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42010 Rail Freight 2008

HS1 has a formal obligation to set freight charges on a non-discriminatory basis ... Establish commercially sustainable charges for freight services ...

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42010 Rail Freight 2008

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    Slide 1:

    Rail Freight 2008

    Slide 2:Presentation Contents

    Objectives of Access Charging Legal Commercial Political Cost Base Avoidable Cost Common Cost Investment Recovery Legal and Regulatory Framework General Pricing Principles Two Exceptions Time Limited Discounts The Market Benchmarking Segmentation Affordability Pricing Framework Approach Consultation

    Slide 3:Objectives of Access Charging

    Legal Objectives HS1 has a formal obligation to set freight charges on a non-discriminatory basis HS1 needs to set charges consistent with the charging principles in the regulations Commercial Objectives Encourage maximum use of HS1 as a high speed railway Maintain the condition so as not to adversely effect use of the line by its prime users Need to cover �incremental costs� Establish commercially sustainable charges for freight services Political Objectives Desire to facilitate use of line by freight operators Desire any freight movements be made on a commercial basis

    Slide 4:Cost Base

    Short Run Avoidable Costs Costs directly related to the number and type of trains running on the line AEA variable cost model built specifically for CTRL Apportions costs on an EMGTPA/Track Usage basis Long Run Avoidable Costs SRAC; plus Cost of freight specific infrastructure Common Costs Required for trains to run on the line but not related to usage Investment Recovery DfT Charging Framework

    Slide 5:Legal and Regulatory Framework

    European Directive 2001/14/EC Forms part of the Second railway package Implemented into UK legal system through the Railways (Access and Management) Regulations 2005 Schedule 3 outlines the principles of access charging Framework of charging to recover directly incurred operating costs Exception to those principles First exception - ability to recover full costs plus mark-up Second exception � ability to charge higher charges to recover investment costs Schedule 3 Paragraph 6 Allows for time limited discounts To encourage the development of new rail service With reference to specific traffic flows

    Slide 6:The Market (1) European Freight Charges

    * Commercially set short-term freight charge whilst long-term freight charges framework established

    Slide 7:The Market (2) Segmentation

    Express Services �TGV� type 230 km/hr Least price sensitive High-Speed Services Continental (some UK) gauge 120-160 km/hr Latent demand Conventional Services UK gauge 100 km/hr Extremely price sensitive

    Slide 8:Pricing Framework

    Investment Recovery Common Costs Freight Specific Infrastructure Variable Cost Cost SRAC LRAC Legal GP1 GP2 GP3 GP4 Exception 1 Exception 2 Market Express Freight High Speed Freight Conventional Freight ??? ??? Price Points

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