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 Felixstowe ('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.