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Rail regulation

Application for consent to obtain recovery of costs incurred in operation of Heathrow rail infrastructure

Background to this consultation

In accordance with Section 2 of Schedule 3 of the Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (the “Regulations”), Heathrow Airport Limited (“HAL”) has applied to the Office of Rail and Road ("ORR") to obtain full cost recovery of certain fixed costs incurred by HAL in providing access to the Heathrow Rail Infrastructure to Train Operating Companies. If successful, the recovery will be applied from 1 January 2019 by way of a mark-up as part of HAL’s track access charges for the Heathrow Rail Infrastructure, in accordance with Section 2 of Schedule 3 of the Regulations, (the “Application”).

Summary of mark-up proposal

HAL has produced a detailed cost analysis (based on scheduled train movements) which indicates that total relevant non-eligible costs are a maximum of £5.8 million per annum. Pursuant to the Regulations, HAL seeks full recovery of the costs incurred on the basis of efficient, transparent and non-discriminatory principles, whilst guaranteeing optimum competitiveness in respect of the relevant rail market segments identified in the Application.

Accordingly, subject to ORR approval, HAL intends to levy the mark-up in full for the ten year period commencing 1 January 2019, on a per movement charge based on scheduled train movements of both Transport for London (“TfL”) Crossrail services and Heathrow Express (“HEX”) services. The mark-up will be applied in a non-discriminatory manner to the Crossrail and HEX services operating in defined market segments (public service contract and other passenger services, respectively).

HAL has commissioned detailed economic analysis by independent transport economic consultants, Jacobs (“Jacobs Report”). The Jacobs Report seeks to identify the relevant rail market segments in respect of the Crossrail and HEX rail services, and to determine whether the proposed level of mark-up can be borne by the two rail market segments identified in the Application. The Jacobs Report indicates clearly that demand for Crossrail and HEX services will not be materially affected as a result of the mark-up, and that no market segment would be excluded from access to the Heathrow Rail Infrastructure as a result of the mark-up. HAL therefore considers that, in all aspects, including cost, the proposed level of the mark-up is wholly compliant with the Regulations.

Next steps - consultation responses

HAL has today published the Application and supporting annexes for public consultation. This consultation follows extensive engagement with the ORR, TfL and HEX throughout the course of this year. Publication of the Application (along with certain supporting Annexes) is undertaken by HAL as part of a formal consultation by the ORR in respect of the Application (the “ORR Consultation”). Full details of the scope of the ORR Consultation can be found on the ORR’s website: http://orr.gov.uk/rail/consultations/open-consultations.

  • Do you agree with HAL’s proposed approach to satisfying the 2016 Regulations requirements with respect to its levying a mark-up?;
  • Do you think HAL has correctly identified and characterised the appropriate market segments in its analysis?; and
  • If we were to allow HAL to levy a mark-up, do you think it would be reasonable for this permission to cover the period to 2029?

Please provide comments to: rail@heathrow.com , and/or Sheona.mackenzie@orr.gsi.gov.uk.

The Consultation period ends on Monday 8 January 2018.

Under the 30 May 2008 Crossrail Deed of Undertaking (DoU) between HAL and the Secretary of State for Transport, HAL undertook to provide access to Heathrow Rail Infrastructure in accordance with certain provisions of the Railways Infrastructure (Access and Management) Regulations 2005 (‘the 2005 Regulations’), since superseded by the Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (‘the 2016 Regulations’).

To comply with these contractual access obligations and following a consultation period, HAL has issued, in accordance with the requirements of Regulation 13 of The Railways (Access, Management and Licensing of Railway Undertakings) Regulations 2016 (the “Regulations”), the 2019 Network Statement and indicative price list. The published price list includes the maximum level of the Fixed Track Access Charge (FTAC) which will be recovered by way of a mark-up and is the subject of ORR approval pursuant to the Regulations and the 2019 Network Statement lists the affected market segments (subject to the mark-up).

Separately, HAL is considering the responses to the Revised Access Documentation consultation which closed on 20 October 2017. HAL continues to engage with stakeholders and intends to publish the final documentation shortly.

Access documentation

HAL Network Statement - an overview of the infrastructure assets and how access can be applied for and is subsequently allocated. It also includes principles of the charging regime to be employed.

HAL Price List - a price list which outlines the applicable Track and Station Access Charges for HAL infrastructure, as updated from time to time.

HAL Network Code - a set of rules which is incorporated into, and therefore forms part of, each bilateral access contract between HAL and holders of rights of access to the track owned by HAL - 2019 updated version to be published shortly.

Plus a number of supporting documents which include a standard track access agreement and a standard station access agreement plus station conditions can be found here 2019 updated versions to be published shortly.

To support the commitments contained within the Network Code and Network Statement, please find links below to relevant documentation:

For access requests, please email rail@heathrow.com with details of the request and review the technical specification document (see link above) to ensure compliance with HAL infrastructure before application.

In addition, please use the following links for industry documentation referenced in the Heathrow rail regulation documents:

 

All queries, applications and change/access requests should be directed to rail@heathrow.com

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