Modelling open access train services
mode - rail, place - europe, organisation - competition, organisation - contracting, organisation - privatisation, economics - appraisal/evaluation, economics - benefits
Great Britain, competition, cost benefit analysis, rail
EC policy is to encourage competition in the rail industry, and directives require governments to facilitate competition for freight and certain passenger services. In Great Britain, such competition was envisaged during privatisation in 1994. Here, most passenger rail services are run by franchised operators but open access passenger services are also permitted subject to certain conditions. In 2002, Hull Trains was granted rights by the ORR (Office of Rail Regulation) to run open access services for ten years on the East Coast Main Line (ECML) from London Kings Cross to Hull. These rights have since been extended to 2016. These services were followed by the approval of three Grand Central services to Sunderland per day in 2007, with a fourth service added in 2009. In May 2009, Grand Central also began running services to Bradford Interchange via Halifax. However, the success of Hull Trains and Grand Central has not been replicated on the Wrexham, Shropshire and Marylebone Railway (WSMR) services, which were withdrawn after three years as a result of not being profitable. The ORR has a policy of not granting access rights to new open access services which fail a “not primarily abstractive” (NPA) test. This is a five stage test that includes calculation of the revenue generated by the service and the revenue abstracted from incumbents’ services. Generally, ORR expects generation to be at least 30% of the level of revenue abstracted from existing operators. In cases where there are alternative uses of capacity that pass the NPA test, and that are feasible in operational terms, ORR has regards to the costs and benefits associated with the alternative uses of capacity, as part of the consideration of the access application against all of its public interest duties. In practice, this may involve conducting a cost benefit analysis. The addition of a new operator to a market has a number of effects on the overall market. A summary of the potential impacts is as follows: - Abstraction from existing services at stations which are served by both the new and existing operators - Choice of station to use which is affected by the availability of car parking as well as the quality of the rail service - Improved journey options generates new rail demand - Offering cheaper fares generates new rail demand - Impacts on rail crowding of adding additional services - Economic benefits resulting from the above. Following our appraisal of track access applications on the East Coast Main Line (ECML) for the ORR in 2008/9, we completed a similar exercise on the West Coast Main Line (WCML) in December 2010. We compiled a framework for assessing each application in a fair and consistent way so as to allow ORR to implement its policy of granting access only to new services that are not primarily abstractive, and taking account of the costs and benefits of alternative uses of capacity which are taken into account through the Net Present Value (NPV) of the benefits.
Permission to publish the abstract has been given by AET, copyright remains with them.
Prior, M., Vickers, J., & Segal, J. (2011). Modelling open access train services. Paper delivered at the European Transport Conference held in Glasgow, Scotland, on 10 - 12 October, 2011.