control period. The rest will be added to the company’s Regulatory Asset Base for CP4 starting on April 1 2009, and repaid out of future access charges.
Winsor emphasised on March 10 that the reprofiling was conditional on the first issue of bonds under NR’s securitisation programme being completed by December 31 2004. Bookbuilding has already started for a £10bn bond issue. This Medium-Term Notes programme has been backed by a ’letter of comfort’ from the Department for Transport.
Winsor also required SRA to relinquish its ’control’ over Network Rail policy which might have brought NR debts within the government’s Public Sector Borrowing Requirement. The relationship between Network Rail, SRA and the Regulator has been clarified by a letter from DfT (right).
After the transitional period, fixed track access charges for the franchised Train Operating Companies will double from just under £900m to around £1·8bn a year with effect from April 1 2006. ORR has recalculated the access charges for each TOC to reflect investment and renewals work planned on each part of the network.
SUBSTANTIAL increases in track access charges for use of the UK rail network have been deferred by two years, following an agreement between Network Rail and Rail Regulator Tom Winsor announced on March 10. Supported by the government, the deal means that around 60% of the company’s income over the next five years will be paid as direct grant by the Strategic Rail Authority.
Access charges for the passenger franchises had been due to double fom April 1 under the terms of a new five-year regulatory Control Period 3. Following an interim review last year, Winsor increased the amount that Network Rail will be allowed to spend on maintenance and renewal of the infrastructure (RG 1.04 p8). However, the need to compensate operators for the sudden increase would have exceeded SRA’s budget.
Under the latest compromise, track access charges will be held at current levels for the next two years. Deferring the increase will create a revenue shortfall of around £1·5bn a year, which NR will cover through a £3·1bn increase in borrowing. Of this, a third is to be paid back over the rest of the control period. The rest will be added to the company’s Regulatory Asset Base for CP4 starting on April 1 2009, and repaid out of future access charges.
Winsor emphasised on March 10 that the reprofiling was conditional on the first issue of bonds under NR’s securitisation programme being completed by December 31 2004. Bookbuilding has already started for a £10bn bond issue. This Medium-Term Notes programme has been backed by a ’letter of comfort’ from the Department for Transport.
Winsor also required SRA to relinquish its ’control’ over Network Rail policy which might have brought NR debts within the government’s Public Sector Borrowing Requirement. The relationship between Network Rail, SRA and the Regulator has been clarified by a letter from DfT (right).
After the transitional period, fixed track access charges for the franchised Train Operating Companies will double from just under £900m to around £1·8bn a year with effect from April 1 2006. ORR has recalculated the access charges for each TOC to reflect investment and renewals work planned on each part of the network.
Relationships clarified
’The jurisdiction of the SRA is separate from that of the Rail Regulator. It neither overlaps nor competes with that of the Rail Regulator. The two authorities have common statutory purposes. They have separate and complementary jurisdictions.
’Apart from the accountability of its Board to its members, Network Rail’s principal accountabilities are to its train operator customers, under access contracts and the network code, and to the Rail Regulator under statute and the company’s network and station licences. The SRA monitors and enforces the consumer protection conditions of Network Rail’s licences. The Rail Regulator is independent of government, whereas the SRA is a non-departmental public body.
’The Secretary of State attaches considerable importance to the independence of Network Rail, as a private-sector company limited by guarantee, which is accountable to its members and subject to independent economic regulation. He views as essential the commercial relationship between Network Rail and its customers, who are the operators of freight and passenger services.
’The fact that income is received in the form of grant will not affect in any way the independence of Network Rail or disturb the company’s contractual and commercial relationships. The payment of grant does not create any obligation on the part of Network Rail to the Strategic Rail Authority or any right on the part of the SRA to seek to direct or influence Network Rail.’
Letter from Department for Transport Permanent Secretary David Rowlands to Rail Regulator Tom Winsor, December 16 2003
TABLE: Table I. Reprofiled Network Rail funding in CP3, úm at 2002-03 prices
2004-05 2005-06 2006-07 2007-08 2008-09 Total
Net revenue requirement 4444 4413 4245 4203 4142 21448
Fixed & variable charges 1203 1219 2132 2121 2284 8959
Existing grants 1262 644 544 0 0 2450
New grants 448 941 1569 2082 1858 6898
Borrowing to cover shortfall 1532 1609 0 0 0 3141
