Network Rail’s consultation on variable charges

and station charges in Control Period 6 (CP6)

28 July 2017

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1. Executive summary 1.1. The purpose of this consultation is to set out our proposed approach to recalibrating the

following charges for control period six (CP6), and seek stakeholders’ views on this approach:

Variable Usage Charge (VUC);

Electrification Asset Usage Charge (EAUC);

Electric Current for Traction (EC4T);

Long-term Charge (LTC) for managed and franchised stations; and

Qualifying Expenditure (QX) Management Fee for managed stations.

1.2. We will be consulting separately on our proposed methodology for allocating fixed costs to

train operators later this summer. The Rail Delivery Group (RDG) will lead on the recalibration

of Schedules 4 and 8 for passenger operators, engaging with the industry throughout the

process.

1.3. In the autumn of 2017 we will also be consulting on potential reforms to the wording of

operators’ track access contracts. These reforms are not directly related to the structure of

charges in CP6, instead they are designed to provide improved clarity and more accurately

reflect current practices regarding areas to which the contracts relate.

1.4. As part of its June 2017 charging conclusions document ORR has determined the structure of

charges for CP6. It is now our role to implement ORR’s policy. In addition, in some areas we

consult on minor recalibration changes to the charging structure, consistent with ORR’s

conclusions.

1.5. This consultation focuses on our proposed methodology for calculating charges in CP6. The

potential impact on the level of these charges as result of updating them to reflect 2018

Periodic Review (PR18) cost data is beyond the scope of this consultation. Our cost forecasts

for CP6 and beyond will not be available until our Strategic Business Plan (SBP) is published in

December 2017 and, for this reason, we are not able to reflect this information in this

consultation.

1.6. We understand that stakeholders will be very interested in any changes to the level of charges

as a result of incorporating PR18 cost data. For this reason we are aiming to publishing our

conclusions on this consultation, incorporating PR18 cost data and draft CP6 price lists in

February 2018. As part of this conclusions document we will also include a high-level

assessment of the impact on train operators of these potential changes to charges.

1.7. ORR will, ultimately, determine the level and structure of charges for CP6 in its final

determination, due to be published in October 2018. It will publish a ‘minded-to’ decision as

part of its draft determination, due to be published in June 2018.

1.8. We have provided a brief overview of our proposed approach to recalibrating each charge

discussed in this consultation, below.

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Variable Usage Charge (VUC) 1.9. As determined by ORR in its June 2017 charging conclusions document, the current structure

of the VUC will be retained for CP6. Consistent with this, we will be calculating operators’ CP6

VUC rates using the same methodology as was used to calculate charges for CP5.

1.10. However, in light of issues that have arisen during the control period, we are consulting on

some minor changes as part of the recalibration process. For example, we are consulting on

the possibility of giving passenger operators the option of setting VUC rates based on the

maximum line speed over the route on which they operate (instead of the maximum speed of

the vehicle), and permitting separate VUC rates for the different variants of the multiple unit

motor/trailer vehicles that they operate (instead of the current average rates).

Electrification Asset Usage Charge (EAUC) 1.11. As determined by ORR in its June 2017 charging conclusions document, the current structure

of the EAUC will be retained for CP6. Consistent with this, we will be calculating operators’

CP6 EAUC rates using the same methodology as was used to calculate charges for CP5.

1.12. As part of the recalibration process, we have re-assessed and updated the assumptions used

to calculate EAUC rates for CP5 regarding the extent to which maintenance and renewal costs

vary with traffic. We propose using these updated variability assumptions when calculating

EAUC rates for CP6.

Electric Current for Traction (EC4T) Charges 1.13. As determined by ORR in its June 2017 charging conclusions document, the current structure

of the EC4T charge will be retained for CP6.

1.14. ORR has determined that we should undertake a recalibration of the Distribution System Loss

Factors (DSLFs) and of the regenerative braking discounts that are applied to modelled

consumption rates (for non-metered trains that are capable of regenerative braking).

1.15. The cross-industry Traction Electricity Steering Group has, previously, recommended that the

power factor correction values used to bill metered trains for their traction electricity be

removed from the Traction Electricity Rules, on the grounds that there are not currently any

power factor correction values used for billing that are not equal to one. Here, we consult on

this issue.

1.16. We also propose introducing default modelled consumption rates for passenger services, with

the purpose of ensuring that we always have a robust contractual basis on which to bill

operators for their traction electricity consumption.

Long Term Charges (LTC) at managed and franchised stations 1.17. ORR has concluded that we should improve the methodology used to forecast maintenance,

repair and renewal costs at managed stations. Our approach to calculating the operational

property element of LTCs for CP5 was based more heavily on local knowledge and reflected

advances in our asset modelling capacity (compared with previous control periods). However,

it did have limitations. In particular, the model did not take into account work carried out in

previous control periods. The model also forecast costs to be zero over 100 years for a cost

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category where there were no expected costs in CP5. In this document, we explain our

proposed approach to addressing this shortcoming for CP6.

1.18. We will retain the current structure of managed and franchised station LTCs for CP6.

1.19. In this consultation, we explain how we propose allocating forecast route-level franchised

station maintenance, repair and renewal expenditure to individual franchised stations. In

addition, we explain how we propose allocating forecast route-level managed station

maintenance, repair and renewal expenditure to individual managed stations.

Managed Station Qualifying Expenditure (QX) Management Fee 1.20. ORR has stated that the Managed Station QX Management Fee approval process should be

better aligned with the periodic review process than was the case in PR13. In response, we are

consulting on the Managed Station QX Management Fee as part of this consultation.

1.21. We will include a range of costs in our calculation of the Managed Station QX Management

Fee for CP6 which, we set out in more detail in Chapter 7, below.

1.22. In addition, we will continue to levy a profit element as part of the Managed Station QX

Management Fee in CP6. The profit element that we propose to ORR will be based on

benchmarking analysis of similar operations. In this document, we include results of initial

benchmarking work.

Responding to this consultation 1.23. We request responses to this consultation by close of play 20 October 2017. This is a 12 week

consultation. We have allowed an extra four weeks because the consultation takes place over

the summer holiday period. Responses should be sent to

RegulatoryEconomics@networkrail.co.uk.

1.24. The questions set out in this consultation are summarised in Chapter 8 of this document. We

would welcome your views in relation to these questions, in particular.

1.25. We intend to publish responses to this consultation on our website. Therefore, if you consider

any part of your response to this consultation to be confidential, please state this clearly and

provide a non-confidential version of your response suitable for publication.

1.26. Thank you for taking the time to read and respond to this consultation.

Future engagement and next steps 1.27. This consultation is an important way for stakeholders to express their views in relation to our

proposed changes to the relevant charging methodologies for CP6. We will also be seeking

stakeholders’ views in respect of this consultation at the following workshops:

VUC workshop on 18 September 2017 as part of the RDG Charges and Incentives, Route

Regulation and Outputs Working Group meeting;

EC4T and EAUC workshop on 20 September 2017 as part of the RDG Traction Electricity

Steering Group meeting; and

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Stations LTC and QX Management Fee workshop on 27 September 2017 as part of the RDG

Station Strategy Group.

1.28. If you have not already received an invite to the relevant meetings and would like to attend

please contact:

James Mackay (James.Mackay@raildeliverygroup.com) for the VUC workshop; or

Aaren Healy (Aaren.Healy@networkrail.co.uk) for the other workshops.

1.29. The main future milestones for this review which relate to the structure of charges for CP6 are

summarised in the table, below. However, as noted in ORR’s recent consultation on improving

our renewals efficiency1, the periodic review timetable is currently being reviewed given the

delay in finalising the governments’ funding decisions. Therefore, it is possible that the dates

shown below may change.

Key milestone Information Date

Network Rail SBP Network Rail’s CP6 business plan, including cost forecasts December 2017

Our conclusions on this

consultation

Network Rail’s conclusions on its proposed charging methodology

for CP6 and draft price lists reflecting PR18 cost data

February 2018

ORR Draft Determination ORR’s minded-to view in relation to setting structure of charges

for CP6, including its views on our February 2018 conclusions

June 2018

ORR Final Determination ORR’s final view which will ultimately set the structure of charges

for CP6

October 2018

Document structure 1.30. The remainder of this document is structured as follows:

Safety;

Proposed VUC methodology;

Proposed EAUC methodology;

Proposed EC4T methodology;

Proposed Station Long-term Charge methodology;

Proposed Managed Station QX Management Fee methodology; and

Summary of Consultation Questions.

1 Available at: http://www.orr.gov.uk/rail/consultations/open-consultations/consultation-on-improving-

network-rails-renewals-efficiency.

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2. Safety 2.1. In preparing this consultation we have reviewed whether any of our proposals have the

potential to affect the safety of the network. We consider that track access charges have an

important role to play in ensuring the safety of our network. In particular, they provide us with

the money that we require to operate, maintain, renew and enhance the network safely.

However, we do not consider that the proposals set out in in this consultation are likely to

impact the safety of the network. If upon reading this consultation you consider that any of

our proposals are likely to impact safety, please let us know.

Question 1: Do you consider that any of the proposals set out in this consultation are likely

to impact the safety of the network?

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3. Proposed CP6 Variable Usage Charge (VUC) methodology

Purpose and structure of the chapter 3.1. The purpose of this chapter is to set out our proposed approach to re-calibrating the Variable

Usage Charge (VUC) for CP6, and seek stakeholders’ views on this approach. This chapter

focuses on the methodology for allocating VUC costs to passenger and freight railway vehicles

in CP6. As noted, above, the potential impact on the level of VUCs as result of updating them

to reflect 2018 Periodic Review (PR18) cost data is beyond the scope of this consultation.

3.2. The remainder of this chapter is structured as follows:

Summary of our proposals;

Background;

Proposed approach for CP6;

Charter operators and North Yorkshire Moors Railway; and

Expected impact of changes to charges.

3.3. In Appendix 1 of this consultation we set out the current VUC methodology in more detail.

Summary of our proposals 3.4. As determined by ORR in its June 2017 charging conclusions document, the current structure

of the VUC will be retained for CP6. Consistent with this, we will be calculating operators’ CP6

VUC rates using the same methodology as was used to calculate charges for CP5.

3.5. We have reviewed stakeholders’ responses to ORR’s December 2016 charging consultation. A

limited number of stakeholders suggested making refinements to the VUC as part of the

recalibration process. However, most stakeholders did not suggest any changes be made for

CP6.

3.6. In light of stakeholders’ responses to ORR’s consultation, and issues that have arisen during

the control period, we are proposing the following minor changes to recalibrate the VUC for

CP6:

Giving all operators the opportunity to review the vehicle characteristics underpinning

their VUC rates;

Allowing more than one VUC rate for each vehicle type, where different operators use the

same vehicle type on different routes with different maximum line speeds; and

Giving passenger operators the option of calculating separate VUC rates for each variant

of the multiple unit motor/trailer vehicles that they operate.

3.7. We are also taking this opportunity to clarify how we will calculate VUC rates for passenger

vehicles that are run by freight operators (e.g. for testing purposes).

3.8. Initial analysis suggests that it should be possible to accommodate these proposals in our

billing system with only a modest level of development work. However, if it emerges that a

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much more significant level of development work is required to implement these changes, it

may not be proportionate to take them forward for CP6.

Background

Purpose of the Variable Usage Charge (VUC)

3.9. The purpose of the VUC is to recover the track, civils and signalling ‘wear and tear’ costs that

we incur when trains run on the network. The charge is paid by all operators (i.e. franchised

passenger, freight, open access and charter operators) and in 2016/17 we received £224m of

income through the charge.

3.10. The VUC is calculated on a short-run marginal cost basis. This means that it is based on the

costs that we incur as a result of a small change in traffic levels, assuming network capacity

remains fixed. As the table, below, shows in CP5 the vast majority of costs recovered through

the VUC were track maintenance and renewal costs.

CP5 VUC cost category CP5 proportion

of the VUC

Track maintenance and renewals costs 85%

Civils renewal costs (embankments, metallic underbridges, brick

and masonry underbridges and culverts)

10%

Signalling maintenance and renewal costs 5%

Key changes to the Variable Usage Charge (VUC) in PR13

3.11. The main change to the VUC between CP4 and CP5 was that new research that we

commissioned in PR13 found that ‘wear and tear’ was more strongly influenced by heavier

vehicles and less strongly influenced by vehicle speed than was previously thought. This

research was carried out by Serco and the results are published on our website here.

3.12. Reflecting this new research in CP5 VUC rates, generally, resulted in higher freight VUC rates

and lower passenger VUC rates. The full increase in freight VUC rates was not, however,

passed on to freight operators in CP5. ORR considered it appropriate to cap the increase in the

average freight VUC rate at 10%, relative to the average CP4 rate. This increase was phased-in

over CP5 and ORR was silent on whether this cap would be retained or removed for CP6.

ORR’s view on the Variable Usage Charge (VUC) in PR18

3.13. As part of PR18, ORR has held two consultations which considered the VUC – its May 2016

initial consultation document and its December 2016 charges consultation. We have

summarised ORR’s view regarding the VUC, below:

ORR’s November conclusions on its Initial Consultation Document: ORR stated that it

would not continue work on options for the geographic disaggregation of the VUC, or take

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forward work to consider the implications (if any) of the differences between the current

bottom-up calculation of the VUC and other econometric benchmarks.

ORR’s June 2017 conclusions on its December 2016 charging consultation. ORR stated

that it will not undertake a fundamental review of the VUC for CP6 but support Network

Rail in making minor methodological changes to improve cost reflectivity. It also

confirmed that, following further legal advice, it would be possible in CP6 to place a cap

on any increase in VUC rates, in certain circumstances and for a time limited period.

3.14. ORR‘s conclusions are consistent with the Rail Delivery Group’s (RDG) coordinated review of

the charging structure in the GB rail industry, which concluded that the VUC was broadly

working as intended and should not be a priority for change in CP6. More information in

relation to the RDG review of charges is available on the RDG website here.

The Variable Usage Charge (VUC) recalibration process

3.15. Broadly speaking, the process for recalibrating VUC rates comprises two steps:

Step one: Estimating our total variable usage costs. This stage involves estimating a single national average variable usage cost rate for passenger and freight traffic on a £ per 1,000 gross tonne mile basis. This rate can then be multiplied by a given traffic level in order to estimate our total variable usage costs.

Step two: Apportioning our total variable usage costs between different vehicle types. This apportionment is carried out using formulae designed to estimate the relative ‘wear and tear’ impact of different types of vehicle based on their individual characteristics (e.g. weight, speed and unsprung mass).

3.16. The diagram, below, illustrates this process:

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Proposed approach for CP6

Areas where we are not making any changes for CP6

3.17. Consistent with ORR’s June 2017 charging conclusions, we will be calculating our total variable

usage costs and allocating these costs between railway vehicles, using the same methodology

as in PR13. We set out the current CP5 methodology in more detail in Appendix 1 of this

consultation.

Areas where we propose small recalibration changes

3.18. In its June 2017 charging conclusions document, ORR stated that it would support us in

making a small number of recalibration changes to the VUC for CP6. A limited number of

respondents to the ORR consultation suggested potential refinements that could be made in

this area. For example, Arriva suggested allowing more than one operating speed for each

class of passenger rolling stock and GB Railfreight suggested that ORR review the incentives

for freight operators to introduce track-friendly wagons onto the network. However, most

stakeholders did not suggest any recalibration changes.

3.19. Having reviewed these suggestions, we set out our proposals in this area, below. These

potential changes are designed to improve cost reflectivity and address particular issues that

have arisen during CP5.

3.20. We would welcome stakeholders’ views in relation to any other minor recalibration changes

that they would like to see made to the VUC in CP6.

Vehicle characteristics

3.21. The characteristics of a railway vehicle (e.g. its speed, axle load and unsprung mass) are

important factors in calculating the ‘wear and tear’ that it imposes on the network and,

therefore, its VUC rate.

3.22. As part of the PR13 consultation process, the industry put significant effort into reviewing

vehicle characteristics used to calculate VUC rates. We consider that this served to materially

improve the accuracy of vehicles’ VUC rates. As part of PR18 we would, once again, like to

work with the industry to review the vehicle characteristics which underpin VUC rates. This

includes whether the assumed maximum speeds of passenger vehicles discussed, below, are

appropriate.

3.23. As part of this consultation we request that all operators review the vehicle characteristics set

out in the vehicle characteristics spreadsheet published alongside this consultation. We

consider that operators are better placed than us to review this information for the vehicles

that they operate. However, we recognise that often the operator of the vehicle may not be

the owner of that vehicle, in which case we suggest that operators work with the vehicle

owners to source this information.

Question 2: Noting ORR’s June 2017 conclusions not to undertake a fundamental review of

the VUC for CP6, would you like to propose any other minor recalibration changes to the

current methodology?

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3.24. Consistent with the approach adopted for CP5, we will not be re-opening CP6 vehicle

characteristics once ORR has set VUC rates as part of its final determination. To do so would

mean that we would risk under recovering the wear and tear costs that we incur when trains

run on the network. Therefore, we strongly encourage operators to review the assumed

characteristics of their respective vehicles now, and provide any comments that they have in

response to this consultation.

The assumed maximum speeds of passenger vehicles

3.25. Subject to it being practicable, we propose introducing the option of basing the assumed

maximum speed of a passenger vehicle on the maximum line speed of the routes over which it

operates (ignoring any temporary speed restrictions), rather than the maximum speed that

the vehicle is capable of. Where different passenger operators operate the same vehicle class

on different routes and are limited to different maximum line speeds, we propose introducing

the option of having two (or more) separate VUC rates. The diagram, below, seeks to illustrate

this scenario.

3.26. At present, a single VUC rate would apply to both passenger operators A and B based on the

maximum speed that the Cl 390 vehicle type is capable of (i.e. 125mph). However, under our

proposed revised approach Operator B would be entitled to a lower VUC rate because it never

runs over a track section with a line speed greater than or equal to the maximum speed that

the Cl 390 is capable of (i.e. in the VUC calculation the maximum vehicle speed would be set

to 110mph). We also provide an example, below, of how we envisage that the passenger VUC

price list could look in CP6 (i.e. including an additional column for speed):

Question 3: Do you have any proposed changes to the list of vehicle characteristics

provided in the vehicle characteristics spreadsheet published alongside this consultation?

Please provide evidence to support these proposed changes, where possible.

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Vehicle type Max speed (mph)2

Pence per vehicle mile

(2017/18 prices)

390/M 125 15.79

390/M 110 14.36

3.27. Initial analysis indicates that we would be able to accommodate this refined approach to

charging passenger VUC rates in our billing system with only modest development work.

However, if it emerges that a much more significant level of development work is required to

implement this change, it may not be proportionate to take it forward for CP6. Moreover, in

order to make this proposal workable, we would need to establish some additional charging

principles, for example:

Each operator would only be allowed one VUC rate per vehicle class because our billing

system is not sophisticated enough to apply different rates when the same vehicle runs on

different parts of the network. The rate would be based on the maximum speed that the

vehicle class is able to reach on any of the parts of the network that it runs on.

Where vehicles are loaned between train operators the obligation would have to be on

operators to inform us, otherwise the ‘parent’ rate would continue to apply. This is

because our billing system attaches rates to vehicles, not operators.

If vehicles were to be redeployed or cascaded to a different part of the network, with a

different maximum line speed, again the onus would be on the operator to inform us

otherwise the ‘parent’ rate would continue to apply.

3.28. In addition, consistent with the approach to setting vehicle characteristics more generally,

there will not be an opportunity to update the assumed maximum speed of passenger

vehicles following ORR’s final determination. To do so would mean that we would risk under

recovering the wear and tear costs. We intend to make changes to passenger operators’ track

access contracts in order to give effect to this change in charging policy. Therefore, if you

would like your vehicles VUC rate to be set based on maximum line speed, rather than the

maximum speed that the vehicle is capable of, this must be agreed prior to ORR’s Final

Determination. We strongly suggest that you let us know in response to this consultation if

you would like an alternative VUC rate reflecting the maximum line speed of the routes over

which your vehicle operates .

2 This could be the vehicle’s maximum speed or the maximum line-speed.

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Rates for passenger multiple units

3.29. We propose introducing the option of having more than one VUC rate for multiple unit

motor/trailer vehicles within a vehicle class. Historically, although there have always been

several variants of motor and trailer vehicles within each vehicle class, the VUC price list has

not distinguished between these variants. The reason for this is that the variants were

generally not materially different and, therefore, it was considered disproportionate to have a

separate VUC rate for each variant.

3.30. For each relevant vehicle class, the VUC price list currently only contains one motor rate and

one trailer rate. This is illustrated in the table, below:

Vehicle type Pence per vehicle mile (2017/18

prices)

375/M 7.79

375/T 5.79

3.31. The above rates should reflect the weighted average characteristics (e.g. weight and unsprung

mass) of the vehicles based on the formation that they typically run in.

3.32. However, we have observed in CP5 that there is increasing variation between motor vehicles,

in particular. The recent introduction of new vehicles onto the network has resulted in more

multiple units with, for example, distributed traction. We also note that it is becoming

increasingly common for the same multiple unit class to run with different vehicle formations

(e.g. as 5-car or 8-car trains) with each formation comprising different variants of

motor/trailer vehicles.

3.33. These emerging trends make it increasingly challenging to calculate an appropriate single,

weighted average, VUC rate for motor/trailer vehicles. Therefore, for CP6, we propose giving

operators the option of calculating separate VUC rates for each variant of the motor/trailer

vehicles, if they wish to do so. We have included an example with illustrative rates, below, of

how the price list could look in CP6 with separate motor unit rates.

Question 4: Do you agree with our proposal to allow operators to reflect line speeds in

passenger VUC rates? Do you operate any vehicles for which you would like a bespoke VUC

rate calculated because the maximum line speed over the route on which the vehicle

operates is lower than the maximum speed of the vehicle?

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Vehicle type Pence per vehicle mile (2017/18

prices)

375/M/DMOC 8.11

375/M/MOSL 7.21

3.34. For the avoidance of doubt, we are not proposing that all multiple units currently operating on

the network will require separate VUC rates for each variant of motor/trailer vehicles. Nor are

we proposing that, going forward, a separate VUC rate should always be calculated for each

variant of motor/trailer vehicles. Rather, we are proposing that this option is available to

operators of both existing and new multiple units, who consider that a weighted average VUC

rate lacks the necessary level of cost reflectivity.

3.35. Initial analysis indicates that we would be able to accommodate this refined approach to

charging passenger VUC rates in our billing system with only a modest level of development

work. However, if it emerges that a much more significant level of development work is

required to implement this change, it may not be proportionate to take it forward for CP6.

3.36. In addition, in order to do this and make it workable and avoid under recovering our wear and

tear costs, we will not be re-opening the price list following ORR’s Final Determination.

Therefore, if you currently operate a vehicle on the network and would like more than one

motor (or trailer) vehicle VUC rate, we strongly suggest that you let us know in response to

this consultation. We intend to make changes to passenger operators’ track access contracts

in order to give effect to this potential change in charging policy, therefore, any new rates

must be agreed prior to ORR’s Final Determination.

Freight operators running passenger vehicles

3.37. During CP5 we have observed an increasing number of passenger vehicles being run by freight

operators, mainly for testing purposes. The CP5 VUC price list did not envisage this scenario

and it was, therefore, initially unclear whether the VUC rates for these train movements

should be calculated using the freight charging methodology, or passenger charging

methodology. If the VUC rate was calculated using the freight charging methodology it would

have resulted in a lower VUC rate, mainly due to a lower assumed operating speed for freight

vehicles.

3.38. During CP5 ORR has stated that an operator’s VUC rate should be based on the type of vehicle

and its intended use when in service, rather than whether it is being operated under a freight

Question 5: Do you agree with our proposal to give operators the option of calculating

separate VUC rates for the different variants of motor/trailer vehicles? Would you like

separate VUC rates for any of the motor/trailer vehicles that you operate, if so, please

provide the relevant vehicle characteristic data.

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or passenger track access contract. For example, if a freight operator is operating a passenger

train for testing purposes its VUC rate should be based on the passenger charging

methodology, not the freight methodology. ORR considers that this approach will reduce the

risk of creating distortions in the market, given both passenger and freight operators are able

to operate passenger vehicles for testing purposes.

3.39. In light of this, in CP6 if a freight operator operates a vehicle intended for passenger use, its

VUC rate will be calculated using the passenger charging methodology. We will continue to

express the rate applicable to the freight operator as a £ per 1,000 gross tonne mile rate,

consistent with other freight VUC rates. However, this rate should be equivalent to the rate on

the passenger price list expressed in pence per vehicle mile.

3.40. In order to accommodate this new approach in our billing system, we will have to apply a

single VUC rate across each passenger vehicle class, irrespective of where the train is being

operated on the network and the freight operator that is running it. When a service is being

run by a passenger operator it is possible in our billing system to attach VUC rates to individual

vehicles, however, this functionality is not available when a train is being run by a freight

operator (even if it is a passenger train). A consequence of this is that when freight operators

run a passenger vehicle class we will not be able to offer more than one VUC rate reflecting

different line speeds or variants of motor/trailer vehicles, like we are proposing above for

passenger operators. Instead, these rates will have to be based on the maximum speed that

the vehicle is capable of and its weighted average characteristics (e.g. weight and unsprung

mass).

Charter operators and North Yorkshire Moors Railway (NYMR) 3.41. The purpose of this section is to set out our methodology for setting VUCs for charter

operators and North Yorkshire Moors Railway (NYMR) in CP6. We also set out our approach to

setting charter operators’ slot and cancellation charges in CP6.

Charter operator VUC rates

3.42. We propose using the same approach to setting charter VUCs in CP6 as was used in CP5.

Unlike other passenger operators, charter operators’ VUC rates are levied ‘per train’ rather

than ‘per vehicle’. The principal reasons for this is simplicity for the charter sector and to avoid

having to calculate new VUC rates for rolling stock which is run relatively infrequently, and for

which vehicle characteristic information may not be readily available. We propose continuing

to assume that a typical charter train is comprised as follows:

One locomotive plus eleven Mark 1 coaches;

The steam locomotive rate should reflect a weighted average of the published rates for a Class 98/5 and Class 98/8 steam locomotive, with a 2:1 weighting in favour of the Class 98/8 based on frequency of use; and

The non-steam locomotive rate should reflect a weighted average of the published rates for a Class 47 and Class 67 locomotive rates, with a 2:1 weighting in favour of the Class 67 based on frequency of use.

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North Yorkshire Moors Railway (NYMR) VUC rates

3.43. Generally, NYMR is charged consistent with other passenger operators and pays the VUC rates

set out in the passenger section of the Track Usage Price List. However, the CP5 Track Usage

Price List also contains two VUC rates specific to NYMR, as shown below:

Train Operator Locomotive (pence per vehicle mile, 2017/18 prices)

North Yorkshire Moors Railway Enterprises PLC

Steam locomotive and any tender

36.20

North Yorkshire Moors Railway Enterprises PLC

Diesel locomotive* 50.35

3.44. These bespoke rates reflect the fact that NYMR is more likely than other open access

operators to use steam and diesel locomotives that are not on the published price list. We

propose retaining these bespoke VUC rates for NYMR in CP6 and calculating them in the same

way. In its PR13 determination ORR stated the following in relation to the above rates:

For steam locomotives taking the average of the rates on the published CP5 price list for

Class 98/4 and Class 98/5 vehicle types; and

For diesel locomotives (not otherwise on the price list) based on the rate for a Class 37/4

vehicle type.

3.45. In PR13 ORR capped the increase in the level of NYMR’s steam locomotive VUC rate at 50%

relative to the level of CP4 rates. Any decision in relation to retaining this cap for CP6, or

revising the level of the cap so that any increase in the level of charges is implemented in full,

will be a decision for ORR in its final determination rather than for Network Rail.

Charter operator slot and cancellation charges

3.46. In addition to VUCs, charter operators also pay slot and cancellation charges:

Slot charges aim to recover the cost of activities which we specifically undertake for charter

services and are not otherwise funded for. These costs include gauging activities and

operational costs (e.g. paying staff to operate ground frames for charter trains to access

branch lines).

*As provided for by the Train Operator’s track access contract, this rate is only applicable to those diesel locomotive vehicles in respect of which there is no specified rate under the Passenger Variable Usage Charge rates section of this Track Usage Price List.

Question 6: Do you agree with our proposal to continue to base charter and North Yorkshire

Moors Railway (NYMR) VUCs in CP6 on the same typical train formations as were assumed

for CP5? If not, please provide any evidence that you have of a more appropriate

assumption.

16

Cancellation charges aim to recover the proportion of the slot charge that has already been

incurred, such as the gauging activity, before the decision has been taken to cancel the train.

At present, the cancellation charge is calculated as a proportion of the slot charge and varies

in accordance with the timing of the cancellation (the later the cancellation the higher the

charge).

3.47. We will continue to apply the same slot and cancellation charges in CP6 as we applied in CP5,

adjusted annually for changes in inflation (based on RPI), unless determined otherwise by

ORR. The detail of these charges is set out in Appendix 2 of this document.

Expected impact of changes to charges 3.48. When we publish draft price lists in February 2018 we will include a full assessment of the

expected impact of changes to the level of charges on train operators. We do not include a full

assessment in this consultation because changes to the level of charges as a result of updating

them to reflect PR18 cost data is beyond the scope of this consultation. This cost data will not

be finalised until we publish our SBP in December 2017. The focus of this consultation is the

VUC charging methodology for CP6, and we are not proposing any material changes in this

respect.

3.49. Below we do, however, set out the impact of removing the caps that ORR applied to VUCs

paid by freight operators and NYMR in CP5. Any impact on the level of charges as a result of

updating them to reflect PR18 cost data would be in addition to the impact shown, below, all

other things being equal.

3.50. The decision in relation to whether to retain or revise the level of these charging caps in CP6 is

for ORR, rather than Network Rail. As noted, above, in its June 2017 charging conclusions

document ORR stated that following further legal advice, it would be possible in CP6 to place a

cap on any increase in VUC rates, in certain circumstances and for a time limited period of

time.

Freight operators

3.51. As noted, above, in PR13 new research that we commissioned found that ‘wear and tear’ was

more strongly influenced by heavier vehicles and less strongly influenced by vehicle speed

than was previously thought. If in PR13 this new information was fully reflected in freight VUC

rates, it would have led to a significant increase in rates for some commodities with heavy axle

loads (e.g. coal and construction materials). However, it would also have resulted in a

reduction in VUC rates for those freight commodities with relatively light axle loads (e.g.

intermodal).

3.52. Given the potential significant increase in VUC rates for some commodities, for CP5 ORR

capped the increase in freight VUC rates at 10% on average, relative to average CP4 rates. It

also determined that this average increase of 10% should be phased-in over CP5. ORR’s

approach to capping freight VUC rates has resulted in operators’ charges gradually migrating

toward the uncapped level for each commodity over CP5, with some rates increasing over the

control period and some falling.

17

3.53. We set out in the table, below, the impact on the average VUC rate for each commodity of

removing the CP5 charging caps applied by ORR in PR13. Any impact on charges as a result of

updating them to reflect PR18 cost data is not reflected in this table.

Commodity % of 2016/17

traffic

Forecast revenue based on end of

CP5 capped rates (£m, 2016/17

prices)

Forecast revenue if CP5

caps totally removed

(£m, 2016/17 prices)

% change if CP5

caps totally

removed

Chemicals 0% 0.0 0.0 -2%

Coal Other 1% 0.9 1.0 16%

Construction Materials 21% 12.9 15.4 20%

Domestic Intermodal 43% 16.2 15.1 -7%

Iron Ore 1% 0.5 0.6 18%

Petroleum 6% 2.4 2.5 3%

Biomass 5% 2.3 2.7 17%

Coal ESI 6% 3.5 4.3 23%

Industrial Minerals 2% 1.2 1.3 11%

Other 1% 0.7 0.8 5%

Domestic Waste 1% 0.7 0.8 7%

Steel 7% 4.3 4.7 10%

Enterprise 1% 0.8 0.7 -4%

European Intermodal 1% 0.3 0.2 -21%

Royal Mail 1% 0.3 0.3 -8%

European

Conventional

1% 0.7 0.6 -6%

Domestic Automotive 2% 0.9 0.8 -17%

European Automotive 0% 0.0 0.0 -3%

Total 100% 48.5 51.8 7%

North Yorkshire Moors Railway (NYMR)

3.54. As noted above, ORR also capped the increase in the level of the VUC rate that NYMR would

be charged in CP5 for operating steam locomotives. Removing this cap in CP6 would serve to

increase the level of this charge by 35% as illustrated in the table, below.

18

Train Operator Locomotive CP5 capped rate (pence per

vehicle mile, 2017/18 prices)

Uncapped rate (pence per

vehicle mile, 2017/18 prices)

North Yorkshire Moors Railway Enterprises PLC

Steam locomotive and any tender

36.20 49.03

19

4. Proposed CP6 Electrification Asset Usage Charge (EAUC) methodology

Purpose and structure of the chapter 4.1. The purpose of this chapter is to set out our proposed approach to re-calibrating the

Electrification Asset Usage Charge (EAUC) for CP6, and to seek stakeholders’ views on this

approach. This chapter focuses on the methodology for calculating EAUC rates for CP6. The

potential impact on the level of EAUCs as result of updating them to reflect 2018 Periodic

Review (PR18) cost data is beyond the scope of this consultation. We are aiming to publish

draft CP6 price lists, including EAUC rates, in February 2018.

4.2. The remainder of this chapter is structured as follows:

Summary of our proposals;

Background;

Proposed approach for CP6;

Charter operators; and

Expected impact of changes to charges.

4.3. In Appendix 3 of this document we provide more detail in relation to the current aspects of

the EAUC methodology, which we will be retaining for CP6.

4.4. Appendix 4 of this document contains a report which explains the justification for the cost

variability assumptions that we propose using to calculate EAUC rates for CP6.

Summary of our proposals 4.5. As determined by ORR in its June 2017 conclusions document, the current structure of the

EAUC will be retained for CP6. Consistent with this, we will calculate operators’ CP6 EAUC

rates using the same methodology as was used to calculate rates for CP5.

Purpose of the Electrification Asset Usage Charge (EAUC) 4.6. The purpose of the electrification asset usage charge (EAUC) is to recover the variable costs

(costs that vary with changes in the level of electrified traffic) of maintaining and renewing

electrification assets. The charge is paid by all operators of electrified services (i.e. franchised

passenger, freight, open access and charter operators). In 2016/17 we received £16m of

income through the charge.

4.7. For a detailed explanation of the methodology used to calculate EAUC rates in PR13, please

see Appendix 3. In summary, EAUC rates were calculated by:

Forecasting the maintenance and renewal costs associated with electrification assets;

Using engineering judgement to quantify the proportion of maintenance and renewal costs

that are variable with changes in the level of electrified traffic; and

Dividing the forecast variable costs by forecast levels of electrified traffic to calculate EAUC

rates.

20

ORR’s view on the Electrification Asset Usage Charge (EAUC) in PR18 4.8. In June 2017, ORR concluded that the EAUC should not be altered, beyond recalibration, in

PR18.

Proposed approach for CP6 4.9. Consistent with ORR’s conclusions, we do not propose altering the EAUC beyond recalibration

in PR18. Recalibration will involve recalculating EAUC rates to reflect our latest forecasts of

costs and traffic, and reassessing the cost variability assumptions used to calculate EAUC rates

in PR13.

Recalibration 4.10. As part of PR18, we will recalculate the AC and DC EAUC charges for both passenger and

freight operators using the latest forecasts of long-run renewal and maintenance costs and

the latest forecast of traffic volumes over the next seven control periods (i.e. 35 years).

4.11. In addition, we have re-assessed the cost variability assumptions that were used to calculate

EAUC rates in PR13 and will use these revised assumptions to calculate EAUC rates in PR18.

The table, below, shows how these revised assumptions compare with those used to calculate

EAUC rates in PR13. Any impact on EAUC rates as a result of recalibrating them to reflect PR18

cost data would be in addition to the impact shown, below.

Category Traction

type Sub-category

PR13 Variability

assumption

Proposed CP6

Variability

assumption

Maintenance

AC OLE maintenance 8% Unchanged

DC ETE maintenance 20.8% Unchanged

Renewals

AC OLE Contact/Catenary Rewire

72% Unchanged

AC OLE Mid-Life Refurbishment

42% 56%

AC OLE Full Renewal 10.5% Unchanged

AC OLE Component Change

10% 20%

DC Conductor Rail Renewal

54% Unchanged

21

4.12. A report detailing how these revised cost variability assumptions were calculated is contained

in Appendix 4.

Charter operators 4.13. In CP5, EAUC rates for electrified charter services have been the same as the EAUC rates for

passenger services. We will continue with this arrangement for CP6.

Question 7: Do you agree with the revised cost variability assumptions that we propose using to

calculate EAUC rates? If not, please provide evidence to support alternative assumptions.

22

5. Proposed CP6 Electric Current for Traction (EC4T) methodology

Purpose and structure of the chapter 5.1. The purpose of this chapter is to set out our proposed approach to the EC4T charge in CP6 and

seek stakeholders’ views on our proposals. The remainder of this chapter is structured as

follows:

Summary of our proposals;

Background;

Proposed approach for CP6; and

Charter operators.

5.2. Appendices 5 and 6 contain reports which explain the methodology used to recalculate

Distribution System Loss Factors (DSLFs) and the regenerative braking discounts that are

applied to modelled consumption rates.

Summary of our proposals 5.3. As determined by ORR in its June 2017 conclusions document, the current structure of the

EC4T charge will be retained for CP6, with recalibrations of the DSLFs and the regenerative

braking discounts that are applied to modelled consumption rates (for non-metered trains

that are capable of regenerative braking).

5.4. The cross-industry Traction Electricity Steering Group has, previously, recommended that the

power factor correction values used to bill metered trains for their traction electricity be

removed from the Traction Electricity Rules, on the grounds that there are not currently any

power factor correction values used for billing that are not equal to one. Here, we consult on

this issue.

5.5. In addition, we are proposing introducing default modelled consumption rates for electrified

passenger services with the purpose of ensuring that we always have a robust contractual

basis on which to bill operators for their traction electricity consumption.

5.6. Furthermore, we are taking this opportunity to confirm how we intend to calculate DSLFs for

any new Electricity Supply Tariff Areas (ESTAs) created during CP6 and how we will charge

freight operators running electric passenger units.

Background

Purpose of the Electric Current for Traction (EC4T) charge

5.7. The purpose of the EC4T charge is to recover the costs of traction electricity supplied by

Network Rail to train operators to power electrified services.

5.8. EC4T is paid by all operators (passenger, freight and charter) who run electrified train services.

In 2016/17 Network Rail received £288m in EC4T income from train operators. A summary of

how charges are calculated is provided, below:

Electrified services can either be charged on the basis of kWh readings taken from meters

on-board a train or on the basis of modelled consumption rates. Once consumption has

23

been measured or estimated, this is multiplied by the relevant pence per kWh tariff in order

to arrive at a bill;

At the end of each financial year, electrified services billed on the basis of modelled

consumption rates participate in the volume reconciliation (often referred to as the volume

‘washup’), which reconciles modelled kWh consumption and actual consumption in each

electricity supply tariff area (ESTA). This results in an increase or decrease in the allocation of

kWh consumption to operators and a payment to / from operators; and

At the end of each financial year, all electrified services participate in the cost reconciliation

(often referred to as the cost ‘washup’) which reconciles the pence per kWh tariffs charged

in each period with the actual pence per kWh tariffs that we paid for that electricity on

behalf of train operators. This results in a payment to / from operators of electric train

services.

ORR’s view on the Electric Current for Traction (EC4T) charges in PR18

5.9. In December 2016, ORR consulted on retaining the loss incentive mechanism whereby a

proportion of costs associated with transmission losses are allocated to Network Rail as part

of the yearly volume reconciliation. In June 2017, ORR concluded that the loss incentive

mechanism should be retained.

Proposed approach for CP6 5.10. As required by ORR, we have calculated revised estimates of the DSLFs that are used to uplift

kWh consumption readings taken from on-train metering systems. We have also recalibrated

the discounts applied to modelled consumption rates for non-metered trains that are capable

of regenerative braking, as was also required by ORR.

5.11. We are also consulting on removing the power factor correction values used for billing

metered AC trains from the Traction Electricity Rules, as recommended by the Traction

Electricity Steering Group.

5.12. In addition to updating these aspects of the EC4T regime, we are proposing introducing a

single default modelled consumption rate for electric multiple units and electrified

locomotive-hauled passenger services.

5.13. Furthermore, we are taking this opportunity to clarify how we intend to calculate DSLFs for

any new Electricity Supply Tariff Areas (ESTAs) created during CP6.

Recalibration of the Distribution System Loss Factors (DSLFs)

5.14. As part of PR13, Network Rail calculated DSLFs for each electricity supply tariff area (ESTA). As

part of PR18, we have undertaken a recalibration of these DSLF figures in order to ensure that

the DSLFs that are applied to metered kWh consumption values in CP6 are cost reflective. In

doing so, we have taken advantage of additional data that was not available in PR13 and also

sought to address the recommendations of the independent reporters, AMCL. Our report is

contained in Appendix 5.

24

5.15. The report in Appendix 5 contains DSLF values for three ESTAs (two AC ESTAs and one DC

ESTA) to illustrate the approach that we are taking to recalibrate DSLFs for CP6. We will

publish DSLF values for all ESTAs in our February conclusions document alongside an

explanation of any changes we have made to the methodology contained in Appendix 5.

5.16. Ultimately, ORR will determine the DSLF that will be applied in CP6. We will provide our final

report and the accompanying DSLF values to ORR as evidence to inform its decisions.

5.17. For the 25 kW AC distribution system losses derived using the methodology described in

Appendix 7 are lower than the losses estimated using the previous approach.

5.18. Similarly, the methodology described in Appendix 5 for the 750 volt DC system resulted in

lower estimated energy losses for ESTA U than the previous method.

New ESTAs created during CP6

5.19. It is possible that, due to additional electrification of the network, we may need to establish

new ESTAs during CP6. If a new ESTA were to be established mid-control period, we would

need to calculate DSLFs so that we could charge any metered operators who ran trains in that

ESTA for their total energy consumption.

5.20. The DSLFs for new ESTAs will be calculated using the same methodology as we have used to

recalibrate DSLFs for the ESTAs already in existence. This methodology is described in detail in

Appendix 5.

Opportunities to reduce losses in the traction power system

5.21. During PR13 two reports were produced (one for the AC electrification system and one for the

DC electrification system) which considered whether there were any financially viable

interventions that could be made to reduce transmission losses in Network Rail’s AC and DC

electrification systems respectively3.

5.22. An intervention was considered financially viable if the forecast financial benefit of

undertaking the intervention (in terms of reduced losses) exceeded the forecast cost of doing

so (e.g. the forecast cost of enhancing the electrification system).

5.23. The key inputs to this analysis were:

The assumed reduction in losses for each intervention;

The forecast price of electricity; and

The forecast cost of each intervention.

3 Network Rail, (December 2011), ‘Review of DC traction energy efficiency proposals’; and Network Rail, (May

2012), ‘Review of AC traction energy efficiency proposals’.

Question 8: Do you agree with the methodology that we have used to recalculate DSLFs? If

not, please provide arguments to support an alternative methodology.

25

5.24. For the AC electrification system, the report concluded that opportunities to undertake

financially viable interventions to reduce transmission losses were minimal because losses on

AC electrical systems are already low.

5.25. For the DC electrification system, no financially viable transmission loss reduction initiatives

were identified, even though transmission losses are more material than on the AC system.

5.26. For PR18 we have reassessed the viability of the interventions identified in PR13 and

concluded that the financial case for these interventions has in fact weakened. Consistent

with this, in May 2017 the Vehicle/Train Energy System Interface Committee (V/TE SIC)

reviewed the case for interventions in DC electrification systems and concluded that the

financial case for intervening to reduce transmission losses had worsened. The reasons for this

are described, below:

Since the PR13 reports were published, a significant amount of work has been undertaken to

improve DSLF estimates. This work estimates that distribution losses are lower than was

assumed in PR13 which has reduced the financial viability of interventions to reduce

transmission losses; and

Future electricity prices are now forecast to be lower than was forecasted for the PR13

analysis. This also has the effect of reducing the financial case for interventions designed to

reduce losses.

Recalibration of the Regenerative Braking Discounts

5.27. Operators of non-metered electric services which operate a regenerative braking system can

apply to receive a fixed percentage discount to their modelled kWh consumption rates to

reflect the fact that, when these trains brake, they return useable energy to Network Rail’s

distribution system. The CP5 discount rates are set out in Chapter 15 of the Traction Electricity

Rules4 and are shown, below. ORR has required us to recalibrate these discount rates for CP6.

4 Available at: https://www.networkrail.co.uk/industry-commercial-partners/information-operating-

companies/on-train-metering/

Type of infrastructure / service frequency CP5 Discount

(%) AC, long distance (more than 10 miles between stations) 16%

AC, regional and outer suburban (less than or equal to 10 miles between stations) 18%

AC, local and commuter (less than or equal to 2.1 miles between stations) 20%

DC 15%

26

5.28. The discounts that are currently applied were set as part of PR08 on the basis of estimates

informed by expert engineering judgement. Unlike in PR08, we now have a significant amount

of data available from meters on-board trains that are capable of regenerative braking and we

have used this data to recalibrate the regenerative braking discounts.

5.29. Discount rates that are based on actual data, rather than engineering judgement, are likely to

be more accurate. This will ensure that the discount that modelled operators who utilise

regenerative braking receive is representative of the proportion of the energy that they use

that is returned to the Network Rail’s distribution system. It will also increase the likelihood

that other modelled operators are not favourably or unfavourably impacted by inaccurate

discount rates via the year-end volume reconciliation.

5.30. A full report which details the methodology we have used to recalibrate the regenerative

braking discount rates applied to modelled consumption rates is available in Appendix 6 to

this consultation.

5.31. As a result of this work, we propose that the Traction Electricity Rules be updated to include

the following discount rates:

Type of infrastructure / service frequency Proposed CP6 Discount (%)

AC, long Distance (more than 10 miles between stations) 16%

AC, suburban (less than or equal to 10 miles between stations) 22%

DC 15%

5.32. As can be seen in the table, above, we are proposing that ‘AC, regional and outer suburban’

and ‘AC, local and commuter’ be combined into a new category called ‘AC, suburban’.

Removing the Power Factor Correction for metered trains

5.33. In certain AC electrical power systems the measured value of consumed power is not an

entirely accurate measure of the useful power delivered. This is due to the way that AC power

is conveyed from the grid supply point to the train. This issue does not occur in DC systems.

5.34. The power factor is the ratio of the useful power to the total measured power. It can be in the

range of zero to one.

Question 9: Do you agree with the methodology that we have used to recalculate

regenerative braking discounts? If not, please provide arguments to support an alternative

methodology.

27

5.35. The ideal power factor is 1. When the power factor is 1, all power drawn from the network is

useful power.

5.36. A power factor correction is an adjustment made to an electrical circuit in order to ensure

that the power factor is closer to being one. The power factor for DC circuits is always equal to

one. Consequently, there is no need to undertake power factor correction for DC circuits.

5.37. Appendix 2 of the Traction Electricity Rules5 contains data on the power factor and power

factor correction by metered train. The power factor correction values contained in this table

are used to calculate traction electricity charges for AC metered trains.

5.38. If a metered AC train had a power factor of less than 1 and this was not corrected to equal 1,

kWh readings taken from the meter on-board the train would overstate the amount of useful

power drawn from the network. This would result in the operator of the metered AC train

being charged for consuming more traction electricity than was actually consumed by that

train.

5.39. Currently all of the power factor correction values contained in Appendix 2 of the Traction

Electricity Rules are either “N/A” (because the metered train in question is a DC train) or equal

to one.

5.40. Since all of the power factor correction values for AC metered trains are equal to one, ORR has

asked us to consult on removing power factor correction values from the Traction Electricity

Rules for CP6.

5.41. Instead of Network Rail and/or a train operator proposing to ORR that Appendix 2 of the

Traction Electricity Rules be amended to include a power factor correction value for a metered

train type and ORR then having to publish an approval notice, it would be assumed that the

power factor correction value for all present and future metered AC trains is equal to one.

5.42. This would have the advantage of reducing the administrative burden on metered train

operators.

5.43. However, this would exclude the possibility of power factor correction values being updated in

CP6.

Introducing default modelled consumption rates

5.44. We propose introducing default modelled consumption rates for electric passenger train

services for CP6. The purpose of default rates would be to:

5 Available at: https://www.networkrail.co.uk/industry-commercial-partners/information-operating-

companies/on-train-metering/.

Question 10: Do you agree with the proposal to remove power factor correction values

from Appendix 2 of the Traction Electricity Rules and, instead, assume that the power factor

correction value for all metered AC trains is equal to one?

28

Provide Network Rail with a robust contractual basis for billing modelled services whilst

waiting for a modelled consumption rate to be consented to / determined by ORR and

billing metered services whilst waiting for the relevant track access contract to be

supplemented to allow for billing on the basis of meter readings, where a generic

consumption rate does not exist; and

Provide an incentive for operators to apply for a modelled consumption rate at the earliest

available opportunity.

5.45. There have, in the past, been occasions where the process of obtaining a modelled

consumption rate for a particular fleet has taken a prolonged period of time. Similarly, there

have been occasions where the process of supplementing an operator’s track access contract

to allow a train to be billed on the basis of meter readings has taken a prolonged period of

time.

5.46. Were a modelled consumption rate not to be consented to / determined by ORR before the

end of the relevant financial year and a generic consumption rate for the vehicle type

concerned not to exist, we could have a situation where we would be unable to bill the fleet

involved for its traction electricity.

5.47. A similar issue could occur were a supplement to an operator’s track access to allow for billing

on the basis of on-train meter readings not to be consented to / determined by ORR before

the end of the relevant financial year and a generic consumption rate for the vehicle type

concerned not to exist, we could have a situation where we would be unable to bill the fleet

involved for its traction electricity.

5.48. There is a deadline of the end of the relevant financial year for modelled consumption rates to

be consented to / determined by ORR because of the need to conduct the year-end volume

reconciliation, which reconciles modelled consumption with actual consumption. Modelled

consumption rates need to be agreed before we can start the volume reconciliation.

5.49. Similarly, supplements to an operator’s track access contract to allow for a train class or

particular train to be billed for traction electricity on the basis of meter readings cannot be

applied retrospectively to a date falling prior to the start of the relevant financial year because

of the need to conduct the year-end volume reconciliation.

5.50. Once the volume reconciliation has started we can no longer recharge journeys that took

place in the financial year to which the volume reconciliation relates. If we were unable to bill

a fleet for its traction electricity consumption, this could have an adverse impact on other

modelled operators who are also in the volume reconciliation. In situations where modelled

consumption rates have not been consented to / determined by ORR before the end of year

deadline, a default modelled consumption rate would provide us with a robust contractual

basis for billing these trains for traction electricity.

5.51. Likewise, in situations where an operator’s track access contract has not been supplemented

to allow for a train class or particular train to be billed for traction electricity via meter

29

readings before the end of year deadline, a default modelled consumption rate would provide

us with a robust contractual basis for billing these trains for traction electricity.

5.52. Furthermore, a reasonably high default consumption rate would incentivise operators to apply

for a modelled consumption rate or supplemental agreement at the earliest available

opportunity. At present, modelled consumption rates frequently have to take effect

retrospectively. Because there is often a lengthy delay between services first operating on the

network and modelled consumption rates for these services being consented to or

determined, we have to recharge a significant number of journeys. This is time-consuming,

costly and could largely be avoided if modelled consumption rates were consented to or

determined sooner.

5.53. In addition, a default modelled consumption rate would provide us with a robust contractual

basis for billing metered trains for traction electricity whilst waiting for their track access

contracts to be supplemented to allow for them to be billed on the basis of meter readings,

without the need to undertake overly burdensome work to model consumption rates.

5.54. Once a modelled consumption rate for a modelled train category has been approved /

determined by ORR or an operator’s track access contract has not been supplemented to

allow for a train class or particular train to be billed for traction electricity via meter readings,

we will recharge all relevant journeys in the relevant financial year.

5.55. For the avoidance of doubt, we will be unable to recharge journeys falling on a date prior to

1st April of the financial year in which a modelled consumption rate for the relevant train

category has been approved / determined by ORR or an operator’s track access contract has

not been supplemented to allow for a train class or particular train to be billed for traction

electricity via meter readings. This is because of the need to maintain the integrity of the

previous year’s volume reconciliation.

5.56. We propose that the default rate for electric multiple units in CP6 should be equal to the

highest rate for electric multiple units on the modelled consumption rates list (including

supplements) at the start of the control period. Similarly, we propose that the default rate for

electrified locomotive-hauled passenger services should be equal to the highest rate for

electrified locomotive-hauled passenger services on the modelled consumption rates list

(including supplements) at the start of the control period.

5.57. The Traction Electricity Modelled Consumption Rates List for CP5 contains a number of

generic modelled consumption rates for freight operators, which we think there is merit in

retaining for CP6. These are shown, below:

Service Group/Generic group Modelled Consumption Rate

(kWh per electrified kgtm)

Generic: heavy haul 25.270

Generic: inter-modal 38.000

30

Charter operators 5.58. In CP5, electric charter services have been charged for their electricity usage on the basis of a

single modelled consumption rate, levied on a kWh per electrified train mile basis.

Recognising the low materiality of charter EC4T charges, charter operators have been

excluded from both the volume and cost reconciliations. In each year of CP5, charter services’

consumption has been charged a pence per kWh tariff that is calculated by summing the

energy tariff, that Network Rail secures for operators with low electricity consumption, and an

average national delivery tariff.

5.59. We will retain the current charging framework for electrified charter services for CP6.

Generic (Multiple Units): parcels/mail 46.380

Question 11: Do you:

(a) Agree with our proposal to introduce default modelled consumption rates for

passenger electric multiple units and electrified locomotive-hauled passenger

services?

(b) Agree with our proposal to retain the generic consumption rates that currently exist

for electrified freight services?

31

6. Proposed CP6 stations Long Term Charge (LTC) methodology

Purpose and structure of the Chapter 6.1. The purpose of this chapter is to set out our proposed approach to re-calibrating the Long

Term Charge (LTC) at managed and franchised stations for CP6, and seek stakeholders’ views

on this approach. This chapter focuses on the methodology for forecasting station

maintenance, repair and renewal costs and turning these in to LTCs. The potential impact on

the level of LTCs as result of updating them to reflect 2018 Periodic Review (PR18) cost data is

beyond the scope of this consultation. As noted in the Executive Summary, above, we expect

to publish draft CP6 price lists, including LTC values, in February 2018.

6.2. The remainder of this chapter is structured as follows:

Summary of our proposals;

Background; and

Proposed approach for CP6.

6.3. In Appendix 7 of this document we provide more detail in relation to the current aspects of

the LTC calculation methodology, which we will be retaining for CP6.

Summary of our proposals 6.4. In summary, for CP6 we will be:

Retaining the current structure of the charge for franchised stations i.e. continuing to levy a

constant annual charge for each station, uplifted every year for RPI which will recover CP6

operational property and Station Information and Security Systems (SISS) maintenance,

renewal and repair expenditure. We have updated our allocation methodology for deriving

individual station long term charges for CP6 to be based on annual average depreciation cost

modelling.

Retaining the current structure of the charge for managed stations i.e. continuing to levy a

constant annual charge for each station, uplifted every year for RPI, based on each station’s

annual average of forecast efficient maintenance, repair and renewal expenditure over 100

years for operational property and 35 years for SISS assets.

Improving the methodology used to forecast 100 year maintenance, repair and renewal

costs at managed stations.

Background

Purpose of the long term charge

6.5. The purpose of the long term charge (LTC) is to recover Network Rail’s efficient maintenance,

repair and renewal (MRR) costs for each of the stations for which it has MRR responsibilities.

The charge is levied at both franchised and managed stations.

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6.6. The LTC recovers MRR costs for both operational property and station information and

security system (SISS) assets (e.g. customer information systems, closed-circuit television, and

public address systems).

6.7. For a detailed explanation of the LTC and how it was calculated in PR13, please see Appendix

7. In summary:

The LTC for a managed station is set to be equal to the forecast of efficient average annual

maintenance, repair and renewal expenditure for operational property and SISS assets. The

operational property element is calculated over 100 years and the SISS element is calculated

over 35 years. The operational property element is calculated using a forecast of

maintenance, repair and renewal expenditure over 100 years in order to even out the

‘lumpy’ nature of this type of expenditure at managed stations, which could be significant

given the size of these stations.

Each franchised station is part of a portfolio of stations – stations in the same Network Rail

route with the same Station Facility Owner (SFO). The LTC for an individual franchised

station is set to be equal to that station’s share of the relevant portfolio’s forecast of

efficient maintenance, repair and renewal expenditure over 35 years multiplied by the

forecast of maintenance, repair and renewal expenditure for the portfolio in the next control

period (in the case of PR13, CP5).

ORR’s view on the Long Term Charge (LTC) in PR18

Managed Stations

6.8. In December 2016, ORR proposed improving the methodology used to forecast maintenance,

repair and renewal costs at managed stations.

6.9. The model used in PR13 to forecast operational property maintenance, repair and renewal

expenditure at managed stations over 100 years had limitations. In particular, the model did

not take into account work carried out in previous control periods and also forecast costs to

be zero over 100 years for a cost category where there were no expected costs in CP5.

6.10. In June 2017, ORR concluded that the methodology used to forecast maintenance, repair and

renewal costs at managed stations should be improved.

Franchised Stations

6.11. ORR did not propose any changes to the structure of franchised station long term charges for

CP6.

Proposed approach for CP6

The Long Term Charge (LTC) recalibration process

6.12. ORR has concluded that the LTC at franchised and managed stations should not be altered,

beyond recalibration and improvements to the methodology used to forecast maintenance,

repair and renewal costs at managed stations. This consultation sets out how we will

recalibrate the LTC, consistent with ORR’s decision.

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6.13. We will be recalculating long term charges for both managed and franchised stations so that

they reflect our latest forecasts of expected efficient maintenance, repair and renewal costs

for operational property and SISS assets.

LTC and franchised station portfolio changes

6.14. In PR13 we calculated ‘shadow’ LTCs for franchised stations in the Greater Anglia Franchise.

These stations had already been transferred to the franchisee on a full repairing and insuring

(FRI) lease which meant that Network Rail would not be levying LTCs for the relevant stations

in CP5. At the time, however, the cost data required to forecast MRR costs was available and it

was agreed that it would be helpful to calculate ‘shadow’ LTCs.

6.15. Since the beginning of CP5, other franchised stations have been transferred to other

franchisees on a FRI lease basis. This includes stations that have been transferred to Virgin

Trains East Coast, C2C, and Rail for London.

6.16. The relevant SFOs have full asset responsibility for these stations. This means that Network

Rail no longer has information about the condition of assets at FRI stations. Therefore, we are

unable to calculate ‘shadow’ LTCs for these stations for CP6. It is for the relevant SFO and DfT

to establish the long term charge that should apply at these stations.

Approach to cost forecasting

PR13 Managed station cost forecasts

6.17. For CP5 the managed station long term charge (LTC) is set equal to the annual average of

efficient forecast maintenance, renewal and repair (MRR) costs, based on a forecast of 100

years for operational property assets and 35 years for SISS assets.

6.18. We consider that the LTC at a managed station should be set so as to recover, in the long-run,

all expected efficient MRR costs at that station. This long-run approach is appropriate for

operational property because it evens out the ‘lumpy’ nature of MRR spending at these

stations. In the absence of this long-run approach, charges would be much more volatile. For

example, if the operational property element of the managed station LTC was set equal to the

annual average of MRR costs over one control period then, in control periods where there is a

significant amount of MRR expenditure planned, managed station LTCs would be high. In the

following control period, one would expect the amount of planned MRR expenditure to be

lower and, consequently, managed station LTCs would be lower. The differences in managed

station LTCs from one control period to the next could be significant, creating uncertainty.

6.19. A long-run approach is also appropriate because the benefits of MRR work are seen over long

periods of time. Without adopting a long-run approach the costs of these works would only

fall on current users, with future users not paying for any of the benefits that they enjoy.

6.20. In PR13, our approach to calculating the operational property element of managed station

LTCs for CP5 was based more heavily on local knowledge and reflected advances in our asset

modelling capacity (compared with previous control periods). However, it did have limitations.

In particular, the model used to forecast operational property MRR costs did not take into

account work carried out in previous control periods. The model also forecast costs to be zero

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over 100 years for a cost category where there were no expected costs in CP5, which in

hindsight was not an appropriate assumption.

6.21. These limitations mean that the LTCs calculated for managed stations for CP5 were not

reflective of the annual average MRR costs that Network Rail is likely to incur over the long-

run. Consistent with ORR’s June 2017 conclusions, we will correct this for CP6.

PR18 Station cost forecasts

6.22. This section explains how we will forecast maintenance, repair and renewal costs at both

managed and franchised stations in order to calculate long term charges for CP6.

Managed stations

6.23. As part of PR18, we will produce route-level forecasts of managed station operational

property maintenance, repair and renewal costs over 100 years and route-level forecasts of

SISS maintenance, repair and renewal costs over 35 years. In the development of these

forecasts, we will make sure that they include all required MRR expenditure to address the

limitations with the PR13 100 year forecasts, described in paragraph 6.20, above.

6.24. In order to calculate long-term charges for CP6, we will allocate the route-level forecasts to

the managed stations in each route. In order to do this, we have developed a model that

estimates the average annual depreciation cost at each managed station for operational

property. SISS costs are based on renewal schedules, calculated from their recorded

installation dates together with expected asset life. A detailed explanation of the depreciation

cost modelling is set out in Appendix 8.

6.25. The model estimates average annual depreciation at a station by calculating an average

annual depreciation cost for each of the asset categories at that station which are then

summed together. To do this, site survey data on the type and quantity of assets at the station

is used. For each asset type, standard estimates of the unit cost of replacement and the

expected life of the asset have been used.

6.26. Network Rail’s asset policy recommends earlier renewal for assets with higher asset risk

scores, which are based on the potential consequences of an asset failure on safety and

performance. Asset risk scores are recorded as part of the regular site surveys that take place

at each station. Reflecting the recommended asset policy, an adjustment is made to the

expected life of assets where the asset risk score is higher. The consequence of this is that

assets with a higher asset risk score are replaced more frequently than assets with a low asset

risk score, all else being equal.

6.27. Adjustments are also made as part of the depreciation calculation to reflect the fact that the

cost of work at busier stations is, all else being equal, usually greater than at quieter stations.

This is because there is the potential for greater disruption and gaining access can be more

difficult. Station category is used, therefore, as a proxy for the busyness of stations.

6.28. Maintenance, repair and renewal activities are intended to offset the effects of depreciation.

A model which calculates each station’s annual average depreciation should, therefore, be

reflective of the relative magnitude of maintenance, repair and renewal expenditure at

stations over the long-run, recognising that this relationship may not hold over short time-

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periods given the ‘lumpy’ nature of maintenance, repair and renewal expenditure at individual

stations.

6.29. We will use the average annual depreciation model to calculate each managed station’s share

of the relevant route’s forecast operational property maintenance, repair and renewal

expenditure over 100 years and forecast SISS maintenance, repair and renewal expenditure

over 35 years. As stated, above, we consider that this should be an accurate estimate of long-

run maintenance, repair and renewal expenditure at each station.

6.30. In summary, to calculate individual managed station long term charges we will do the

following:

(a) Operational property assets

Forecast route managed station operational property assets MRR expenditure over

100 years;

Multiply each station’s percentage share of the relevant route’s average annual

managed station operational property depreciation by that route’s forecast

managed station operational property MRR expenditure over 100 years; and

Divide this figure by 100 to calculate the expected average annual operational

property maintenance, repair and renewal expenditure for that station.

(b) SISS assets

Calculate route forecasts of SISS MRR expenditure over 35 years;

Multiply each station’s percentage share of the relevant route’s average annual

managed station SISS depreciation by that route’s forecast managed station SISS

MRR expenditure over 35 years; and

Divide this figure by 35 to calculate the expected average annual SISS maintenance,

repair and renewal expenditure for that station.

(c) Total LTC calculation

We will sum the figures calculated in (a) and (b) to calculate the long term charge for

each managed station.

Franchised stations

6.31. In PR18 we will produce route-level forecasts of franchised station operational property and

SISS MRR costs for CP6.

6.32. In order to calculate franchised station long term charges for CP6, we need to be able to

allocate the route-level forecasts to each franchised station that is located in the relevant

route.

6.33. The same annual average depreciation model described earlier for managed stations exists for

franchised stations. See Appendix 8 for a detailed explanation of this model.

6.34. For each franchised station we will calculate its percentage share of the total annual average

depreciation for all franchised stations in the relevant route for operational property and SISS

assets respectively. We will then multiply the relevant percentages by the route-level forecast

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of annual average operational property and SISS maintenance, repair and renewal costs in CP6

to calculate the long term charge for each franchised station.

Differences with CP5 approach

6.35. While the use of annual average depreciation cost modelling to allocate route-level

operational property and SISS MRR expenditure to calculate individual franchised station LTCs

is a different approach compared with the one used in PR13 (which used a combination of

bottom-up and top-down expenditure forecasts to allocate CP5 MRR expenditure), the

depreciation rate calculation is identical to the long-run average annual renewal cost. We

consider that the depreciation cost modelling approach should provide an objective reflection

of medium-long term costs, since this is what the renewals undertaken by Network Rail would

offset, on average, each year.

6.36. In summary, to calculate individual franchised station long term charges we will do the

following:

(a) Operational property assets

Forecast route franchised station operational property MRR expenditure for CP6;

and

Multiply the station’s percentage share of the relevant route’s average annual

franchised station operational property depreciation by that route’s forecast annual

average franchised station operational property MRR expenditure over CP6.

(b) SISS assets

Forecast route franchised station SISS MRR expenditure for CP6; and

Multiply the station’s percentage share of the relevant route’s average annual

franchised station SISS depreciation by that route’s forecast annual average

franchised station SISS MRR expenditure for CP6.

(c) Total LTC

We will then sum the figures calculated in (a) and (b) to calculate the total long term

charge for each franchised station.

Question 12: Do you support our proposed method for calculating station long term charges

at franchised and managed stations? If not, please provide evidence to support using an

alternative methodology.

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7. Proposed CP6 Managed Station Qualifying Expenditure (QX)

Management Fee methodology

Purpose and structure of the chapter 7.1. The purpose of this chapter is to set out our proposed approach to recalibrating the Managed

Station Qualifying Expenditure (QX) Management Fee for CP6, and seek stakeholders’ views

on this approach. This chapter focuses on the methodology for calculating the Managed

Station QX Management Fee. The potential impact on the level of the Managed Station QX

Management Fee as a result of updating cost estimates to reflect 2018 Periodic Review (PR18)

cost data is beyond the scope of this consultation.

7.2. The remainder of this chapter is structured as follows:

Summary of our proposals;

Background; and

Proposed approach for CP6.

7.3. In Appendix 9 of this document we provide more detail in relation to Managed Station QX

charges in PR13. In Appendix 10, we explain our proposed approach for CP6.

Summary of our proposals 7.4. We are proposing including the cost categories listed in Appendix 10 in the central overheads

element of the Managed Station QX Management Fee. These cost categories are similar to

those included in the central overheads element of the Managed Station QX Management Fee

for CP5. In addition, we are proposing using benchmarking analysis of other businesses

providing similar services in order to determine the level of the profit element of the Managed

Station QX Management Fee.

Background

Purpose of the Qualifying Expenditure (QX) Management Fee

7.5. The QX charge has two parts:

The fixed element of QX (Fixed QX) is not determined by ORR. It is negotiated between

Network Rail and train operating companies who run services that call at managed stations.

It forms the majority of QX and recovers the costs Network Rail incurs for direct operational

costs such as station cleaning; and

The Managed Station QX Management Fee which is levied as a proportion of the fixed QX

and is determined by ORR.

7.6. In 2016/17 Network Rail received £65m in QX income from train operators (of which c.£4m

was through the QX Management Fee).

7.7. QX at a managed station is payable by operators whose services call at the station. These

operators are referred to as ‘beneficiaries’. Network Rail recovers the Managed Station QX

charge at each station directly from all beneficiaries in proportion to the number of vehicle

departures at the managed station in question.

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7.8. The purpose of the QX Management Fee is to recover the central costs and overheads that

Network Rail incurs as a result of operating managed stations (‘central costs element’) and a

profit element which is charged to compensate Network Rail for the financial risks we incur in

providing common station services and amenities.

7.9. In PR13, Network Rail calculated the central cost element of the Management Fee by

forecasting these central costs and expressing this amount as a percentage of the fixed QX. In

PR13, the profit element of the Management Fee was calculated by benchmarking of the

management fee charged in similar industries.

ORR’s view on the Qualifying Expenditure (QX) Management Fee in PR18

7.10. In its December 2016 consultation, ORR proposed supporting Network Rail’s plan to align the

timings for the calculation and approval of the QX Management Fee at managed stations with

the periodic review process. In its June 2017 conclusions, ORR confirmed this approach.

Proposed approach for CP6

The Qualifying Expenditure (QX) Management Fee recalibration process

7.11. In PR18, we will review which cost categories should be included in the central costs element,

develop detailed cost forecasts for each of these, and review the level of the profit element.

ORR has stated that the Managed Station QX Management Fee approval process should be

better aligned with the periodic review process than was the case in PR13. In response, in this

chapter we consult on the methodology for calculating the Managed Station QX Management

Fee as part of this consultation. In addition, we explain how we will agree timings for

submitting the proposed QX Management Fee for CP6 to ORR.

Central costs element

7.12. For a detailed description of the cost categories which we will include in the central costs

element of the QX Management Fee please see Appendix 10.

7.13. In summary, we will include the following cost categories in the central costs element:

National managed station team;

Aspects of asset management;

Architecture;

Aspects of utilities;

Fire safety;

Mapping;

The Operational Property Help Desk;

Legal Services and Planning and Regulation;

Corporate communication;

Financial shared services;

Contract and procurement specialists;

Human Resources;

Training;

Competence;

Services;

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Facilities management; and

Information systems.

7.14. Appendix 10 also sets out our proposed methodology for calculating what proportion of these

central cost categories should be allocated to QX activities, as well as any differences in the

approach taken for CP5.

Profit element

7.15. Fixed QX is a negotiated amount that is set for five years based on forecasts of future costs.

There is uncertainty about future costs and, consequently, by agreeing to set Fixed QX for five

years, Network Rail is taking on a financial risk. QX represents a service that Network Rail is

providing to train operators that call at managed stations. As a commercial company providing

a service to other commercial companies, we consider that it is appropriate to continue to

levy a profit element.

7.16. We have undertaken a benchmarking exercise to establish a reasonable range for the profit

element of the Managed Station QX Management Fee in CP6. Please find a full description of

this work in Appendix 10.

7.17. The benchmarking work that we have completed to-date indicates that the profit element for

CP6 should be in the range of 6 to 10%.

7.18. We think that the services offered at franchised stations are most similar to the services

offered at managed stations. Accordingly, it would be beneficial to use data on the profit

element charged at franchised stations as part of our benchmarking work.

7.19. In July 2017, we asked train operators via RDG’s Station Strategy Group if they would be

willing to share this data with us. If train operators provide us with this data, we will use this

to inform the level of the profit element of the Managed Station QX Management Fee.

7.20. Any information that train operators provided to us regarding the level of profit element

levied at franchised stations would be treated as confidential.

7.21. Data can be sent to Jason.Manley@networkrail.co.uk.

Question 14: Are you a Station Facility Owner (SFO) and, if so, will you provide us with data on the

profit element you levy as part of QX at those franchised stations where you are SFO?

Question 13: Do you agree with our proposal to levy a profit element of 6 – 10%? Please provide

evidence to support any alternative proposals.

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Timings

7.22. ORR has stated that the managed station QX Management Fee approval process should be

better aligned with the periodic review process than was the case in PR13. Ahead of our

February 2018 conclusions, we will work with ORR to agree timings for submitting our

proposed QX Management Fee to ORR.

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8. Summary of consultation questions

Question 1: Do you consider that any of the proposals set out in this consultation are likely

to impact the safety of the network?

Question 2: Noting ORR’s June 2017 conclusions not to undertake a fundamental review of

the VUC for CP6, would you like to propose any other small recalibration changes to the

current methodology?

Question 3: Do you have any proposed changes to the list of vehicle characteristics

provided in the vehicle characteristics spreadsheet published alongside this consultation?

Please provide evidence to support these proposed changes, where possible.

Question 4: Do you agree with our proposal to allow operators to reflect line speeds in

passenger VUC rates? Do you operate any vehicles for which you would like a bespoke VUC

rate calculated because the maximum line speed over the route on which the vehicle

operates is lower than the maximum speed of the vehicle?

Question 5: Do you agree with our proposal to give operators the option of calculating

separate VUC rates for the different variants of motor/trailer vehicles? Would you like

separate VUC rates for any of the motor/trailer vehicles that you operate, if so, please

provide the relevant vehicle characteristic data.

Question 7: Do you agree with the revised cost variability assumptions that we propose

using to calculate EAUC rates? If not, please provide evidence to support alternative

assumptions.

Question 6: Do you agree with our proposal to continue to base charter and North Yorkshire

Moors Railway (NYMR) VUCs in CP6 on the same typical train formations as were assumed

for CP5? If not, please provide any evidence that you have of a more appropriate

assumption.

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Question 8: Do you agree with the methodology that we have used to recalculate DSLFs? If

not, please provide arguments to support an alternative methodology.

Question 9: Do you agree with the methodology that we have used to recalculate

regenerative braking discounts? If not, please provide arguments to support an alternative

methodology.

Question 10: Do you agree with the proposal to remove power factor correction values

from Appendix 2 of the Traction Electricity Rules and, instead, assume that the power factor

correction value for all metered AC trains is equal to one?

Question 11: Do you:

(c) Agree with our proposal to introduce default modelled consumption rates for

passenger electric multiple units and electrified locomotive-hauled passenger

services?

(d) Agree with our proposal to retain the generic consumption rates that currently exist

for electrified freight services?

Question 14: Are you a Station Facility Owner (SFO) and, if so, will you provide us with data

on the profit element you levy as part of QX at those franchised stations where you are SFO?

Question 13: Do you agree with our proposal to levy a profit element of 6 – 10%? Please

provide evidence to support any alternative proposals.

Question 12: Do you support our proposed method for calculating station long term

charges at franchised and managed stations? If not, please provide evidence to support

using an alternative methodology.,