Rail Delivery Group Industry Forum

1. Rail Delivery GroupIndustry Forum Industry Forum 21 November 2011

2. Secretary of State for Transport Industry Forum 21 November 2011 Rt Hon Justine Greening MP

3. Introductory remarks Industry Forum 21 November 2011 Tim O’Toole Chairman, Rail Delivery Group Chief Executive, First Group

4. Timetable for the morning • Introductory remarks • Contractual and Regulatory Framework – David Higgins • Q&A session – Minister of State for Transport, Tim O’Toole and David Higgins • RDG Priorities – Presentations, questions and answers • Train Utilisation – Anton Valk • Asset, Programme and Supply Chain Management – Tim O’Toole • Break • RDG Priorities – Presentations, questions and answers (continued) • Technology, Innovation and Working Practices – Martin Griffiths • The need for a “Rail Systems Agency” – Tony Collins • 2012 Priorities – Paul Plummer • Franchising update – Roger Jones, Department for Transport • Question and answer session • Concluding remarks – David Higgins

5. Introductory remarks • The Rail Value for Money Study of the GB Rail Industry found that: • There was much to celebrate: growth, safety, performance • There were areas to fix, principally the cost of the railway where unit costs have remained unchanged despite significant growth • There was a lack of leadership in the industry

6. Introductory remarks Industry Forum 21 November 2011 Tim O’Toole Chairman, Rail Delivery Group Chief Executive, First Group

7. Contractual and Regulatory Framework Industry Forum 21 November 2011 David Higgins Vice Chairman, Rail Delivery Group Chief Executive, Network Rail

8. Contractual/Regulatory Framework • Very complex and too long • Historically, Track Access Agreements and the Network Code aimed to codify issues and solutions • Our focus on getting these ‘right’ and ‘uniform’ is now out of date: • Our railway is not uniform, routes differ physically and service different markets • Industry reform requires greater flexibility • Codification removes responsibility for solving issues closer to the action

9. Contractual/Regulatory Framework • IIP assumes lower range of savings from RVfM study • Further savings require better industry collaboration and new ways to fund rail services • This is worth £600m per annum by end of CP5 • But this requires two key contractual and regulatory reforms: • Smarter Franchises • Stronger Partnerships

10. Smarter Franchises These should reflect the following features: • Longer franchises • Less prescription of inputs • Greater focus on outputs • Sensible sharing of risk • Real sanctions for failure to deliver

11. Stronger Partnerships • Won’t be an universal approach • But requires specific support from DfT and ORR to: • fine tune charging regime • recognise separate accountabilities • support flexibility to meet regulatory requirements • support different forms of partnership, and different pace for delivery • promote stronger partnerships within existing franchises and throughout refranchising process

12. The opportunity for change • PR13 is next opportunity for significant change • CP5 requires contractual flexibility: • for shared incentives; • to allow the industry to operate in a more commercial way; and • to provide greater flexibility for the industry to reduce costs and increase revenue.

13. Questions and Answers Industry Forum 21 November 2011 Rt Hon Theresa Villiers MP Tim O’Toole / David Higgins

14. Train Utilisation Industry Forum 21 November 2011 Anton Valk Chief Executive, Abellio

15. Rail Value for Money and metrics RVfM Study: UK 30% lower train utilisation Limited value to the UK RDG: Understand costs of train utilisation. Propose actions for improvement Metrics: Average load factor per train in the peak passengers per vehicle km Revenues per vehicle mile (difficult)

16. Challenge to respond Working group with representatives from Network Rail, Train and Freight Operating Companies Focus on the efficiency of train utilisation for London and the South East Work has been commissioned by ATOC and Network Rail to get metrics in place to complement data and analysis of individual TOC’s Results of this work will be available in Q1 2012 Opportunities to improve train utilisation fall into three categories: Specification, contractual and commercial issues Demand management The operational response to those issues

17. Specification, contractual and commercial issues Specification of train services determine to a large degree the train utilisation A discussion between government and industry should take place to determine the starting points. This should be part of the work on franchising which is going on Efficient utilisation results from providing a train service that meets actual market Current specification of maximum journey time, number of journeys and calling points does not always create optimal train utilisation

18. Demand management Train utilisation is influenced by peak demand Spreading peak loadings will improve train utilisation No simplistic solutions that reduce revenues and increase demand on the taxpayer Sophisticated retailing technology Improve the spread of trains during the peak and the shoulders as part of the 2012 fares review The working group is capturing the work ATOC has already done Results Q1, 2012

19. Operational response Traditional solution to meeting demand is new or cascaded rolling stock Many alternative solutions to release rolling stock so that it can be utilised most effectively These solutions are part of the bids of operators Potential improvements can be found in closer cooperation with Network Rail and cross TOC’s

20. Next steps Populating metrics for train utilisation and quantification of potential savings by improving train utilisation will be finalized Q1 2012 The RDG will engage with the minister and the DfT about the relation between specification and improving train utilisation to be included in the franchising review A view will be formed on fares and technology to enable a better spread between peak and shoulders as input for the upcoming fares review Investigate possibilities between Network Rail and TOC’s to operationally improve train utilisation

21. Train UtilisationQuestions and Answers Industry Forum 21 November 2011 Anton Valk Chief Executive, Abellio

22. Asset, Programme & Supply Chain management Industry Forum 21 November 2011 Tim O’Toole Chairman, Rail Delivery Group Chief Executive, First Group

23. RVfM findings and scope of review • The largest savings identified in the RVfM report were in the inter-related areas of: • asset management, • programme management and • supply chain management • Network Rail’s plans for CP5, based on actions within their own control, should deliver the RVfM Study “Low” savings • Our focus has been on what changes can operators or the wider industry make to deliver the “High” savings • The working group’s initial review established a high likelihood of significant savings through greater coordination of planning and aligned incentives

24. Initiatives • Scope and accountability for major projects • Route based workbank planning • Network rationalisation • Cost of contingency • Train borne monitoring equipment • Access management

25. Conclusions • There are major opportunities for significant industry savings on top of those which Network Rail can deliver on its own • Changed processes and timescales around timetable development and access management could enable more efficient planning of maintenance workbank, saving costs and reducing abortive possessions • Earlier TOC & FOC involvement in specification of investments or development of maintenance workbank will identify more appropriate scope or more cost effective delivery of the work • Overall the group believes the initiatives could help unlock additional savings of the order of several hundred million pounds in CP5. The next steps are to help demonstrate the potential savings in each area and identify early deliverables • The key to institutionalising these savings is joint incentives through alliances or other such structures

26. Asset, Programme & Supply Chain managementQuestions and Answers Industry Forum 21 November 2011 Tim O’Toole Chairman, Rail Delivery Group Chief Executive, First Group

27. Technology, Innovation & Working Practices Industry Forum 21 November 2011 Martin Griffiths Finance Director, Stagecoach Group

28. Background • Technology, Innovation and Working Practices • Validating McNulty • Exploring new ideas • Strong rail future

29. Key areas of focus • People development • Administration & Overheads • Productivity • Pensions • Retail

30. Next Steps • Continue to develop recommendations • Industry led • Involvement of stakeholders • March 2012

31. Technology, Innovation & Working PracticesQuestions and Answers Industry Forum 21 November 2011 Martin Griffiths Finance Director, Stagecoach Group

32. The need for a “Rail Systems Agency” Industry Forum 21 November 2011 Tony Collins Chief Executive, Virgin Trains

33. The McNulty Study “A Radically more effective approach to system – wide technical challenge is needed” “An RSA would lead on Systems Wide Issues” “Undertake Planning/Appraisal around System – Wide Technological Initiatives”

34. The Features of a “Rail Systems Agency” A Not-For-Profit Company owned and funded by major stakeholders in the railway industry but independent of any one party Funded by levies on its members and would report to the Rail Delivery Group Its governance would be such the RSA would be trusted and have the confidence of the industry, suppliers and key stakeholders It will not have authority over the industry, individual accountabilities will remain unchanged Staffed by a small number of experienced individuals

35. What an “RSA” will Deliver Project leadership Planning and appraisal Solutions/Options Innovation Legal/Commercial alignment Stakeholder engagement

36. Next Steps Detailed review of the interaction with the RSSB Identify and define roles and responsibilities Consult with various industry and donor bodies (e.g. ORR, ATOC, DfT, NR, etc.) Consider regulatory and governance issues

37. Timeline • Complete review and definition March 2012 of the RSA • Transition to RSA April 2012 to March 2013 • Shadow running of RSA From April 2013 • Full running of RSA/Start of CP5 April 2014

38. The need for a “Rail Systems Agency” –Questions and Answers Industry Forum 21 November 2011 Tony Collins Chief Executive Virgin Trains

39. 2012 priorities Industry Forum 21 November 2011 Paul Plummer Group Strategy Director, Network Rail

40. RDG’s Initial Priorities Contractual and Regulatory Framework Train Utilisation Asset, Programme and Supply Chain Management Technology, Innovation and Working Practices The need for a “Rail Systems Agency” Potential 2012 priorities Follow up on Initial Industry Plan and development of the industry’s Strategic Business Plan Cross-industry Groups Rolling Stock Information Systems Lower-cost Regional Railway Other opportunities RDG’s potential priorities for 2012

41. Strategic Business Plan Strategic Business Plan Initial Industry Plans • Industry SBP • Industry output trajectories • Industry strategies and plans • Network Rail SBP • Headline outputs & expenditure • Strategies and policies e.g. asset policies, operating strategy • Revenue requirement and financing • 10 route plans • Outputs • Route Asset Management Plans • Operate & support plans

42. Cross-industry groups • The GB rail industry is host to numerous groups and meetings that cover a myriad of subjects. • Many of these groups add considerable value • Others were created for a particular purpose but have forgotten to close themselves down when that purpose has been achieved • The Rail Delivery Group has commissioned research to establish the number and purpose of these groups so that it can review • The groups with which RDG wishes to engage • The groups that should continue with an independent existence • The groups that no longer add value to the industry • This will allow RDG to initiate a debate with the umbrella bodies and group chairs to decide whether there can be rationalisation of the number of groups • Forum attendees are invited to contribute their views to info@raildeliverygroup.org

43. 2012 prioritiesQuestions and Answers Industry Forum 21 November 2011 Paul Plummer Group Strategy Director, Network Rail

44. Rail Franchising Roger Jones Head of Franchise Policy Department for Transport

45. Four Key Policy Issues • Train service requirements • Unit cost reduction • The role of regulation/ licensing • The passenger experience

46. ICWC • ITT will go out 17 Jan • Up to15 Years - starting December 2012 • New TSR based on quantum of station stops per week • Crowding duty • NPS based Service Quality monitoring • GDP support mechanism (symmetrical) and profit share • Cost reduction commitments • Stations with full repairing leases • Investment options • Revised Change mechanism

47. Train service specification Three Service Types • Long Distance • Should we use the ICWC model of weekly quantum of station calls? • How is this influenced by IEP? • LSE services • Possibly a mix of minimum levels of connectivity and operating period plus peak capacity requirements • Should the Government and/or the operator be on risk for accommodating future growth? • Regional • Likely to be the minimum connectivity require on each route plus operating times • Who leads specification? • Accommodating Growth

48. Cost reductions • What role does Alliancing have? • Enabling • Incentives • Requirements specified • Are cost reductions committed in bid? • TOC costs • Joint costs

49. Regulation and Licensing • ORR Consultation commences shortly • Licensing proposals • DPPP • Complaints handling • Station Stewardship • Seeking views • Operational Performance • Passenger service/quality commitments

50. Passenger Experience • Seeking passenger views on the franchise specification • More effective consultation on timetable changes • Reaction to the service quality provided – Passenger Satisfaction Monitoring against targets set out in the bid • DfT will take account of passenger views on the overall management/delivery of the franchise