

A number of stakeholders supported our proposition to fix the DSLF for the whole of CP5 though subject to some form of re-opener during the period if new and material evidence emerged. There was a mixed response to our proposal that ORR, rather than industry, set the value of the DSLF. With some exceptions, there was strong support for our proposals to set the DSLF by electricity supply tariff area (ESTA) and to charge for transmission losses so that the DSLF is applied to gross metered consumption net of metered regenerative braking.

Exempting metered operators from the volume wash-up

Metered operators are currently excluded from the volume wash-up where less than 90% of an ESTA is metered. We proposed to entirely exclude metered operators from the volume wash-up even when metering exceeded 90% in an ESTA. This was broadly supported by stakeholders.

Exposing Network Rail to the volume wash-up

There was strong support from a majority of stakeholders for our proposal to expose Network Rail to a greater share of the volume wash-up.

Partial fleet metering (PFM) 

There were a wide variety of views offered on our proposals on the way in which partially metered services should be charged and the extent to which they should be exposed to the volume wash-up. For example, some respondents questioned our suggested formula/approach for allocating the volume wash-up to services with PFM, while one response questioned the appropriateness of PFM as a whole.