05 August 2013

PR13 determines the outputs expected from Network Rail, the funding it will have and the incentives it will face for the next five year regulatory control period (CP5) which starts in April 2014. On 12 June 2013 the Office of Rail Regulation (ORR) published its draft determination. It will publish its final determination on 31 October 2013.

In its PR13 Strategic Business Plan, submitted to ORR in January 2013, Network Rail had asked to be allowed total expenditure over the control period of £40.095 billion. ORR provisionally concludes that Network Rail should be able to manage on £37.869 billion, consisting of £13.456 billion for operating expenditure, £12.173 billion for renewals and £12.239 billion for enhancements.

Key outputs to be delivered by Network Rail over the control period include:

  • 92.5% of all of trains in Great Britain to run on time by March 2019 with every franchise in England and Wales achieving 90%
  • no more than 2.2% of all trains in England and Wales to be cancelled or very late by March 2019
  • 92.5% of freight trains to arrive at their destination within 15 minutes of scheduled time
  • disruption to passengers and freight caused by engineering works to reduce by over 10% for passengers and over 30% for freight by 2019 compared to 2014
  • improved asset management performance
  • completion of a wide range of improvement projects, including a major expansion of capacity in London and Scotland, increased capacity and quicker journey times between major cities, increased capacity for commuter travel into major urban areas and an expansion of electrification
  • the introduction of new route-based efficiency benefit sharing schemes (REBS) to encourage further savings to be made in day-to-day operating costs – the Department for Transport has said that as franchises are re-competed the franchise agreement will allow the franchisee to benefit from REBS.

PR13 also sets the levels of access charges that will apply for CP5. ORR proposes some significant changes to variable usage charges and a new freight specific charge (FSC) for the electricity supply industry, spent nuclear fuel and iron ore so that access charges better reflect the costs that Network Rail incurs. ORR has decided not to introduce a further FSC for biomass or to recalibrate capacity charges as part of PR13.

Recognising that these changes will significantly increase freight charges ORR has decided to phase them in from April 2016 and to cap the amount of the increase in CP5 at a level lower than previously indicated. Nonetheless ORR expects average total freight charges to increase by 4% per annum in real terms over CP5. By contrast ORR expects average total franchise passenger/open access variable charges to increase by 1% in real terms over this period.

Of course, under the terms of the franchise agreement franchised passenger operators are not exposed to the effects of ORR access charges reviews. ORR thinks this should be changed so as to strengthen franchise operators' incentive to work with Network Rail to reduce its costs.

Brioney Thomas is a partner in our specialist Rail team.

Key contact

Brioney Thomas

Brioney Thomas Partner

  • Head of Transport
  • Asset Finance and Asset Backed Lending
  • Commercial

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