10BI SCHENKER

DB Schenker Rail (UK) Limited Access Team Paul McMahon Wembley Depot Deputy Director, Railway Markets and Economics Pendolino Way Office of Rail Regulation London NW10 ORP 1 Kemble Street London WC2B 4AN Stewart Smith Telephone: +44 (0)8701407012 15 Aprii 2010 Fax: +44 (0)208 963 6265 Mobile: +44 (0)7801 906059 [email protected] Dear Paul,

APPEAL UNDER REGULATION 29 OF THE RAILWAYS INFRASTRUCTURE (ACCESS & MANAGEMENT) REGULATIONS 2005 - ACCESS TO THE PORT OF FELlXSTOWE WHERE FELlXSTOWE DOCK AND RAILWAY COMPANY IS THE SERVICE PROVIDER

This letter constitutes the response of DB Schenker Rail (UK) Limited ('DB Schenker') to the representations of GB Railfreight Limited ('GBRf') and Freightliner Limited ('FLL') (dated 18 March and 17 March 2010 respectively) on the above appeal.

GB Railfreight Limited

1. DB Schenker recognises GBRf's analysis of the allocation of paths between the raii freight operators using the Port of ('the Port') as this concurs with the information contained within DB Schenker's appeal. DB Schenker notes that out of the 14 new paths allocated by Felixstowe Dock and Raiiway Company ('FDRC') since 2001, 50% (7) have been allocated to FLL (who already held 14 paths), 36% (5) to GBRf and only 14% (2) to DB Schenker.

2. DB Schenker also notes GBRf's comments that in order to faciiitate the allocation of rail capacity in a structured manner, FDRC introduced an informal bidding process which ensured each party presented its case for capacity in a consistent and comparable format. DB Schenker assumes GBRf is referring here to the capacity allocation principles issued by FDRC on 4 August 2008 when inviting tenders for capacity to accommodate a 27'" train at the Port (Appendix 1 of DB Schenker's appeal refers).

3. Rather than being an informal bidding process as GBRf suggests, DB Schenker understood that the capacity allocation principles were intended to be FDRC's formal published policy of how it would allocate capacity at the Port. However, as DB Schenker has made clear in its previous representations to ORR:

• Without consultation, these capacity allocation principles were revised by FDRC in May 2009 so that the process of capacity allocation would no longer be by open tender. This was purportedly as a consequence of FDRC's belief that the Felixstowe Branch Line was at capacity. FDRC stated that these revised principles wouid remain in place until the Felixstowe Branch Line was upgraded and specified that requests for additional train services from operators would be considered where those operators could identify or create capacity on the Felixstowe Branch Line (Appendix 2 of DB Schenker's appeal refers).

DB Schenke r Rail (UK) Limited Registered Office: lakeside Business Park Ca rolina Way Doncaster ON4 5PN Registered in England andWales Registered No: 2938988 10BI sCHENKER

• In June 2009, the 28th path was allocated by FORC unilaterally to FLL outside of either the original or revised capacity allocation principles (published by FORC in August 2008 and May 2009 respectively) According to FORC, this was due to overriding commercial principles.

• In September 2009, when DB Schenker (in line with the revised capacity allocation principles published by FORC in May 2009) identified spare capacity on the Felixstowe Branch Line and made a formal request for capacity to be allocated at the Port (Appendix 5 of the appeal refers), FORC subsequently advised that it had returned to the previous capacity allocation principles that were issued in August 2008 (i.e. process of capacity allocation by open tender).

4. DB Schenker notes GBRf s comments that FORC's capacity allocation process seeks to identify the degree to which new rail capacity is 'pre-sold' by bidders. Given that GBRf and FLL have arrangements with the world's two largest shipping lines, and enjoy 'exclusive/preferred supplier' status, they have significant leverage at the Port to demonstrate 'pre-sold' capacity. However, for other operators, such as DB Schenker, it is often the case that in order for them to credibly bid for new traffic they need to provide assurance to customers that they have secured the necessary access to all of the facilities and services they need to run the train. This significant factor is recognised by ORR in paragraph 1.21 of the ORR's Guidance on Appeals under the Regulations. GBRfs comments in this respect, therefore, reinforce DB Schenker's concern that FORC's capacity allocation principles fail to take this into account and, consequently, it is more difficult for some operators to secure new or additional access at the Port than others. DB Schenker believes that this is demonstrated by the current share of rail capacity at the Port (i.e. whilst FLL and GBRf between them have been allocated 93% of current paths, DB Schenker has only been allocated a mere 7%).

5. Moreover, DB Schenker notes GBRf s view that the capacity allocation principles have been upheld by FORC in its dealings with GBRf since 2001 and that it has been allocated capacity fairly when it has become available. DB Schenker, believes that this is not the case as far as it is concerned and notes that out of the 14 new paths referred to in paragraph 1 above, only one has been allocated using the capacity allocation principles (introduced in August 2008) referred to by GBRf (i.e. the 27'hpath allocated to GBRf).

6. In respect of the process for the allocation of the 27'h path, DB Schenker's tender did in fact indicate that it had 'pre-sold' committed volume that would be conveyed using this path which consisted of transferring traffic that DB Schenker was already moving by road from the Port to Ipswich for onward rail transportation to Burton (a location not then served directly by rail from the Port), thereby negating the need for a road shuttle and the double handling costs. However, despite the fact DB Schenker had this committed volume, the 27th path was still awarded to GBRf who then, as it transpired, did not have the traffic in place to begin immediately operating the service. DB Schenker understands that the delay became so protracted that FORC set GBRf a deadline to commence operation of the 27th service and threatened to re-run the award process in the event of non-compliance.

7. Therefore, rather than there being a fair, transparent and consistent process of allocating capacity at the Port, DB Schenker submits that FORC has introduced, revised and withdrawn its published capacity allocation principles at various times unilaterally (and without consultation) to

Page 2 016 lOBI SCHENKER

suit its own purposes. DB Schenker understands that Regulation 6 (3) of the Railways Infrastructure (Access and Management) Regulations 2005 provides that the service provider must ensure that access to, and the supply of services is granted in a transparent and non­ discriminatory manner. Given the matters set out above (and in its previous representations) , DB Schenker believes that this is not the case in respect of FORC at the Port.

8. DB Schenker concurs with the efficiency related factors (listed as bullet points at page 2 of GBRF's representations) that should be applied by FORC at the Port. In this respect, DB Schenker particularly notes GBRf's reference to the importance of deploying the most efficient rail wagon configuration and the degree to which rail capacity at the Port (either under the cranes or on adjacent rail lines) is used efficiently, and that this can specifically relate to the negative effect on available capacity of "empty running" on Port rails, ancillary rail movements for the benefit of one operator, or wagon sets with unnecessary long dwell times under the cranes. DB Schenker believes that GBRf's subsequent reference to addressing with FORC certain 'legacy' issues relating to pathing and slot occupation of rail services that existed pre-2001 concerns many of these specific issues.

9. In its previous representations to ORR, DB Schenker has expressed the view that FORC's use of rail capacity in the Port is currently inefficient. Therefore, GBRf's corroborative comments in this respect are welcomed. DB Schenker has maintained that FORC permits over-length trains to be operated into the Port which require splitting into separate sections, therefore necessitating the use of two sidings (rather than one). This in turn increases the time taken to process such trains as well as negating capacity in the second siding (that could be better used for a full length train). Given GBRf's confirmation of the current existence of inefficiencies which pre-date 2001, DB Schenker submits that there is a clear inconsistency with GBRf's statements in support of FORC's capacity allocation principles, as such principles have clearly not addressed legacy inefficiencies which appear both entrenched and systematic.

10. Finally, DB Schenker considers that GBRf's apparent satisfaction with the charges that it is levied by FORC, does not address DB Schenker's concern that that the charging arrangements and level of charges currently in place for access and services at the Port are not being applied on a fair, transparent or consistent basis to the different operators using the Port. The fact that one operator is content with its charging arrangements does not verify that such charging arrangements and the level of charges are being applied on a fair, transparent and consistent basis to all operators. In order for this matter to be determined, all operators using the Port should be required to disclose the charges levied on them to ORR so that appropriate comparisons can be made. As DB Schenker has stated in its previous representations, FORC has failed to provide relevant information to DB Schenker or, it appears, to ORR, which would help resolve this issue.

Freightliner Limited

11 . DB Schenker notes FLL's comments that it believes that the rail terminals at the Port are operating at full capacity and that until actions are taken to create additionai capacity and ensure reliability of service to train operators, no additional services should be accepted. DB Schenker suggests that it may be easier to arrive at such a view from a position where FLL (a) has already been allocated 75% of capacity at the Port (including being allocated unilateraiiy by FORC outside of any capacity allocation process, the 28'h path) and (b) is responsible for train

Page 3 of 6 10BI sCHENKER

configurations, dwell times and ancillary movements that contribute to the inefficient use of available capacity at the Port.

12. However, whilst FLL's view appears to correspond to FORC's claims in respect of DB Schenker's appeal (namely, that the Port has no ability to handle any additional rail traffic and would not be in a position to offer any capacity until at least 02 2010 (Appendix 7 of DB Schenker's appeal refers)), it does not correspond with FORC's position in respect of discussions it has had with both the Department for Transport ('OfT') and regarding the proposed change of the backstop date for the Remote Railway Works to be delivered under a s106 agreement, in which FORC stipulated that 30 trains into the Port are achievable and 32 trains would be possible if freight operators could reduce the amount of time some trains dwell on the terminals at the Port (paragraphs 3.3 to 3.5 and Appendix 3 of DB Schenker's representations to ORR dated 31 March 2010 refer).

13. DB Schenker notes FLL's comments over the problems that it has been experiencing since it was unilaterally allocated the 28th path by FORC. This again reinforces DB Schenker's view that FORC has not been operating a fair, transparent, consistent and non-discriminatory process for the allocation of capacity.

14. DB Schenker disagrees with FLL's view that the Port cannot operate efficiently within 4-hour loading windows using block trains of sufficient length that can be accommodated in one siding. Even if a very conservative view is taken that it takes 5 minutes to unload/load each container, with a 24 platform train it would still only take 4 hours to achieve a full unload/load of each service, DB Schenker suggests that the reason why this may not be achievable currently is FORC's continued tolerance of inefficient use of capacity, particularly in allowing over-length trains to be operated into the Port. These trains require splitting into separate sections, thereby necessitating the use of two sidings (one whole one and a portion of a second), rather than one. This increases the time taken to handle such trains and also makes most of the capacity in the second siding unusable. DB Schenker, therefore, submits that if the Port was operating efficiently, the 4-hour turnaround of block trains of sufficient length to be accommodated in one siding should be relatively easy to achieve.

15. In respect of FLL's comments on the measures it is investigating to improve capacity, DB Schenker would agree that ordinarily it would seem logical that increasing train-length would increase payload and make more efficient use of capacity and resources. However, the length limit on trains in the Port would mean that the introduction of 30x60' platform trains, as FLL suggests, would require splitting into separate sections, thereby necessitating the use of two sidings (Le. one whole siding and a small portion of a second). For reasons explained in paragraph 14 above, this will only serve to further increase current inefficiencies. Therefore, as DB Schenker has argued in its previous representations, the operation of over length trains at the Port using two sidings (rather than one), with up to to-hour dwell times already works against, rather than for, efficient capacity utilisation. Instead, DB Schenker submits that the operation of block trains of sufficient length to use one siding with up to 4-hour turnaround times would significantly improve the efficient use of capacity at the Port.

16. DB Schenker notes FLL's comments that all operators should use 60' wagons to maximise train loading capacity as such wagons can take two containers. FLL suggests further that as DB Schenker uses sub-60' wagons it can only load one container per wagon. Whilst DB Schenker

Page 4 of 6 IDBI SCHENKER

does possess 50' wagons, it is hampered in using these for services that operate over the due to gauging issues. FLL also acknowledges that it has to use sub-50' wagons for services operating over the East Coast Main Line. DB Schenker also considers that it is incorrect to state that sub-50' wagons can only convey one container as, for example, a 50' wagon can accommodate two 20' containers.

17. DB Schenker strongly disagrees that FLL's operation of over-length trains into the Port requiring them to be split over two sidings actually benefits other operators by increasing flexibility. DB Schenker considers that using the terminals as a marshalling yard, splitting trains and increasing dwell times as FLL does can in no way lead to achieving efficient use of capacity. If FLL requires its trains to be split then this shouid be carried out elsewhere, such as Ipswich Yard, rather than utilising scarce capacity at the Port.

18. DB Schenker notes FLL's admission that its wagons sit for no longer than 10 hours at the Port and that the average dwell time in the South Terminal at the Port is 5 hours. Whilst FLL has not indicated what its average and maximum dwell times are at the North Terminal at the Port, 5 hours at the South Terminal is already 50% more than the dwell times achieved by DB Schenker and 20% more than those achieved by GBRf. DB Schenker, therefore, also disagrees with FLL's suggestion that 4-hour turnarounds are too 'tight'. Block trains that can be accommodated in one siding should be easily loaded/unloaded to achieve 4-hour turnaround times, even if this would involve FORC itself becoming more efficient in ensuring the better 'housekeeping' of import containers as FLL suggests would have to be the case, and which FLL speculates FORC could not achieve. Whiist DB Schenker notes FLL's statement that its shunt plans and wagon occupation charts have been checked and authorised by FORC, and that FLL believes they stand up to scrutiny, DB Schenker argues that this does not alter the fact that with biock trains that can be accommodated in one siding which achieve 4-hour turnaround times, those shunt plans and wagon occupation charts would be more efficient and, therefore, require less capacity at the Port.

19. FLL obviously has a financial interest in operating over-length trains within the Port. However, it is abundantly clear that it is not in the interest of the efficient operation of the Port and, as a result, in the interest of other rail operators.

20. In respect of the potential conflict between DB Schenker's proposed new path and FLL's OB30 light engine movement, DB Schenker notes FLL's comments that this light engine movement is not required during normal operations but may be required during planned or unplanned perturbations at the Port. DB Schenker submits that a light engine path that is not required during normal operations but only on perhaps a very few occasions per year should not hinder the achievement of another train path into the Port. DB Schenker also points to the offer contained in its appeal that, if necessary, it could convey this locomotive 'dead in train' on its own service.

21 . DB Schenker notes FLL's concluding comments reaffirming its view that the Port does not currently have capacity for an additional rail service. Again, DB Schenker would point to its comments made in paragraph 12 above referring to FORC's representations to the OfT and Network Rail, namely that 30 trains into the Port are achievable and 32 trains would be possible if freight operators could reduce the amount of time some trains dwell on the terminals. DB Schenker believes that it is reasonable to infer that this refers to FLL's operations. DB Schenker also disagrees with FLL's concluding comment that FORC's capacity allocation process is

Page 5 of 6 10BI sCHENKER

reasonable (DB Schenker assumes here that FLL is referring to the procedure used to allocate the 27'h path) and in this regard points to comments made in paragraphs 3 to 7 above, particularly as regards FORe's alteration of the capacity allocation process on at least 4 occasions within the past 18 months.

Conclusion

22. Given that FLL and GBRf between them currently hold 93% of the allocated train paths at the Port, and that FLL's service plans involve the operation over over-length trains (that require splitting at the Port with consequent long dwell times), DB Schenker suggests that they have a vested interest in arguing for the retention of the 'status quo'. However, DB Schenker believes that if rail capacity at the Port is artificially constrained it will inevitably lead to price increases. If (a) more capacity is made available and (b) a fair, transparent and consistent charging regime is applied to all operators, it can only be of benefit to the market and the wider UK economy.

23. DB Schenker confirms that representations made by GBRf and FLL have not deterred it from proceeding with its appeal.

Yours sincerely, (,f' ~ Stewart Smith Industry Contracts Manager

cc. Bill Hammill ORR Kara Johnson ORR

Page 6 of 6