Northern owner Deutsche Bahn wants compensation from Network Rail

[js1000]

While I appreciate there is fault on all sides here, it also makes me think whether DB will work out running the railways isn't just about extracting profit to prop up their own railway (if the nay sayers are anything to be believed!).

Hasn't it already been highlighted that a lack of franchise bidders is already a problem anyway?

 

[Bantamzen]

Having had the misfortune of having to use their train, and attempting to use their "bus service" today, I can't help but think it wouldn't be too much of a shame if Arriva were to dissappear from these shores altogether.

Agreed, First are significantly worse than any other transport operator. Their West Yorkshire bus operation is dire, and both TPE and Hull Trains have had a rough few months

I'd agree more that First are worse, they have all but abandoned my little corner of the world, with ironically Arriva picking up a least a fraction of the slack.

However if any of the big transport giants left the business, who exactly would take their place? There isn't exactly a huge queue of companies willing to bring in and attract investment into the UK transport industry.

 

[The Planner]

Perhaps a claim is being made under the 'Sustained Planned Disruption' provisions in Schedule 4 of the Track Access Contract. This can be found in the standard passenger track access agreement. Not really feasible to summarize this lengthy document but it can be found at http://orr.gov.uk/__data/assets/word_doc/0004/2956/model-passenger-contract.docx

Sounds more like it as Schedule 4 only covers for specified pieces of disruption and the sustained element enables them to claim further costs.

 

[HH]

I think you misunderstand Part G/Network Change, that process is effectively to get agreement on the material change to the network in its final state and to claim compensation in relation to that change, such as driver training, route learning etc... the date of implementation doesnt really come into it as they are normally worded open ended.

Perhaps a claim is being made under the 'Sustained Planned Disruption' provisions in Schedule 4 of the Track Access Contract. This can be found in the standard passenger track access agreement. Not really feasible to summarize this lengthy document but it can be found at http://orr.gov.uk/__data/assets/word_doc/0004/2956/model-passenger-contract.docx

I can assure you that I understand Part G very well, having been involved in numerous claims. As G2.2 states,

...the amount of the compensation referred to in Condition G2.1 shall be an amount equal to the amount of the costs, direct losses and expenses (including loss of revenue) which are reasonably incurred or can reasonably be expected to be incurred by the Access Beneficiary as a consequence of the implementation of the proposed change.

I know of several existing disputes where TOCs are claiming compensation under this section for NR not delivering what it had proposed. I would also note that Network Change is the only way that the TOC could claim for its losses from NR in this case.

Sustained Planned Disruption only relates to Restrictions of Use. While I'm sure that Northern is entitled to compensation for disruption caused by the works, that is not what we're talking about here. Nor are we talking about Sustained Poor Performance under Schedule 8, which they may well also be claiming.

 

[Muttley]

However if any of the big transport giants left the business, who exactly would take their place? There isn't exactly a huge queue of companies willing to bring in and attract investment into the UK transport industry.

Small companies doing individual routes, owner operators ? Individuals that can see a gap in the market, work hard, and exploit it. Fast forward 15yrs, get bought out/undercut by a multi-national, rinse and repeat.

 

[Bantamzen]

Small companies doing individual routes, owner operators ? Individuals that can see a gap in the market, work hard, and exploit it. Fast forward 15yrs, get bought out/undercut by a multi-national, rinse and repeat.

That was the theory back in 1986 when the buses were privatised, and whilst some smaller operators remain the big operators have the monopoly. And bus networks are far cheaper to finance than rail. Its a nice idea, but simply won't work in the current climate.

 

[Bletchleyite]

That was the theory back in 1986 when the buses were privatised, and whilst some smaller operators remain the big operators have the monopoly. And bus networks are far cheaper to finance than rail. Its a nice idea, but simply won't work in the current climate.

There's also that things like the 56 day requirement basically closed the market to "one man and his bus" type operations despite that allegedly being the aim (think the old Malta buses), so what we ended up with was the big operators operating largely monopolies plus small, largely disreputable, cut-price firms, the likes of which seem to cluster around small towns like Aylesbury.

 

[yorkie]

Can we try to stay reasonably on topic please?

I do not want to stop anyone from discussing any spin-off topics at all; we just ask these are posted in a new thread in the appropriate area (or an existing thread, if there is one).

Thanks!

 

[coppercapped]

Right! To get back closer to the original topic! As is the case with all franchises the Northern franchise will have been based on certain number of assumptions which will have been agreed with the DfT as part of the franchise agreement. Some of these assumptions will include the delivery of new rolling stock and some routes going electric from a specified date. The premium payments made (or or subsidy received) will reflect the changed operating costs and the revenue growth that these changed and new service will bring.

If the new service does not start on the date specified then the finances of the relevant company will be hit. If the fault lies with the TOC then it should take the hit, but when the fault lies with the government-owned, monopoly supplier of infrastructure then the TOC is entitled to adjust the payments it makes.

Revenue growth will build year on year from the start date of the new infrastructure and this will affect every subsequent year of the franchise. The cumulative total will almost certainly be a lot more than the cost of running Pacers instead of electrics for a year or two.

The Section 4 and Section 8 payments are designed to cover the costs of disruption during on-going operation and not, as I understand it, significant delays in the availability of new infrastructure. I suspect that Northern has a good case.

 

[tbtc]

If the new service does not start on the date specified then the finances of the relevant company will be hit. If the fault lies with the TOC then it should take the hit, but when the fault lies with the government-owned, monopoly supplier of infrastructure then the TOC is entitled to adjust the payments it makes

Good sober analysis (as usual).

If all of this is written down somewhere in advance (as it will be, i.e. back at the time that the franchise bid was agreed), then someone at Network Rail has to decide whether the cost of throwing more money at completing projects (e.g. Bolton corridor electrification) will be cheaper than the subsequent penalties they'll have to pay to the TOCs.

Somewhere along the way, the costs got so high that it became cheaper to pay the resultant "fine" - if they now have to pay Northern a few quid to cover the knock on effects upon the TOC then this was a known cost and one factored in when deciding whether Network Rail should throw more resources at getting the infrastructure improvements done on time.

Worth pointing out that even if we went back to a "nationalised" railway, there would still be different divisions/ subsidiaries, and such payments would still be accounted for - it's not about nationalisation/privatisation - it's about the incentives/penalties for one part of the railway to deliver what they are there to do - maybe the incentives for Network Rail weren't sufficient - maybe the penalties weren't harsh enough - the question is how we fix things so that they are more likely to get the job done on time in future.

 

[hwl]

Good sober analysis (as usual).

If all of this is written down somewhere in advance (as it will be, i.e. back at the time that the franchise bid was agreed), then someone at Network Rail has to decide whether the cost of throwing more money at completing projects (e.g. Bolton corridor electrification) will be cheaper than the subsequent penalties they'll have to pay to the TOCs.

Somewhere along the way, the costs got so high that it became cheaper to pay the resultant "fine" - if they now have to pay Northern a few quid to cover the knock on effects upon the TOC then this was a known cost and one factored in when deciding whether Network Rail should throw more resources at getting the infrastructure improvements done on time.

Worth pointing out that even if we went back to a "nationalised" railway, there would still be different divisions/ subsidiaries, and such payments would still be accounted for - it's not about nationalisation/privatisation - it's about the incentives/penalties for one part of the railway to deliver what they are there to do - maybe the incentives for Network Rail weren't sufficient - maybe the penalties weren't harsh enough - the question is how we fix things so that they are more likely to get the job done on time in future.

But Northern's handling of many issues has been sub-optimal so it will be quite hard to split the effects of that from was is NR's fault. NR shouldn't be paying for Northern inabilites and poor management that added to the problems they actually caused.

 

[tbtc]

But Northern's handling of many issues has been sub-optimal so it will be quite hard to split the effects of that from was is NR's fault. NR shouldn't be paying for Northern inabilites and poor management that added to the problems they actually caused.

I'm not defending Northern (or any of the different parties responsible for the May 2018 shenanigans) - but someone will be paid to attribute "blame" here, in the way that someone has to apportion "blame" when trains are delayed.

I'm just trying to put it into context - it's a little like one train being delayed (and someone having to foot the bill for the compensation claims) - but on a massive scale. Someone will be to blame, someone will have decided that the penalty for failure was a smaller price to pay than actually tacking the root of the problem.

The concern I have is that Northern end up like GNER did - so dependent upon the infrastructure problems/ delays and the resultant compensation that they factor in a certain level of income/profit from such streams - their revenue forecasts end up with an expected level of compensation from Network Rail. With GNER, once the railway got back onto a sounder footing, the "cash cow" of compensation payments to the TOC was no longer there and the economics became a lot harder (I appreciate that GNER's problems related to the parent company too - I'm not trying to rewrite history).

If Arriva think that Northern is a viable franchise based on certain levels of Network Rail compensation, and Network Rail get their act together, then the TOC may be in for a shock!

 

[hwl]

I'm not defending Northern (or any of the different parties responsible for the May 2018 shenanigans) - but someone will be paid to attribute "blame" here, in the way that someone has to apportion "blame" when trains are delayed.

I'm just trying to put it into context - it's a little like one train being delayed (and someone having to foot the bill for the compensation claims) - but on a massive scale. Someone will be to blame, someone will have decided that the penalty for failure was a smaller price to pay than actually tacking the root of the problem.

The concern I have is that Northern end up like GNER did - so dependent upon the infrastructure problems/ delays and the resultant compensation that they factor in a certain level of income/profit from such streams - their revenue forecasts end up with an expected level of compensation from Network Rail. With GNER, once the railway got back onto a sounder footing, the "cash cow" of compensation payments to the TOC was no longer there and the economics became a lot harder (I appreciate that GNER's problems related to the parent company too - I'm not trying to rewrite history).

If Arriva think that Northern is a viable franchise based on certain levels of Network Rail compensation, and Network Rail get their act together, then the TOC may be in for a shock!

I suspect Northern will get less than they think from this claim and will be in for a shock when NR get their act together /the upgrade programmes complete.

There would have been plenty of issues in May even if all the infrastructure was ready.

 

[jayah]

There are only 10tph that actually call at Oxford Road, and they are not evenly spaced. Even if everything is on time, there are gaps (in the standard hour) up to 9 minutes eastbound and 12 minutes westbound. That is similar to the walking time between the stations.

Even just missing one train you would be doing well to get out of the station and across all those traffic light controlled junctions for 0.5miles with all the work kit in 10mins.

 

[HH]

But Northern's handling of many issues has been sub-optimal so it will be quite hard to split the effects of that from was is NR's fault.

And that's where the lawyers on both sides will earn money. Because there are no simple ways to apportion the effects here. Although I would note that legally you can't get into "what ifs", so what Northern might have ballsed up if NR did everything right is not going to enter the equation.

 

[The Planner]

I can assure you that I understand Part G very well, having been involved in numerous claims. As G2.2 states,

I know of several existing disputes where TOCs are claiming compensation under this section for NR not delivering what it had proposed. I would also note that Network Change is the only way that the TOC could claim for its losses from NR in this case.

Sustained Planned Disruption only relates to Restrictions of Use. While I'm sure that Northern is entitled to compensation for disruption caused by the works, that is not what we're talking about here. Nor are we talking about Sustained Poor Performance under Schedule 8, which they may well also be claiming.

Surely depends on what the Network Change has said it would deliver, and also which Network Change they are going to try and claim against as NWEP and Ordsall etc had several. If they were purely saying they would deliver the infrastructure, then like you say the lawyers are going to have great fun and it will take ages, but if it did state to deliver a specific timetable then it will be fairly cut and dry.

 

[HH]

Surely depends on what the Network Change has said it would deliver, and also which Network Change they are going to try and claim against as NWEP and Ordsall etc had several. If they were purely saying they would deliver the infrastructure, then like you say the lawyers are going to have great fun and it will take ages, but if it did state to deliver a specific timetable then it will be fairly cut and dry.

Yes, how you unpick the various different Network Changes and which you make the claim against is an art form in itself. And one which definitely can confuse TOCs and NR (and their lawyers!). All we know is that Northern have made a claim; I can guarantee that NR won't have accepted it; so now the fun begins!

 

[yorksrob]

Another day, another short form.

How I miss Abellio/Serco.