Level 2, 35 Spring St Melbourne 3000, Australia Telephone +61 3 9651 0222 +61 1300 664 969 Facsimile +61 3 9651 3688 REVIEW OF THE VICTORIAN RAIL ACCESS REGIME: FINAL REPORT VOLUME III: SUPPORTING MATERIAL FEBRUARY 2010 An appropriate citation for this paper is: Essential Services Commission 2010, Review of the Victorian Rail Access Regime − Final Report: Supporting Material , February 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. STRUCTURE OF THE FINAL REPORT The Commission’s final report on its review of the Victorian rail access regime is set out in three volumes: • The first volume sets out the Commission’s findings and its recommendations to the Minister for Finance. The volume concludes with a range of observations for future consideration. • The second volume provides a comprehensive explanation of the Commission’s analysis and its findings. It elaborates on the reasoning behind its recommendations and discusses responses received from stakeholders. • This volume comprises supplementary material set out as appendices to the report. These appendices provide background information and more technical analysis related to the Review. CONTENTS STRUCTURE OF THE FINAL REPORT III CONTENTS 5 APPENDIX A TERMS OF REFERENCE 7 APPENDIX B CPA CLAUSE 6 PRINCIPLES 11 APPENDIX C SUBMISSIONS RECEIVED 17 APPENDIX D THE VICTORIAN RAIL FREIGHT INDUSTRY 19 D.1 Railway track access providers 19 D.2 Passenger train operators 21 D.3 Freight train operators 22 D.4 Rail terminals and rail terminal operators 25 D.5 Recent developments & government role in the rail industry 31 D.6 Above-rail contestability 31 D.7 Buy-back 33 D.8 Dynon terminals 35 D.9 Rail freight activity 36 D.10 The Metropolitan freight terminal network 39 APPENDIX E DYNON/SWANSON RAIL TERMINALS 43 E.1 Summary of the current rail terminals 43 E.2 Outlook for rail terminals in the Dynon-Swanson precincts 46 APPENDIX F THE VICTORIAN RAIL ACCESS REGIME 53 F.1 Introduction 53 F.2 Statutory framework 54 F.3 General overview of the VRAR 55 F.4 Declaration 55 F.5 Pricing Principles 56 F.6 Commission Instruments 58 F.7 Assessment of Access Arrangements 59 F.8 Dispute resolution 62 F.9 Access provider obligations 63 ESSENTIAL SERVICES COMMISSION LOCAL GOVERNMENT CONTENTS 5 VICTORIA PERFORMANCE ASSESSMENT AND BENCHMARKING FRAMEWORK F.10 Enforcement 64 APPENDIX G COMPARATIVE RAIL ACCESS REGIMES 65 G.1 Australian rail access regimes 65 G.2 Review of the SA Rail Access Regime 70 G.3 ARTC’s rail access framework 70 G.4 Summary of the comparison of VRAR with other rail access regimes 73 APPENDIX H EXAMPLES OF LIGHT HANDED ACCESS REGIMES 77 H.1 Victorian port services regime 77 H.2 National gas pipeline access regime and light regulation 79 APPENDIX I COSTS OF REGULATION UNDER THE VRAR 83 I.1 Administrative costs 83 I.2 Compliance costs 85 I.3 Arbitration costs 85 I.4 Other stakeholder costs 85 I.5 Impacts on economic efficiency 86 I.6 Costs of certification 86 I.7 Conclusions 86 APPENDIX J REVIEW OF RAIL SUBSIDY ARRANGEMENTS IN OTHER JURISDICTIONS 89 J.1 Queensland 89 J.2 New Zealand 91 J.3 United Kingdom 94 J.4 Melbourne metropolitan rail networks 95 J.5 Considerations for funding the regional rail network 97 APPENDIX K SUPPLY CHAIN COORDINATION IN AUSTRALIAN JURISDICTIONS 99 K.1 Hunter Valley 100 K.2 Port Botany 102 K.3 Dalrymple Bay 104 ESSENTIAL SERVICES COMMISSION LOCAL GOVERNMENT CONTENTS 6 VICTORIA PERFORMANCE ASSESSMENT AND BENCHMARKING FRAMEWORK APPENDIX A TERMS OF REFERENCE Essential Services Commission Act 2001 Part 5 Inquiry and Report Notice of Reference – Victorian Rail Access Regime Pursuant to section 41 of the Essential Services Commission Act 2001, I, Tim Holding MP Minister for Finance, WorkCover and the Transport Accident Commission, hereby direct the Essential Services Commission (‘the Commission’) to conduct an inquiry into the effectiveness of the Victorian Rail Access Regime. Background At the 10 February 2006 meeting of the Council of Australia Governments (COAG), the Commonwealth, State and Territory Governments signed the Competition and Infrastructure Reform Agreement (CIRA), which among other things, requires each jurisdiction to submit all state-based access regimes to the National Competition Council for certification. In March 2007, the Victorian Government released its response to the Victorian Competition and Efficiency Commission’s final report on transport congestion – Making the Right Choices: Options for Managing Transport Congestion . In its response, the Government indicated that it would ask the Commission (in conjunction with the Department of Transport) to review the rail access regime. In December 2007, the Victorian Government released the report of the Rail Freight Network Review – Switchpoint: the Template for Rail Freight to Revive and Thrive! – led by Tim Fischer. The review recommended that the Victorian Government simplify its rail access regime and determine the ongoing role of the Commission in rail freight access following the recent changes in lease arrangements. Responding to this report recently, the Government affirmed its intention to review the rail access regime in Freight Futures: Victorian Freight Network Strategy for a More Prosperous and Liveable Victoria , released on 8 December 2008. Specific Terms of Reference The Review will examine, report on, and make recommendations in relation to: ESSENTIAL SERVICES COMMISSION REVIEW OF THE VICTORIAN APPENDIX A – TERMS OF 7 VICTORIA RAIL ACCESS REGIME REFERENCE i. Whether a Victorian rail access regime is still required given the current and likely future structure of the industry, and having regard to the costs and benefits of economic regulation. ii. If continuing the access regime is recommended: a. whether the current objectives for the Victorian Rail Access Regime (VRAR) remain relevant, and if not, what new objectives the VRAR should adopt; b. what services the VRAR should regulate; and c. what form the regulation of those services should take. In conducting its review, the Commission is to have regard to factors that affect the efficient operation of the Victorian rail industry, including market conditions, the Government’s investment in, and funding of, rail infrastructure and the rail industry and the Government’s policies and priorities for the rail freight network. In conducting its review, the Commission is to have regard to: i. the objectives set out in section 38F of the Rail Corporations Act 1996 and section 8 of the Essential Services Commission Act 2001 , and the matters which the Commission must have regard to as specified in section 8A of the Essential Services Commission Act 2001 (ESC Act); ii. relevant principles in the Competition Principles Agreement and Part 3A of the ESC Act; and iii. Victoria’s obligations under the Competition and Infrastructure Reform Agreement. Review Process The Review will be conducted independently by the Victorian Essential Services Commission (ESC) under s.41(1) of the Essential Services Commission Act 2001 , which requires that: “The Commission must conduct an inquiry into any matter which the Minister by written notice refers to the Commission under this Part”. In conducting the Review, the Commission will also have regard to the objectives under ss.8 and 8A and Part 3A of the Essential Services Commission Act 2001 . The specific design and conduct of the Review process will be determined by the ESC and publicised at the outset of the review. However, it is envisaged that the process will include the following key elements: • preparation and dissemination of a discussion/issues paper as a basis for informing stakeholders and the general public about the purpose and nature of the Review and the key matters to be addressed; • invitation and receipt of written submissions; • preparation and dissemination of a draft report for public comment; and ESSENTIAL SERVICES COMMISSION REVIEW OF THE VICTORIAN APPENDIX A – TERMS OF 8 VICTORIA RAIL ACCESS REGIME REFERENCE • preparation and submission of a final report and recommendations to the Minister for consideration by the Government. Timetable Review to commence by end June 2009 Draft report to be submitted by end October 2009 Final report to be submitted by end January 2010 TIM HOLDING MP Minister for Finance, WorkCover and the Transport Accident Commission Date: 26/06/2009 ESSENTIAL SERVICES COMMISSION REVIEW OF THE VICTORIAN APPENDIX A – TERMS OF 9 VICTORIA RAIL ACCESS REGIME REFERENCE ESSENTIAL SERVICES COMMISSION REVIEW OF THE VICTORIAN APPENDIX A – TERMS OF 10 VICTORIA RAIL ACCESS REGIME REFERENCE APPENDIX B CPA CLAUSE 6 PRINCIPLES 6.(1) Subject to subclause (2), the Commonwealth will put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure facilities where: (a) it would not be economically feasible to duplicate the facility; (b) access to the service is necessary in order to permit effective competition in a downstream or upstream market; (c) the facility is of national significance having regard to the size of the facility, its importance to constitutional trade or commerce or its importance to the national economy; and (d) the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist. (2) The regime to be established by Commonwealth legislation is not intended to cover a service provided by means of a facility where the State or Territory Party in whose jurisdiction the facility is situated has in place an access regime which covers the facility and conforms to the principles set out in this clause unless: (a) the Council determines that the regime is ineffective having regard to the influence of the facility beyond the jurisdictional boundary of the State or Territory; or (b) substantial difficulties arise from the facility being situated in more than one jurisdiction.