1. TRACK ACCESS CHARGING IN PRACTICE SEETO - Rail and Intermodal Working Group Belgrade, 25 April 2007 Diego Fernández Belmonte Center for Innovation in Transport Nexus II, Jordi Girona 29, Barcelona www.cenit.es

2. CONTENTS Conclusions SEETO – Rail and Intermodal Working Group (4th session) The RailCalc project Track access charges in the EU –Overview –Some practices... –United Kingdom –The Netherlands

3. THE RAILCALC PROJECT SEETO – Rail and Intermodal Working Group (4th session) The RailCalc project Background Objectives Scope Structure WP-1 Inventory

4. RAILCALC - Background SEETO – Rail and Intermodal Working Group (4th session) “There is a general demand (from IM, regulatory bodies and new entrant railways) to better define the cost elements that could be included in the charge, and those that could not “ Charges so derived shall: Relate to the costs actually incurred Place incentives for a more efficient use of infrastructure Avoid discrimination of users Allow public authorities or even the public at large to verify compliance with these objectives Calculation Of Charges For The Use Of Rail Infrastructure EC Contract No. TREN / 110-2006

5. RAILCALC - Objectives The RailCalc project is aimed to two main objectives: « To develop a best practice guide to set and verify compliance of rail infrastructure charges with the rules of Directive 2001/14/EC in close collaboration with rail infrastructure managers, national regulatory bodies and the UE Commission » « To analyse the estimate of infrastructure charges in the Member States, in particular the estimates of charges and the calculation of mark-ups and to harmonise step-by-step the accounting practices in this domain » SEETO – Rail and Intermodal Working Group (4th session)

6. RAILCALC - Scope UE-27 Members (Except Cyprus and Malta) Switzerland West Balkans 32 COUNTRIES SEETO – Rail and Intermodal Working Group (4th session)

7. PHASE C : BEST PRACTICES IMPLEMENTATION PHASE B : BEST PRACTICES PROPOSAL RAILCALC - Structure Diagnostic Solutions Implementation WP 1: Inventory WP 4: Current practice assessment WP 6: Best practice on charging calculation WP 7: Road map for best practice implementation WP 5: Best practice on cost structure WP 2: Inventory analysis WP 3: State of the art and evaluation framework PHASE A : CURRENT PRACTICES ANALYSIS Validation process 3 PHASES APPROACH SEETO – Rail and Intermodal Working Group (4th session)

8. RAILCALC – WP1 Inventory SEETO – Rail and Intermodal Working Group (4th session) In WP-1, RailCalc has inventoried the track access charges applied in 24 different countries Collected data: General information Charge structure Variables considered Market segmentation Values considered Adjustments RailCalc is the background for the following contents

9. TRACK ACCESS CHARGES IN THE EU SEETO – Rail and Intermodal Working Group (4th session) Track access charges in the EU Overview Some practices... Example 1: United Kingdom Example 2: The Netherlands

10. TRACK ACCESS CHARGES IN THE EU SEETO – Rail and Intermodal Working Group (4th session) Overview

11. OVERVIEW (I) SEETO – Rail and Intermodal Working Group (4th session) Directive 2001/14/EC Final Users Railway Undertakings Infrastructure Manager Final user charge Track access charge Marginal cost based Mark-ups are allowed Scarcity and congestion Reservation charges Environmental issues Discounts Performance regimes Minimum access package Track access to service facilities Additional and ancillary services

12. OVERVIEW (II) SEETO – Rail and Intermodal Working Group (4th session) Cost recovery level Structure of charges Calculation procedures Great heterogeneity Application of charging principles

13. TRACK ACCESS CHARGES IN THE EU SEETO – Rail and Intermodal Working Group (4th session) Some practices –Marginal costs –Mark-ups –Scarcity charges –Reservation charges –Environmental charges –Performance regimes –Discounts

14. SOME PRACTICES... Marginal costs SEETO – Rail and Intermodal Working Group (4th session)  “Top-down” : statistical analysis of cross sectional and/or time series data relating costs and transport outputs  Estimates the variability of expenditure categories through practical experience, expert judgement, etc. Econometric models Engineering approach Cost allocation approach AT - Charge for directly incurred costs (---) Maintenance costs FI - Basic infrastructure charge (passenger/freight) Operation, maintenance and renewal costs  “Bottom-up” : disaggregation and separate analysis of expenditure sub-categories UK - Track usage charge (partly) PT – Charge for essential services

15. SOME PRACTICES... Mark-ups SEETO – Rail and Intermodal Working Group (4th session) Cost relatedness Allocation criteria  Mark-ups for specific investment projects DK – Bridge tariff Investment in Oresund / Great Belt bridges  Mark-ups for a general increase in cost recovery CH – Contribution margin Determined by the franchised authority  Equally allocated among different users FI – Investment tax (per gross ton·km)  Differently allocated among different users FR – Path reservation charge According to lines and traffic

16. SOME PRACTICES... Congestion and scarcity SEETO – Rail and Intermodal Working Group (4th session) Congestion charges Scarcity charges  Dir 2001/14/EC requires infrastructure to be declared congested in order to recover scarcity charges. Up to date only Romania (RO) and The Netherlands (NL) have declared congested sections, but no scarcity charge is levied there.  Several countries are considering congestion costs within their charging schemes. DK – Capacity charge Dependent on type of service and time period EL – Traffic management charge Time deviation with respect to optimal use DE - Incentives to rise efficiency Increasing factor (1.2) applied in some sections

17. SOME PRACTICES... Reservation charges SEETO – Rail and Intermodal Working Group (4th session) “Ex ante” charges “Failure to use” charges  Reservation charges levied to all trains (with independence of slot consumption)  Cancellation charges levied to trains which failed to run in the requested slot BE - Train path line charge (per train path) Administrative costs for request of train capacity HU – Charge for granting train path (per type of service) Administrative costs for request of train capacity ES – Capacity reservation (per path·km, service and line) Linked to fixed maintenance, operation and rail infrastructure management costs PT – Charges for loss capacity (per train·path) Depending on the anteriority to running date

18. SOME PRACTICES... Environmental issues SEETO – Rail and Intermodal Working Group (4th session) Global compensation Air pollution charges Noise subsidies  Environmental subsidies reflecting the non compensated costs of competing modes DK – Environmental subsidy (per ton·km of freight) Applied to freight and intermodal trains  Charges reflecting the cost of the environmental effects caused by gaseous emissions SE – Emission charge (per litre of diesel fuel) Differentiated per type of traction unit  Subsidies aimed at improving the rolling stock to a low noise condition, they result in a track acces charge reduction CH – Low noise bonus (per axle·km) Applied to low-noise vehicles

19. SOME PRACTICES... Performance regimes SEETO – Rail and Intermodal Working Group (4th session) Many variables to consider  Scope (many traffics or some of them)  Acceptance (compulsory or volunteer)  Delay definition (allowance, control points)  Procedure to allocate responsibilities  Treatment of secondary delays  Level and nature of payment rates FR - Coefficient of modulation Applied to the reservation charge for train paths with mean speed > 70 km/h IT - Performance regime Applied through a delay minutes accountancy system, charges a unique value per delay minute NL - Performance scheme Performance regime considering a fixed assumption as regards allocation of responsibilities

20. SOME PRACTICES... Discounts SEETO – Rail and Intermodal Working Group (4th session) To introduce new rail services Other discounts  Time-limited discounts to encourage the development of new rail services NL – Discount to promote the use of the Port line Discounts incentivising access to the link CZ – Discount for newly acquired performance Applied to new freight traffics  Derived from a cost reduction due to a specific service LV – Discount for locomotives and service trains Rebate in the charge for the use of infrastructure

21. TRACK ACCESS CHARGES IN THE EU SEETO – Rail and Intermodal Working Group (4th session) Example 1: United Kingdom –Framework –Charging structure and principles –Calculation procedures –Charging level

22. EXAMPLE 1 - United Kingdom (I) SEETO – Rail and Intermodal Working Group (4th session) Stakeholders Legal framework Administrative procedure Government - Department for Transport Main Regulatory Body - Office of the Rail Regulator (ORR) Infrastructure Manager - Network Rail Operators - 68 licensed RU (most of passenger operators under franchise agreement) Railways Act (1993) Transport Act (2000) Railway Regulations (2005), Stat. Instr. 3049 & 3050 ORR establishes the charging framework and the specific charging rules. FRAMEWORK

23. SEETO – Rail and Intermodal Working Group (4th session) CHARGING STRUCTURE & PRINCIPLES EXAMPLE 1 - United Kingdom (II) Variable charges  intended to recover variable costs - Variable usage charge (wear & tear) - Capacity charge - Electrification asset usage charge - Traction electricity charge Fixed charge  mark-up to ensure full cost recovery Access charge supplements: - Performance regime  to incentivise Network Rail and train operators to improve performance - Possessions regime  to incentivise Network Rail to improve engineering access efficiency

24. SEETO – Rail and Intermodal Working Group (4th session) Franchised passenger operators Non - franchised passenger operators Freight operators Variable charges √√√ Fixed charge √--- Access charge suppl. √√√ EXAMPLE 1 - United Kingdom (III) Two part tariff (fixed + variable) for franchised passenger operators Linear tariff for the rest of operators

25. SEETO – Rail and Intermodal Working Group (4th session) Usage chargeTop-down model  Variability of operation, maintenance and renewal costs per asset category. Bottom-up model  Vehicle propensity to cause damage to the network. Costs are then allocated to vehicle classes and recovered per vehicle·mile. Capacity chargeMarginal congestion costs  Calculated for more than 2700 route sections and 13 time bands. Definition of service groups (similar unitary costs) Costs are recovered for every service group according to mileage. EXAMPLE 1 - United Kingdom (IV) CALCULATION PROCEDURES

26. SEETO – Rail and Intermodal Working Group (4th session) Fixed charge Electrification asset charge Top-down approach  Variability of electrification costs Allocation to kWh consumed Traction electr. charge Electricity supply tariffs, recovered per kWh consumed EXAMPLE 1 - United Kingdom (V)

27. SEETO – Rail and Intermodal Working Group (4th session) EXAMPLE 1 - United Kingdom (VI) CHARGING LEVEL ValueDepending on... Track usage charge 2.82 – 96.74 pence/veh- mile Vehicle class Capacity charge 0.0001 – 2.1344 £/train·mile Service group Fixed charge 4,040,528,804 £ (total amount 2007) Franchised operator Electrification asset usage charge 1 pence/kWh--- Traction electricity charge2.16 – 14.78 pence/kWh Geographical area, season, type of day, time period

28. TRACK ACCESS CHARGES IN THE EU SEETO – Rail and Intermodal Working Group (4th session) Example 2: The Netherlands –Framework –Charging structure and principles –Calculation procedures –Charging level

29. SEETO – Rail and Intermodal Working Group (4th session) EXAMPLE 2 - The Netherlands (I) Government - Ministry of Transport Main Regulatory Body - Office of Transport Regulation (within Nma) Infrastructure Manager - ProRail Operators - 16 licensed RU (some regional services are franchised) Railway sector Legal framework Administrative procedure Railways Act 2005 (Spoorwegwet 2005). ProRail submits the tariffs and the pricing principles Verification - Netherlands Monopolies Committee. Publication - Ministry of Transport, Public Works and Water Management. FRAMEWORK

30. SEETO – Rail and Intermodal Working Group (4th session) Basic access charges  Intended to recover some variable costs (Minimum Access Package) - Tariff per ton·km  Maintenance costs (wear and tear) - Tariff per train·km  Traffic management costs EXAMPLE 2 - The Netherlands (II) CHARGING STRUCTURE & PRINCIPLES Access to facilities charges  Intended to recover the costs of use of facilities (Track Access to Service Facilities) - Charge for the use of the overhead contact line - Charge for the use of refuelling systems - Charge for passenger access and transfer facilities at stations - Charge for stabling and shunting of rail vehicles, loading and unloading roads

31. SEETO – Rail and Intermodal Working Group (4th session) EXAMPLE 2 - The Netherlands (III) Surcharges, discounts and compensation  Instrument for advancing the optimal use of the infrastructure and its capacity. - Discount to promote the use of the Port Railway Line - Discount to promote the use of the A15 line of the Betuwe Line - Correction for tyre irregularities (to be agreed) - Surcharge for scarcity of capacity (not applied in 2007) - Surcharge for new investments (not applied in 2007) - Reservation charge (under study) Performance scheme  Intended to increase operational and environmental performance of railway transport - Partial reimbursement of delay indemnities (under review) - Bonus for the implementation of noise reduction measures (under study)

32. SEETO – Rail and Intermodal Working Group (4th session) EXAMPLE 2 - The Netherlands (IV) CALCULATION PROCEDURES Basic access charges Tariffs are based on the variable operating costs of the train services (maintenance and traffic management )  Renewal not included Point of departure is the train service at the current transport volume + or – 5 %. Marginal costs are estimated through a cost allocation approach (expert judgement, benchmarking) Average variable charges are calculated Access to facilities charges Tariffs are based on the usage cost of the services Similar approach as for basic access charges

33. EXAMPLE 2 - The Netherlands (V) SEETO – Rail and Intermodal Working Group (4th session) CHARGING LEVEL ValueDepending on... Ton·km tariff0.001715 €/ton·km--- Train·km tariff0.5059 €/train·km--- Use of overhead contact line0.02996 €/kWh--- Passenger access and transfer facilities at stations 0.8637-5.0799 €/stop Station category Holding sidings and sorting lines, loading and unloading roads 14% train·km charge---

34. CONCLUSIONS Conclusions SEETO – Rail and Intermodal Working Group (4th session)

35. CONCLUSIONS SEETO – Rail and Intermodal Working Group (4th session)  Directive 2001/14/EC sets a general framework for track access charges in which several structures and elements are possible  The Member States have implemented the Directive principles in many different ways, leading to a wide spectrum of current charging practices  The European Commission is promoting research in order to identify and develop best practices in this domain (e.g. the RailCalc Project)  Preliminary analysis shows the existence of several good practices in line with the Directive concerning different charging elements: marginal costs, mark-ups, congestion and scarcity, reservation charges, environmental issues, performance regimes, discounts, etc.  There exists an increasing experience that will certainly allow profitable benchmarking for the implementation and optimisation of the charging practice

36. THANK YOU VERY MUCH FOR YOUR ATTENTION SEETO – Rail and Intermodal Working Group (4th session)

37. TRACK ACCESS CHARGING IN PRACTICE SEETO - Rail and Intermodal Working Group Belgrade, 25 April 2007 Diego Fernández Belmonte Center for Innovation in Transport Nexus II, Jordi Girona 29, Barcelona www.cenit.es