ORR Draft determination

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Dear Colleagues,

ORR – Draft Determination

Network Rail, pursuing the targets set by McNulty, outlined in its Strategic Business Plan its

aims to achieve 18% efficiencies.

The Office of Rail Regulation has now responded to the Strategic Business Plan with its draft determination, published on 12th June 2013, recommending cuts even beyond those suggested by Network Rail.

Further cuts are recommended to Network Rail’s support, operations, maintenance and renewals costs. ORR’s draft determination cuts £1,907m more than the figure Network Rail outlined in its Strategic Business Plan.

These include:

· a cut of £1,684m deeper than Network Rail’s suggested figure for renewals costs.

· a cut of £139m deeper than Network Rail’s suggested figure for support costs.

· a cut of £59m deeper than Network Rail’s suggested figure for operations costs.

· a cut of £26m deeper than Network Rail’s suggested figure for tractions electricity costs.

· a cut of £24m deeper than Network Rail’s suggested figure for maintenance costs.

A cut of £788m below Network Rail’s suggested figure for enhancements is also being suggested, with an additional £639m being put aside to compensate train operators for any additional disruption during enhancements, due to lateness as a result of asset failure or engineering works.

Network Rail’s “risk buffer” of £250m a year is being removed, and the cost of capital to Network Rail is being set at 4.31% (the ORR claim this is the return private shareholders would receive if Network Rail was a dividend paying private company).

ORR have cut Network Rail’s forecast actual cost of finance by some £2,389m.

ORR also claim that Network Rail can generate an additional £376m from property than Network Rail stated in its Strategic Business Plan.

ORR state that they want Network Rail’s annual net revenue requirement during CP5 to be £5.5bn per annum, as opposed to the Strategic Business Plan’s requirement of £5.85bn per annum. In the last control period this amount was £5.82bn per annum.

A new additional access charge for freight trains carrying coal, nuclear fuel and iron ore is being created.

Network Rail has been denied the £300m Research and Development fund it requested in its Strategic Business Plan with the ORR claiming that this will be carried out by train operators anyway.

The Draft Determination is available to download here:

http://www.rail-reg.gov.uk/pr13/PDF/pr13-draft-determination.pdf

RMT will now respond to the draft determination and the ORR will then publish their final determination on 31st October 2013.

I will keep you informed of any developments.

Yours sincerely

Bob Crow

General Secretary