Thursday, October 31, 2013

Rail Freight Body Welcomes Track Access Charge Amendments for Cargo Whilst Others Harbour Doubts

Draft Proposals Granted with Only Minor Changes but Some Still Fear Overhead Increases
Shipping News Feature

UK – Despite the publication today by the Office of Rail Regulation (ORR) of its Final Determination for plans appertaining to Britain’s railways from 2014 to 2019 concentrating on passenger transport, news that the changes for cargo carriage originally proposed in draft form in June are to be taken up with only minor changes has been greeted with a degree of scepticism by the Freight Transport Association (FTA) but warmly met by the Rail Freight Group (RFG) whose Executive Director, Maggie Simpson, said in a statement:

“We are pleased that ORR has confirmed its previous conclusions, a balanced decision that is broadly affordable and fair. This document brings a conclusion to the Periodic Review 13, which has been a long and at times difficult process. We look forward to working with ORR and industry colleagues to now help establish a longer term framework that will give the confidence and certainty necessary to support rail freight growth.”

Essentially the decision concerns the charges to be levied on freight operators to access the rail network from next April. The draft proposals called for reduced caps on freight specific charges for ESI coal, iron ore and spent nuclear fuel, the abolition of the proposed 400% increase to the capacity charge for freight plus caps on variable access charges.

The capping of charges was welcomed by the RFG when first announced as it believed this would mitigate higher costs for the bulk markets and cut costs for intermodal traffic, an industry segment which the government is keen to see expanded. Others, however are not so ebullient in their reaction to today’s news, an FTA statement saying it believes that the ORR's policy will increase freight rates by 21% over the control period and that 4% per year represents a major setback for promoting future growth for the sector if this is passed through in full to end users, continuing:

“What the freight industry doesn’t want is surprises, and [it needs] recognition of the longer term investment horizons for rail freight, including terminals, wagons and other equipment in future Determinations. There is still the need for better understanding of the rail freight market and the expectations of existing and potential new customers.”

The FTA had voiced its concerns to the ORR over the proposed higher track access charges stating that this could lead to intermodal and retail traffic being pushed back off rail and onto roads. Although the FTA agrees that in reply the ORR appears to have listened to and responded to the Association’s and industry’s serious concerns which were articulated during the consultation process, and capped the proposed increases below that initially intended, thereby reducing the impact of the new charging regime, the organisation still has concerns. Chris MacRae, FTA Rail Freight Policy Manager, commented:

“The FTA is pleased that ORR appears to have listened to our concerns regarding the impact the proposed charges could have on the freight industry, but it cannot be assumed that existing traffic will simply stay on rail. The FTA remains concerned that the new higher freight track access charging announced today by the ORR which could still cause future uncertainty as to the direction of rail freight policy. We believe that rail must find ways of becoming more price competitive with road where costs to customers have gone down in real terms.”