Submission from Roy Pedersen, Pedersen Consulting – 24 March 2008 Dear Sir/Madam Response to the Inquiry into Ferry Services in Scotland I have had the privilege of making a verbal presentation to the Ferry Services Enquiry at Oban on 4th March. On that occasion I was representing the Highland Council and restricted my comments mainly to matters relevant to that authority. As my personal and professional interest in ferries is Scotland-wide, not least as the original architect of Road Equivalent Tariff, I am submitting this further response on behalf of my consultancy firm. The Call for Views stated that written views of no more than six sides of A4 should be submitted. It is unfortunately impossible to set out the general principles upon which improvements should be based and to apply these separately to the sixty plus Scottish state funded ferry routes with a rational in each case explaining how and why change options are recommended. Whilst attempting to keep verbiage to a minimum, this task has in fact taken up 30 pages. To cover your requirement, therefore, I have prepared an executive summary within the stipulated page limit which summarises in cryptic form the main issues highlighted in the 30 page document [NOT REPRODUCED]. Without the main document, however, I am afraid the full reasoning behind its contents will be lost. In that circumstance, I would be most grateful if you would include this letter as part of my response and draw the main document to the committee’s attention. I believe the Transport, Infrastructure and Climate Change Committee have a golden opportunity to set in motion the radical change of policy required to create a cost effective ferry system that can bring hitherto undreamt of benefits to our island communities. I wish it well in this task. Yours faithfully Roy N Pedersen A Better Way to Run Ferries Response to the Inquiry into Ferry Services in Scotland by Roy N Pedersen MA, FRSA, MCIT EXECUTIVE SUMMARY Introduction This Executive Summary covers the main issues highlighted in Pedersen Consulting’s full response to the inquiry into ferry services in Scotland by Scottish Parliament’s Transport, Infrastructure and Climate Change Committee. It addresses the committee’s brief in terms of routes, frequency and timetabling, capacity, integration and competition. The issues highlighted can only be wholly understood by reference to the full report, attached, which sets out a comprehensive analysis of how the Scottish Government may seek better value for money in terms of improved community benefit whilst containing public expenditure. The Scottish Government’s Aims The Scottish Government has listed the following inter-related aims among its priorities: sustainable communities, reversing population decline, supporting economic development, accessing mainland services and social integration as priorities. This full response sets out to show how ferry services may best be arranged to fulfil these aims. Scottish State Funded Ferries & Value for Money In contrast with other state subsidised ferry systems worldwide, Scotland does not compare favourably. Subsidy levels as a proportion of operating costs have risen to very high levels, yet fares and charges also remain relatively high and traffic growth is sluggish. It has been argued that a contributory factor to this state of affairs is that even many of the newer vessels employed are of old fashioned design or otherwise less than optimal for their purpose and that the routes themselves constrain traffic growth because they are not best selected to maximise, in a cost effective manner, benefit to some of the island and peninsular communities served. The full response describes a set of principles and ideas that may help focus policy to bring about the kinds of changes needed to improve matters – perhaps radically so – to the benefit of both local communities and the tax-payer. “Road Equivalence” and “Impedance” To explain “road equivalence” in terms of ferries: roads are the universal transport mode that connect virtually everywhere with everywhere. Where water intervenes ferries act as a floating bridge. However traffic on a ferry crossing is always less than if there had been an actual road across that stretch of water. This constraining effect of a ferry crossing is described as “impedance”. The degree of impedance can vary greatly depending on: passage time, frequency, hours of operation and price (the latter by no means the most important). The pursuit of “road equivalence” seeks to make ferry crossings as “road like” as possible, thereby reducing the “impedance” effect, by reducing passage time, increasing frequency, extending hours of operation and constraining price. A comparison between the ferries serving the islands of Gigha and Lismore illustrates this effect very starkly. Both islands have similar populations but the vehicle ferry to Gigha with its more frequent, shorter passage and cheaper fares carries some six times the vehicles and passengers as that to Lismore. Gigha flourishes while Lismore stagnates. If these principles of shortening passage time, increasing frequency and reducing fares are applied to the Scottish ferry system, they offer the potential to create a much improved quality of service while actually reducing the burden on the taxpayer. There is much scope for such route shortening in Scotland. Effective application, however, hinges on a number of technical and operational issues. Ships: Old versus New Technology The main cost components of ferry operation are: Capital (annualised to give comparison with running costs), Crew, Fuel (as a rule of thumb, 200 litres/hour/megawatt (MW) of power). Scottish policy has favoured on the longer open sea (Class IIA) routes, large slow roll-on roll-off (RO RO) ferries that are heavily subsidised, expensive to build (Typically £20 million plus), carrying large live-on-board crews and high in fuel consumption of up to 1,500 litres/hour. It is worth noting that this equates to 100 litres per mile, or 2 litres per car per mile at 50% capacity. This is some TWENTY TIMES the fuel consumption of an average car on the road. On shorter more sheltered routes simpler and much cheaper mainly double ended vessels, employing small (3 to 5) live ashore crews, provide more or less frequent passage for vehicles and some foot passengers between landing places equipped with sloping landing hards. Besides these predominant vessel and terminal configurations, there are a few hybrid types. There is virtually no interface between these distinctive operational types such that they may be regarded as being separate fleets. Best Practice Worldwide In a world context the range of vessel designs employed by ferry operators is huge but there are a few examples that offer particularly useful pointers as to possible ways forward in modernising Scotland’s ferries to achieve greater “road equivalence” and reduce “impedance”. These are: Semi-Fast Vehicle Carrying Catamarans Typically costing £10 -£12 million with a capacity of some 350 passengers and 60 to 90 cars, a speed range of some 17 to 22 knots and a fuel consumption of some 500 – 700 litres per hour up to one third that of a conventional CalMac Class IIA ferry. High Capacity Ropax Ferries High capacity ROPAX ferries of the Visintini type of similar capital cost, speed and passenger capacity of the NorthLink twins Hjaltland and Hrossay are able to carry over FOUR TIMES the number of trailers High Speed Passenger Ferries These craft may be described as providing a high quality coastal or island bus service, typically with a passenger capacity of around 250, a crew of 3 or 4 and speeds of between 25 and 35 knots and a capital cost is around £3 million. Because of their very low deadweight compared with a vehicle carrying ferry, their fuel consumption is relatively low considering their high speed. Other Options In Queensland Australia, Brisbane CityCat provides a frequent fast river bus service with low wash 22 knot catamarans, a type of service that could be emulated on the river Clyde. To serve New Zealand’s Stewart Island an infrequent heavily loss making Government owned ferry service was replaced by a frequent and profitable community owned semi-fast passenger and freight catamaran (crew 3) to cross the often stormy Foveaux Straight. Competition There are two important locations where state owned and subsidised ferries are in direct competition with unsubsidised and profitable private ferry operators. These are: Cowal – Inverclyde (private Western Ferries and state owned CalMac) Orkney – Caithness (private Pentland Ferries and state owned Northlink) Both private companies have pioneered innovative and cost effective operating methods and have developed new traffic flows at no cost to the taxpayer. The full response looks at how the private sector is capable of introducing more frequent and cost effective ferry services than had been provided hitherto without capital or operating subsidy, in face of heavily subsidised state owned operators. This phenomenon throws up a number of issues, not least the high cost to the public purse of the state run system and its resistance to innovation and more efficient operating methods. It also highlights deficiencies in the current ferry route tendering system. Tendering In essence the single tender specification required bidders to operate the current routes, to the current schedules with the current ships using the same crews under the same terms and conditions and applying the same scale of charges. The opportunity for innovation was virtually eliminated. The process was so complex and expensive to comply with, however, that only CalMac, whose very substantial costs in preparing their bid were met by the Scottish Executive (now Government), was able to bid. No other interested party felt able to proceed with making a formal bid. There is indeed a question as to whether the subsidising of bid preparation of the state owned bidder, but not other private sector bidders is in itself a breach of state aids rules.