Track Access Charges Research Articles

The impact of rail industry restructuring on incentives to adopt innovation: A case study of Britain

This paper examines whether there are features of the structure and regulation of the British rail industry which fail to provide adequate incentives for innovation and how to overcome those found. British experience is of wider interest because Britain has gone further than any other European country to try to provide appropriate incentives through sophisticated track access charges and performance regimes and through cost- and revenue-sharing arrangements. The methodology adopted in this study started with a literature review but then followed this up with a round of interviews in Britain and a more limited round of interviews in Germany and Sweden plus reports prepared by partners on Sweden, France and Slovenia. The two main issues identified are fragmentation of the rail system, so that the organisation bearing the costs of the innovation may not receive the benefits, and short time horizons produced by franchising and regulatory arrangements. A variety of solutions have been tried in different European countries, including the holding company model, government leadership and alliances or other cost- and revenue-sharing arrangements, but all have disadvantages as well as advantages, and the best approach to take depends on circumstances such as whether there is, or could be, a single dominant operator on the network concerned.

Dynamics in rail infrastructure provision: Maintenance and renewal costs in Sweden

In this paper, we extend to the literature on marginal wear and tear cost estimation in railways, by applying a panel vector autoregressive model to rail infrastructure renewals and maintenance costs, using an extensive dataset from Sweden. This study is significant given the inherent difficulties in modelling the substantial renewals element of infrastructure costs, as well as the need to account for the dynamics in renewals and maintenance. The dynamic model allows us to estimate equilibrium cost elasticities with respect to train usage, which are significantly larger than their static counterparts. Overall, this work highlights that dynamics in rail infrastructure costs are important to consider when setting track access charges with respect to the wear and tear caused by traffic. This is particularly important given several countries, for example France, Sweden and Switzerland, are now setting access charges at marginal costs based on econometric studies.

Capacity utilisation and performance at railway stations

As railway traffic levels increase in Britain and elsewhere, improved understanding of the trade-offs between capacity provision/utilisation and service quality is increasingly important, as Infrastructure Managers and Railway Undertakings seek to maximise capacity provision while maintaining service reliability and punctuality. This is particularly true of the stations and junctions forming the nodes and capacity bottlenecks of railway networks, for which the relationships between capacity utilisation and performance are less well understood than for their intermediate links. Following work undertaken for the OCCASION project on the calculation of nodal Capacity Utilisation Indices, and on the application of these techniques to the recalibration of the Capacity Charge element of the Track Access Charges in Britain, one objective of the DITTO Rail Systems project is the further investigation of the relationship(s) between capacity utilisation and performance, as indicated by congestion-related reactionary delay levels at railway stations and junctions. Historic timetable and delay data for selected stations have been used to investigate these relationships, which take the expected form and tend to suggest lower maximum capacity utilisation levels for stations than for the links between them. Work is ongoing to develop these datasets and relationships further, and to identify suitable capacity utilisation upper limits.

ANALYSIS ON RAILWAY INFRASTRUCTURE UTILIZATION PRIORITY FACTOR VARIATION ON TRACK ACCESS CHARGES (TAC)

In Presidential Decree Republic of Indonesia Numb. 53 in 2012, it is explained that every railway operator which use railwaysinfrastructure have to pay Track Access Charges (TAC) to Government. The rules of the calculation of TAC which have to be paidby PT.KAI is explained in Regulation of Transport Minister Numb. 62 in 2013. In this regulation, there is priority factor whichhas same value for every service type of the train (Fp=1). Actually, every service type of railway has different priority and givesdifferent damages for infrastructure based on the speed. This research intended for analyzing the influence of priority factor toTAC. Quantitative description method is used in this research. The objects of the research are Executive, Business, and Economicclass of passenger train in Java. It suggested with two alternatives calculation of TAC with variations in priority factor (Fp) whichoriented on train travel time. Then, the best Fp is chosen which represented the real condition where the train with higher priorityhas to pay higher TAC than that of others. The result of this research, with Fp=1, showed the value of TAC for Economic class isIDR 68.00/GT/km, for Executive class is IDR 30.00/GT/km, while for Business class is IDR 28.00/GT/km. A modified of Fp,with two alternatives calculation, considering travel time and stay time of each railway service type showed a better result. Thefirst alternative generates Fp= 1.39 for Executive class and gives IDR 42.00/GT/km for the average TAC, while Fp=1.21 forBusiness class and generates IDR 34.00/GT/km for average TAC. The second alternative generates Fp=3.00 for Executive classand it gives IDR 91.00/GT/km while for Business class generates Fp=2.00 and it gives IDR 56.00/GT/km. The calculation of TACwith second alternative is more represents the real condition, where Executive class has higher priority and speed than the otherclasses, so it also has to pay higher TAC.

Improving the quality of Sweden’s rail freight rolling stock

PurposeThe purpose of this paper is to provide a theoretical conceptualization of how data envelopment analysis (DEA) can be applied to rail freight rolling stock in order to develop a tariff for track access charges which is functionally dependent upon the derived relative benchmark values of performance.Design/methodology/approachIt is posited that track access charges should be differentiated to reflect differences in the performance of rolling stock and that this can be achieved purely on the basis of technical and other characteristics. The performance benchmarking of rolling stock is proposed as the basis for formulating and justifying a performance-based tariff structure. Using DEA, relative index measures of rolling stock performance can be derived, benchmark performance can be identified and a tariff structure can be developed.FindingsA workable approach to implementing the concept, utilizing existing in-house databases, is found to be feasible and a template for tariff setting is established.Research limitations/implicationsIn the absence of access to in-house technical data on rolling stock, which is commercially sensitive, no empirical application of the concept is possible.Originality/valueThere are many ways to improve the efficiency of a railway system. Many are inherently long term and involve significant investment. Using Sweden as an example, this paper proposes the more immediate, simpler and cheaper approach of incentivising the use of better rolling stock through appropriate track access charging. Such an approach should reduce the number of problems arising on the rail network and the costs imposed on other rail users, the infrastructure providers and society. Ultimately, the implementation of this approach would support the objective of increasing long-term robustness and reducing disruptions to railways.

Evaluating the roles and powers of rail regulatory bodies in Europe: A survey-based approach

European railways have been shaped by multiple reforms since the mid-1990s, covering industry structure, market opening and economic regulation. However, the literature has given little attention to the latter; namely the evolution and impacts of regulatory reforms amongst Europe's railways. This paper fills this gap by providing an up-to-date, bottom-up assessment of current rail regulatory practice in Europe. We develop a survey of economic regulators across Europe, thus complementing top-down studies of the impact of economic regulation by enabling a richer insight into regulatory activity and its impacts. The questionnaire is based on a review of the literature on ideal regulatory characteristics across multiple industries. Our results show that European rail regulators, in general, exhibit many of the features of ideal regulation; in particular around key features such as independence, resourcing, longevity and expertise, transparency and in turn stability and predictability. However, we find that rail regulatory bodies could take a more proactive role in shaping track access charges, given their importance in respect of efficient use of the network and maintaining non-discriminatory access. Importantly, there is also scope for regulators to play a greater role in regulating the efficiency and quality of infrastructure managers, and potentially becoming more involved in the designing stages of passenger market opening as it emerges; and these changes could deliver substantial beneficial impacts for rail users and funders across Europe.

Track Access Charge Control in the Railway Sector, Its Interaction with Specific Financing Structures and the Determination of Incentives – The German Infrastructure Manager DB Netz AG

Abstract The contribution explains the financing system of the German railway sector. Market players like infrastructure managers, railway undertakings, the federal and the regional level (“Länder”) and the Bundesnetzagentur are interrelated due to the institutional setting, especially due to the control- and supervision duties of Bundesnetzagentur. This also concerns the financial flows related interconnections of market players and the government level. Bundesnetzagentur is under the new rail regulation law in charge of controlling the charging system of infrastructure managers. The new legal framework allows for the first time an incentive regulation related to infrastructure charges and sets incentives for the infrastructure manager to decrease costs and increase the traffic on the network.

Estimating the marginal maintenance cost of rail infrastructure usage in Sweden; does more data make a difference?

This paper updates knowledge about the marginal cost of railway maintenance. Using a panel dataset comprising 16 years, we test whether more data makes a difference to conclusions. In contrast to previous estimates using a shorter panel, maintenance costs are now demonstrated to exhibit a positive dynamic effect; an increase in maintenance cost during one year indicates the need for more maintenance also the next year. Moreover, the marginal cost from the dynamic model is larger than its static counterpart. We conclude that the use of dynamic models on longer time series may have charging implications in several EU member states, considering that their track access charges are based on econometric studies that use static models and short panel datasets.

Effective abatement of railway noise in Germany

Many people are exposed to high levels of noise that adversely affect their health and quality of life. Noise is now experienced virtually every-where and around the clock. Therefore, noise is an important environmental issue in Germany and within the EU. Under the Directives on rail traffic across Europe, the EU Commission has established pan-European noise thresholds for new types of rolling stock in the Technical Specifications for Interoperability (TSI). The most important consequence of the noise thresholds is that particularly noisy rolling stock fitted with cast iron block brakes is no longer permitted. The challenge is now to replace these brakes in especially noisy freight wagons in the current rolling stock with quieter braking systems. As a financial incentive for rail operators to refit such rolling stock with quieter brakes, track access charges are implemented in Germany. Additionally, there are a number of technical and legal measures available. The presentation will give an overview on these measures to efficiently abate railway noise in Germany.

Estimating the relative cost of track damage mechanisms: combining economic and engineering approaches.

This paper proposes a new, two-stage methodology to estimate the relative marginal cost of different types of vehicles running on the rail infrastructure. This information is important particularly where the infrastructure managers wish to differentiate the track access charges by vehicle type for the purpose of incentivizing the development and use of more track-friendly vehicles. EU legislation requires that the European infrastructure managers set the access charges based on the incremental (marginal) cost of the running trains on their networks. The novelty of the approach derives from the combination of: (1) engineering simulation methods that estimate the track damage caused by the rail vehicles; and (2) econometric methods that estimate the relationship between the actual maintenance costs and the different damage mechanisms. This two-stage approach fills an important gap in the literature, given the limitations of the existing “single-stage” engineering or econometric approaches in obtaining the relative marginal costs for different types of damage. The authors demonstrate the feasibility of the method using 45 track sections from Sweden, for which the data on maintenance costs are available together with relevant track and vehicle data for 2012 (supplied by the Swedish Transport Administration). The authors demonstrate the feasibility of producing summary, section-level damage measures for the three damage mechanisms (wear, rolling contact fatigue, and track settlement), which can be taken forward to the second stage. The econometric results of the second stage indicate that it is possible to obtain sensible relationships between cost and the different damage types, and thus produce relative marginal costs by the damage mechanism and in turn the vehicle type. Based on this feasibility study, tracksettlement has been found to be the most expensive (in terms of maintenance cost) of the three mechanisms, followed by the rolling contact fatigue and then the wear. Future applications should focus on larger datasets in order to produce the required degree of precision on the estimation of the marginal cost.

Track access charge for Indonesian railways using full cost method: improving industry competitiveness

The government of Indonesia currently focuses on improving the public railway services to be more effective and efficient by formulating suitable railways infrastructure charges. This paper examines a possibility to determine the track access charge (TAC) for Indonesia railways infrastructure based on a benchmark to other countries. Compared to existing charge that used basic price and product factor, the alternative proposed concept also considers multiplicative surcharge and load component. In-depth interviews will be conducted with related stakeholders from government bodies, operator, and academics to gain more insights and further to validate the research outcomes. The result shows that the suitable TAC value for the railway’s operator ranging from 56% to 66% from total proposed payable TAC, while government subsidy will cover the rest of 34% to 44% of determined track access charge to liberalize railways industry in Indonesia.

Innovative Track Access Charges

A detailed and serious cost calculation is a precondition for a competitive offer of railway traffic services in future. This task does not only concern the Train Operating Companies (TOCs), but also the Infrastructure Managers (IMs) when transferring the infrastructure costs into track access charges. These charges are subject to discussions since they were foreseen in the European regulations back in the 1990-ies the first time. The principle, to charge the “cost that is directly incurred as a result of operating the train service”, lead to numerous different interpretation throughout Europe. Beside the legislation, it is still the objective of the IM to calculate the costs for the single train. Averaged charges based on gross-tonne-kilometres are definitely no proper estimation.It is essential to base the charge on three levels. The first level is the network-section or line. The costs of Railway's permanent way differ very much on the given boundary conditions. Curved, mountainous sections come up with costs that are very likely up to three times higher compared to straight sections. Averaging costs network-wide leads to unfair conditions. Modulating gross-tonne-based charges due to the line conditions is the first necessary attempt in order to calculate “directly incurred costs”. A proper cost accounting system provides all necessary input data.The second step has to be seen from the view of the competiveness of railway freight transport. Just allocating costs does not include the cost-by-cause principle. The infrastructure is designed and maintained to the highest needs of the collective of all users. One example is the quality of track geometry that generates much higher costs if only one train is operated on high speed. These high costs are distributed to all trains if simply allocating it to gross-tonnage. Turnouts are a second major cost driver. As only the cost level is given by the accounting system, this steps needs a modelling process. Calculating gross-tonne-costs on a defined quality level is possible using detailed cost analyses for different assets at different quality standards. This second step makes it possible to calculate a cost level for freight operation, not covering the additional costs of fast or regional passenger services, and is therefore a pre-condition for a competitive railway freight service in a tight market situation.Last but not least, the quality of rolling stock is an essential part of the generated infrastructure costs. The forces of the rail-wheel-contact define the wear and damage process on the track involving the maintenance cost to be charged. It needs a sound track deterioration model to calculate the cost relevance of different forces. This modulation is an important step towards lower overall costs of the total railway system, as optimisation of subsystems is eliminated.In the end, Track Access Charges must be calculated on a much more detailed level in order to cover the goals defined by the cost-by-cause principle and a non-discriminatory access to railway infrastructure. Most of the necessary data are existing, it needs to transform the detailed cost calculation to a manageable charging system.

Analyzing Financial Relationship between Railway Industry Players in Shared Railway Systems

Capacity pricing and allocation play important roles in efficient management of railway corridors, especially shared ones. This study analyzes how train operators would respond to different track-access charges as a first step to understanding the relationship between train operators and infrastructure managers in railway systems with some level of vertical separation. With the modeling of a corridor whose users are longdistance high-speed trains and freight trains along the entire corridor and commuter trains offering services around large urban areas in the corridor, the focus is narrowed down to each individual operator, and the factors that drive each operator's ultimate service levels are studied. Assuming an environment in which the train operators are competing for capacity, financial goals and boundary conditions of each train operator are derived, and a number of sensitivity analyses for various typical and extreme conditions are performed. This model allows forecasting the train operator's response to track-access charges and can thus help the government, regulators, and infrastructure managers in the design of appropriate capacity pricing and allocation schemes.

Structural reforms in the railways: Incentive misalignment and cost implications

In Europe, many countries have completely separated their railways into totally separate infrastructure managers and railway undertakings (train operators) and the European Commission has sought to make such complete vertical separation a legal requirement.This study used both quantitative and qualitative methods to investigate the impact on costs of vertical separation. We find the impact to vary with circumstances, but for more densely used railways and those with a higher proportion of freight traffic, vertical separation raises costs. It appears that the main reason for this is the misalignment of incentives, leading each player to seek to optimise their own costs rather than those of the system as a whole. Various approaches are used to try to overcome this misalignment, through track access charges, performance regimes and various forms of partnership, but none is fully successful. We also find no evidence that complete vertical separation leads to more competition, or indeed that such an increase in competition reduces costs, though we consider that further work is needed to better measure the extent of competition in different markets. From a policy perspective our findings suggest that alternative railway structures will suit different railways with different patterns of usage and therefore a policy that seeks to impose complete vertical separation on all EU members would increase costs.

Competition and the provision of rail passenger services: A simulation exercise

This paper presents the results of simulating the effects of introducing competition on a long distance international rail passenger route where there is also a strong domestic market served by high speed trains. We are aware of a number of proposals to introduce new services in such circumstances. It has allowed for the fact that on such a service seat reservations are likely to be compulsory and yield management practiced, so that whatever is initially assumed about fares there will be further endogenous changes in average fares to maintain high load factors. It is found that on-track competition has benefits to consumers, in terms of fares and services, but that it would reduce the profitability of the incumbent and that it would be difficult for the new entrant to attain profitability unless its costs were significantly lower than those of the incumbent. A large part of the revenue of the entrant on this route would come from the domestic market, and if open access competition were permitted then the entrant might seek to run a frequent service offering head on competition on this part of the route. However, again it would appear that both operators would make heavy losses in this situation. One way of restoring profitability might be to reduce track access charges, but that would require additional government subsidy to the infrastructure manager, as the additional train kilometres run would not compensate for the lower charges. An alternative way of seeking to achieve the same result as on track competition in terms of reduced costs and innovation whilst preserving economies of density would be to award a monopoly franchise by means of competitive tendering. Franchising has generally succeeded in raising rail demand and reducing costs, although in the one example where inter-city services were franchised – Britain – costs have actually risen. Thus unless this is due to peculiarities of the British situation which would not exist elsewhere, on track competition may still have a role in reducing costs.

Estimating the marginal cost of railway track renewals using corner solution models

Economic theory advocates marginal cost pricing for efficient utilisation of transport infrastructure. A growing body of literature has emerged on the issue of rail marginal infrastructure wear and tear costs, but the majority of the work is focused on costs for infrastructure maintenance. Railway track renewals are a substantial part of an infrastructure manager’s budget, but in disaggregated statistical analyses they cause problems for traditional regression models since there is a piling up of values of the dependent variable at zero. Previous econometric work has sought to circumvent the problem by aggregation in some way. In this paper we instead apply corner solution models to disaggregate (track-section) data, including the zero observations. We derive track renewal cost elasticities with respect to traffic volumes and in turn marginal renewal costs using Swedish railway renewal data over the period 1999–2009. This paper is the first attempt in the literature to apply corner solution models, and in particular the two-part model, to disaggregate renewal cost data in railways. It is also the first paper that we are aware of to report usage elasticities specifically for renewal costs and therefore adds important new evidence to the previous literature where there is a paucity of studies on renewals and considerable uncertainty over the effects of rail traffic on renewal costs. In the Swedish context, we find that the inclusion of marginal track renewal costs in the track access pricing regime, which currently only reflects marginal maintenance costs, would add substantially to the existing track access charge. EU legislation requires that access charges reflect the ‘costs directly incurred as a result of operating the train service’, which should include a marginal renewal cost component. This change would also increase the cost recovery ratio of the Swedish infrastructure manager, thus meeting a policy objective of the national government.

Introducing New Technology to the Railway Industry: System-Wide Incentives and Impacts

This article is concerned with the role of innovation in cost reduction and the mechanisms for bringing it about. In the first section, it investigates the efficiency of UK's railways through the medium of cost benchmarking of both UK and continental European costs. It finds that Britain's rail infrastructure manager faces an efficiency gap of 40 per cent against European best practice and that train operating costs have also risen substantially, both because of rising factor prices (wages and fuel) and because of deteriorating productivity. It then explores the situation surrounding incentives for shaping technological innovation through a series of semistructured interviews with senior managers representing a wide range of railway interests. This section highlights the presence and successful functioning of the commercial mechanism for technology development in the industry both through natural commercial factors and through mechanisms such as track access charges. Finally, it studies the feasibility of modelling systems subject to technological change, with the aim of creating a methodology to assess, at an early stage in the development cycle, the physical impact innovation might have on the existing system. It finds that the objective data needed to construct such models can be extracted from existing technical standards and that systems engineering techniques provide a suitable framework for structuring and linking that data.

Sustaining Political and Financial Allocation as a Sustainable Approach in Transport Policy Development: The Case of Indonesia's Railway during the Restructuring Process

This paper explores the introduction of transport policy instrument namely Public Service Obligation (PSO), Infrastructure Maintenance and Operation (IMO), and Track Access Charges (TAC) schemes as the basis of national railway financial restructurization to clarify the relationship between government obligation and commercial function of train operator. The first five year implementation is analyzed to determine the convergence of the objectives and their achievements. The result shows that the outcomes are not meeting the objectives since they have not been properly conducted. The fund allocation provided by the government was insufficient thus the net payment system causing the impacts for both circumstances of present service performance and preparation in the near future development. This paper emphasizes that the attention of sustaining political action as sustainable approach for allocating sufficient fund to railway sector plays a critical role to improve the later restructuring process of Indonesian Railways system.

Applying social marginal cost pricing in rail PPPs: Present state, drawbacks and ways forward

The application of social marginal cost pricing (SMCP) in PPP's in the railway sector faces several challenges. We examine in detail the practical applicability of SMCP in railway PPPs from the perspectives of cost accounting and effectiveness of SMCP towards the allocative efficiency goal, addressing the likely drawbacks in conciliating the welfare objectives of SMCP with the objectives of project financing (cost recovery) and value for money that justify the realization of PPP's. To this end, we combine theoretical analysis with the observation of empirical results of a case study. We split the analysis per type of private service provision, which can be for service operation or infrastructure management. For infrastructure management, we recommend splitting the operator remuneration and the track access charges. For service operation, we argue that the correct decision on source of funding of the service operator should depend on the characteristics of the contract.

Overview of Railway Noise Control in Europe

European and national legislation, increasing freight traffic, political pressure and many more factors contribute to make noise an issue of increasing importance for the railways. This paper provides an overview of railway noise abatement efforts throughout Europe. Different countries in Europe have adopted varying noise abatement strategies, ranging from an emphasis on infrastructure based measures to a combination of rolling stock measures with noise barriers. Important in the current European discussion is the development and retrofitting of freight wagons with K- and LL-brake blocks. To support this retrofitting a wide variety of incentives, such as differential track access charges, operational restrictions or direct subsidies are being discussed. The current efforts by the European Commission, the International Union of Railways (UIC), the Community of European Railways (CER) and other international organisation to promote silent railways are presented.