Railway Regulation in Portugal: Lessons from Experience

1. Railway Regulation in Portugal: Lessons from Experience Maurício Levy A. V. Guimarães da Silva Raúl Vilaça e Moura

2. Outline • Introduction • The evolution of Regulation • Regulation applied to railways • The European reform of railways and the emergence of Regulatory Bodies • The national context • Conclusions

3. The national context

4. The national context

5. Point ofno-return 2001 1995 2000 1991 2005 2nd Package 1st Package Dir 95/18 Dir 2001/12 Reg 881/2004 3.º Package Dir 91/440 Dir 95/19 Dir 2001/13 Dir 2004/49 Dir 2001/14 Dir 2004/50 Dir 2004/51 Dir 96/48 Dir 2001/16 1st White Paper Transport Policy White Paper Railways 2nd White Paper Transport Policy DL 104/97 DL 60/2000 DL 75/2003 DL 252/95 DL 299-B/98 DL 270/2003 DL 189-B/99 Port 167/2004 L 88-A/97 Port 168/2004 Reg INTF 19/2000 Reg INTF 21/2005 Milestones of railway liberalisation

6. The national context Regulatory bodiesof special type and statuteBanco de Portugal, CNVM TypesofRegulators InstitutesINTF, INAC, IPTM Independent regulatory bodiesANACOM, ERSE

7. The national context • INTF Instituto Nacional do Transporte Ferroviário • “Railway sector” defined as “all public transport modes operating in exclusive guided way” (heavy rail, light rail, underground, tramway, lifts, aerial cableway) • Regulation • Supervision • Safety • Service quality and passenger rights • Development of railway system • State representation in international fora • Pubic service procurement, contract awarding and supervision • Government consultancy /support • Arbitration • Accident enquiries

8. The national context Consumers rights Sector’s reform OBJECTIVESof INTFTo promote: Development andmodernization Inter-modality Safety Economic efficiency

9. The national context • In 2001 the government approved a staff of 80, but never gave authorization to hire more than half of that number • The operational budget was about 4 million Euros (2003), ¾ of INTF’s revenues come from sources other than the state budget

10. The national context • From the set of activities carried out by INTF, the following can be highlighted: • Regulations (access charging, capacity allocation, ...) • Directive implementation (interoperability, cableway, 1st railway package) • Approval of access charges • Railway public property (domínio público ferroviário) • Public service concessions • Accident enquiries • Cooperation with the Fair Competition Authority

11. The national context Phases of INTF life, before and in the course of our terms of office, 1998 to 2004 (M. Levy 2001-2004, R. Vilaça e Moura 2000-2004, A. V. Guimarães da Silva 1998-2004): • Pre-historic phase, up to 1998, beginning with the creation of three commissions that approached the reform, one dedicated to regulation; INTF was only created after vertical disintegration (REFER+CP), situation which came to have consequences in its life; • Birth phase, from 1998 to 2001, corresponding to the construction of the global instruments of regulation, characterized by high transaction costs deriving from litigation; • Youth phase, from 2001 to 2004, in which important sector structuring acts were approved (implementation of several European directives) and the extension of the scope of INTF’s action to other systems other than heavy rail; restructuring of technical regulations.

12. The national context In the future, twelve principles should be taken into account: • The need to continuously invest in the network and its maintenance, which poses the question of adequate funding; • The need to carry out the financial clearing activities known to be necessary and which have not yet seen the light of day; • The need for significant improvement in the operational results of the undertakings; • The need to carry out the revision of the incumbent’s statutes to bring it to compliance with the model designed for the sector; • The need to construct a true rail market; • The need for the regulator to settle and be able to develop in a “non litigational” environment;

13. The national context • The need for stability to create the conditions for attracting private initiative; • The need to assure a critical mass of “know-how”, essential for the diffusion of knowledge and innovation; • The need to think that the ongoing reform calls for attention to the evolution of undertakings but also to the whole industry and the transparency of this market; • The need for a framework for tendering and contract awarding; • The need to cut the high transaction costs that have characterized the functioning of regulation; • The evolution of the regulator’s institutional model calls for an analysis. Its “institute statute” appears not to be adequate.

14. Conclusions

15. Conclusions • Some of the future challenges are clear and easy to predict: • creation of conditions for attracting private sector initiative; • clarification of the State’s different functions as regulator, shareholder and service provider; • transparency of action and of contract awarding in public service provision. • A critical success factor for all these objectives is the development of the regulatory function and regulatory bodies, giving them conditions for authority, impartiality and autonomy and, at the same time, requiring them to meet accountability, efficiency and predictability conditions.

16. Conclusions • In Portugal, the reform of the rail system effectively started in 1996/1997 and closely followed the construction of the European model. Yet the timings in the setting up of the Regulator Institute and the option of its constitution as Institute did not guarantee optimal conditions for the establishment of the Regulatory function, situation which was worsened by erratic behaviour of the political powers. This originated the establishment of a litigation environment in the relations with the regulated bodies that led to high transaction costs.

17. Conclusions • It is easy to predict that the future calls for a revision of some of the choices made at the time the Regulator was founded, if only to respond to the emergence of new problems (like the creation of the Fair Competition Authority) and the beginning of a new cycle in the railway reform. It is unfortunate that some opportunities were lost, at least temporarily, by a general reflux of the regulatory function (diminishing some of the elements that are an indispensable part of its autonomy).

18. Conclusions • The desired evolution of the rail Regulator’s institutional model calls for an analysis on some of the solutions adopted at the time of its creation and on which it is worth reflecting upon. Its “Institute Statute”, in particular, appears not to be very adequate in making him resist, in good conditions and without high internal and external costs, to assaults against its impartiality and autonomy and to material strangling attempts on its action. On the other hand, caution is needed when analysing proposals for the fusion of transport regulators and some positions that seem to confuse governance issues with Regulatory issues.

19. Mblevy@netcabo.pt