V/Line Access Arrangement May 2012
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Level 2, 35 Spring St Melbourne 3000, Australia Telephone +61 3 9651 0222 +61 1300 664 969 Facsimile +61 3 9651 3688 V/LINE ACCESS ARRANGEMENT DRAFT DECISION MAY 2012 An appropriate citation for this paper is: Essential Services Commission, V/Line Access Arrangement, Draft Decision, May 2012. Essential Services Commission. This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968 and the permission of the Essential Services Commission. CHAIRPERSON’S INTRODUCTION The Rail Management Act 1996 (RMA) sets out the Victorian rail access regime that applies to providers of declared rail infrastructure. The RMA prescribes that the Commission is responsible for administering the Victorian rail access regime. Through Declaration Orders, the Victorian Government determines which infrastructure services are subject to be declared for access. The Victorian regional rail network is declared for access and V/Line is the operator and access provider for this rail network. Under the RMA, V/Line must at all times have an approved access arrangement in place with the Commission. Access arrangements encourage competition and efficiency in the rail freight industry by allowing access seekers (i.e. freight operators) to negotiate access to certain declared infrastructure provided by access providers (i.e. V/Line) in order to enable freight operators to compete in markets where competition is dependent on such access. On 30 March 2012, the Commission received an application from V/Line to renew its access arrangement. On 5 April 2012, the Commission published a notice in the Melbourne Age and Herald Sun newspapers regarding V/Line’s application and undertook a stakeholder consultation process whereby stakeholders and the public were invited to make a submission regarding the application. Two submissions were received from stakeholders and these submissions were considered in preparing this draft decision. Under the RMA, the Commission must make a draft decision as to whether it proposes to approve V/Line’s proposed access arrangement. In making its draft decision, the Commission must have regard to whether the proposed access arrangement contains the specific elements and meets the relevant requirements of the RMA. This draft decision outlines the Commission’s views on V/Line’s proposed access arrangement and sets out the amendments and matters that V/Line must address (see Box1.1) in order for the Commission to approve its proposed access arrangement. Submissions on this draft decision are requested from interested parties by 14 June 2012. Dr Ron Ben-David Chairperson ESSENTIAL SERVICES COMMISSION PACIFIC NATIONAL CHAIRPERSON’S III VICTORIA ACCESS ARRANGEMENT INTRODUCTION CONTENTS Chairperson’s introduction ................................................................................... III Contents ................................................................................................................. IV Acronyms ............................................................................................................... VI Glossary ................................................................................................................ VII 1 Introduction ................................................................................................. 14 1.1 V/Line’s access arrangement 14 1.2 Commission’s role and approval process 15 1.3 Commission’s draft decision 16 1.4 Summary of draft decision 16 2 V/Line and the regional rail network ......................................................... 25 2.1 Who is V/Line? 25 2.2 Declaration orders 26 2.3 Leases 26 2.4 What infrastructure is subject to access? 26 2.5 Users of the regional rail network 29 3 Price issues ................................................................................................. 31 3.1 V/Line’s access prices 31 3.2 Government support of freight 32 3.3 V/Lines proposed access charges 33 3.4 Stakeholder views 33 3.5 Efficient pricing 33 3.6 Assessment of V/Lines access prices 34 3.7 Commission’s proposed access prices 35 3.8 Summary and conclusions 38 4 Track standards .......................................................................................... 40 4.1 The regional rail context 40 4.2 V/Line’s proposal 42 4.3 Commission’s draft proposal 45 4.4 Commission draft proposal 46 5 Non-price issues ......................................................................................... 49 5.1 Information provisions relating to access 49 ESSENTIAL SERVICES COMMISSION PACIFIC NATIONAL CONTENTS IV VICTORIA ACCESS ARRANGEMENT 5.2 Information to be made available to an access seeker 52 5.3 Procedure for making an access application 53 5.4 Assessment of access applications 53 5.5 Term of access arrangement 54 5.6 Consistency with the Account Keeping Rules 55 5.7 Consistency with the Capacity Use Rules 58 5.8 Consistency with the Negotiation Guidelines 61 5.9 Consistency with the Network Management Rules 64 5.10 Other matters in the access arrangement 68 5.11 Access agreement terms and conditions 72 Appendix A Legislative requirements ........................................................... 85 Appendix B Commission approval process ................................................. 89 Appendix C Matters to be taken into account .............................................. 91 Appendix D Revenue Cap & Weighted Average Cost of Capital ................ 93 Appendix E GHD report ................................................................................... 99 Appendix F Booz & Co. Report .................................................................... 123 ESSENTIAL SERVICES COMMISSION PACIFIC NATIONAL CONTENTS V VICTORIA ACCESS ARRANGEMENT ACRONYMS CPA Competition Principles Agreement CPI Consumer Price Index DoT Department of Transport EMCMP Emergency Management and Crisis Management Plan ESC Essential Services Commission (Victoria) GTK Gross Tonne Kilometres MPM Major Periodical Maintenance MSIS Mode Shift Incentive Scheme NSP Network Service Plan PIL Primary Infrastructure Lease PTDA Public Transport Development Authority RIL Regional Infrastructure Lease RMA Rail Management Act 1996 TEU Twenty-foot Equivalent Unit TK Train Kilometres VRAR Victorian Rail Access Regime WACC Weighted average cost of capital ESSENTIAL SERVICES COMMISSION PACIFIC NATIONAL ACRONYMS VI VICTORIA ACCESS ARRANGEMENT GLOSSARY Above rail Refers to activities associated with the provision and operation of train services including provision of rolling stock and freight handling. Above rail costs Costs related to train operation, rolling stock and related activities/services. Above rail operator A person or company that operates (runs) rolling stock (trains) for movement of freight/cargo. Usually a train/freight operator. Access The use of infrastructure owned and/or operated by another party. Access agreement A standard (pro forma) agreement between an access provider and an access seeker that sets out the contractual terms of access. Can be negotiated between the parties. Once signed becomes contractual. Access arrangement Sets out the process and protocols and information for obtaining access to the rail network. It includes the access agreement. Also referred to as an access undertaking by the Commonwealth (ACCC) and other State regulators. Access arrangement Information provided by the access provider to an access information seeker. Access charge A price paid in return for access to infrastructure. Access holder A freight operator (i.e. network user) who has signed an access agreement with V/Line and thus holds access rights (i.e. entitlements to train paths) to the rail network. Access provider A provider of a declared rail transport services (i.e. V/Line). Access regime The overarching legislative framework for access (see Part 2A of the Rail Management Act 1996). ESSENTIAL SERVICES COMMISSION V/LINE ACCESS GLOSSARY VII VICTORIA ARRANGEMENT Access seeker A person seeking access to a declared rail transport service. Usually an above rail operator. Becomes an access holder once they sign an access agreement with the access provider. Account Keeping Rules A Commission Instrument which requires access providers to maintain and provide the Commission with accounting records and accounts. Ballast The material upon which the sleepers bear. It is used to form the road bed of a railway track. It is laid on the base formation with the rack laid on top of it and provides a storm water drainage medium. Ballast cleaning The process of extracting the ballast from the railway track and shaking or washing the ballast to remove detrimental material, and then returning it back to the track. The process improves the performance of the ballast by removing the material that tends to lubricate the ballast particles. The process is most commonly performed using a track mounted machine and the track is relatively undisturbed while it occurs. Below rail The rail track infrastructure, including rail, sleepers, signals, overhead power systems and track fencing. Below rail costs Costs related to the rail track and related structures. Bridges (over and under the Overbridges are those that go over the track and are track) typically pedestrian footbridges or road bridges. Underbridges are under the track and typically convey rivers, subways, or roadways. The bridge structure is separate from the earth formation that is usually under the track but abuts the earth formation at the ‘abutments’. Capacity Use