Study on Regulatory Options for Further Market Opening in Rail Passenger Transport

Stakeholder Meeting

10 February 2010

Session 3Possible Regulatory Options

Presented by Robert Skene

Possible Regulatory Options

1. Objectives & Evaluation Criteria

2. Possible Options

3. Selection of Options for Modelling

1. Objectives & Evaluation CriteriaObjectives

The key objectives of the process are to:

Identify 3/4 models for regulatory structure that can be applied across the EU for modelling against Base Option

Models must provide market opening

Options suitable for each market segment must be developed

1. Objectives & Evaluation CriteriaEvaluation Criteria

Evaluation criteria for short listing:

Practical to implement

Compatible with increasing rail’s modal share

Maintains socially necessary services

Provides public benefits

Maintains integrated services & network benefits for users

Minimises public funding

1. Objectives & Evaluation CriteriaBase Option

Selected options will be evaluated against Base Option (2020):

Market opening is not an objective in itself

Base Option is not “exactly as things are now”

Includes:

all states coming into compliance with EU rail legislation,

expansion of high-speed rail network

Other modes evolve over time (e.g. increases in airport landing charges, increased road congestion, expansion of motorway network, etc)

1. Objectives & Evaluation CriteriaDiscussion Session

Questions:

Are the six key criteria identified appropriate for the initial sorting process?

Are there other criteria that you believe to be of equal importance?

2. Possible Options for Market OpeningMain Options - Overview

Fundamentally there are two main options:

competition within the market (e.g. open access)

competition for the market (e.g. public service contracts for the operation of defined groups of services)

There are; however, a number of ways in which these two options can be combined (“Detail Options”)

2. Possible Options for Market OpeningMain Options – Open Access, Pros and Cons

Only profitable services would be operated

Loss of unprofitable socially necessary services

Even potentially profitable services might not operate

Issues of “cherry picking” Network instability likely Difficult to provide co-ordinated

national service with network benefits

Sensitive to differential between infrastructure charges & fare levels

Potential reluctance to commit to contested markets

Services require no financial support

Non-discriminatory for RUs & lowest barriers to entry

On popular routes frequency should increase & fares fall

Gives RUs freedom to develop linkages between origin-destination pairs not currently served

Main advantagesMain advantages Main disadvantagesMain disadvantages

2. Possible Options for Market OpeningMain Options – Public Service Contracts, Pros and Cons

Limited leeway for development of new services

Little scope for innovative ideas & techniques

Public authorities responsible for determining services & quality – not very responsive to passenger needs

Dependent on public funds

No competitive pressures to reduce fare levels

Barriers to entry for new entrant RUs can be high

Ensures that national network of services is provided

With genuine competitive tendering, costs should fall

Facilitates integrated national network & network benefits

Stable for contract duration

Insensitive to level of infrastructure charges

Fare controls/fare regulation possible

Main advantagesMain advantages Main disadvantagesMain disadvantages

2. Possible Options for Market OpeningDetail Options – Overview Group A

Identified options: all or part of network open access only:

Model A: entire network open access only

Model B: as Model A but with support for unremunerative services (on individual basis, by tender)

Model C: as Model B but support provided by fixed public service support payment

Model D: individual train path auction

Model E: open access for profitable parts of network only, public service contracts for remainder

2. Possible Options for Market OpeningDetail Options – Overview Group B

Identified options: public service contracts for whole network:

Model F: open access permitted without restriction

Model G: open access permitted under regulatory control

Model H: open access permitted without restriction, but on certain lines only

Model J: no open access permitted

In all cases the public service contracts would be let by competitive tender, & would comply with Regulation 1370/2007

2. Possible Options for Market OpeningDetail Options – Overview Group C

Alternative model for minor lines:

Model K: vertical micro-franchise

This is a special case applicable to very lightly used lines, which might be used in conjunction with any of the other options. Only applicable for lines that might be regarded as “lines and networks isolated from the rest of the Community”.

2. Possible Options for Market OpeningDiscussion Session

Questions:

Are there any other models that should be considered?

What are the pros and cons of each model?

3. Selection of Options for ModellingPreliminary Evaluation Matrix

Practical to Implement

Compatible with

Increasing Modal Share

Keeps Socially

Necessary Services

Provides Public

Benefits

Integrated Services for

Users

Minimises Public

Funding

Model A some Model B complex some probably

Model C possibly possibly possibly some possibly

Model D possibly possibly possibly Model E

some sub- options possibly some possibly

Model F some possibly

Model G Model H probably

Model J possibly

3. Selection of Options for ModellingDiscussion Session

Questions:

Which models should be taken forward for impact assessment?