Well really this revenue extraction is the central dispute. The rail regulator had the job at looking into the issues and took responses from various TOCs including GNER – who have since been taken over by National Express East Coast.
Firstly, there was the key issue of revenue extraction from the main TOC operator along the ECML. This was done under ‘the primary abstractive test’. Grand Central provided little information in its original application. They replied on 19th May 2004 with estimates setting out their revenue breakdown, including modal shift from cars, passengers shifting from other TOCs and so on. At the time, most of the TOCs were concerned about this issue, especially GNER[1].
The Regulator then appointed AEA Technology to carry out a review of Grand Central’s data and the credibility of its demand forecasts. As it turned out in the draft report, Grand Central did not agree with some of the conclusions.
The regulator did some MOIRA analysis (a sort of data breakdown simulator exercise) and it concluded that the service would earn £1 million revenue and 90% would be extracted from other operators. AEAT then conducted an independent assessment of GC’s forecasts and concluded the service would earn £1.3 million and, again, 90% would be extracted from other operator’s fare boxes. [2]
However, a number of assumptions in these models were not valid in GCs case. Arguments in favour of GC was the quality of their rolling stock, lower ticket costs and the introduction of services to new stations, all of which were expected to induce extra demand. In the end, the regulator agreed the MOIRA model was poor, which was hotly contested by GNER who denied GC could run the service to Teeside without extracting its revenue from passengers at York.
Other operators, especially GNER, were concerned about the reliability of GC’s rolling stock [3], this was expressed in their response to the rail regulator. Virgin too responded saying ‘the reliability of un-refurbished HSTs has been questionable’ [4]
According to Network Rail, ‘There was no evidence that the performance impact of Grand Central’s trains would be disproportionate.’ despite the disagreement of other operators [5]. In the end the regulator agreed with Grand Central, that with the proposed refurbishment of the passenger accommodation the HST’s would be ‘reliable’, but in 2004 rejected the application.
In 2006, the regulator finally agreed to allow Grand Central to run 3 services between the NE and London. [6] But required Grand Central to use: 125 mph rolling stock with performance characteristics as good as that of HSTs.
In doing so, it had to reject GNER’s application for more services and alter the rights of other operators. [7]. In other words, tweak the timetable to squeeze more out of the ECML.
GNER said ‘the proposed decision was ‘manifestly absurd in a number of respects, not least because its impact will be wholly inconsistent with its stated objectives.’ And went on further to say ‘“the proposed decision is fundamentally unsound as the key assumptions which ORR uses with regard to capacity and economic benefits are both incorrect and based on highly questionable speculation on the part of ORR.” [8]
GNER based most of their conclusions on their own experience and a further study by ARUP.
The DfT, who had taken over from the SRA concluded ‘it was concerned about the level of abstraction from other operators and the amendments required to existing access rights in order to accommodate Grand Central’s services and the impact this would have on its existing franchises’ and went on further to say the overall benefits were ‘negative’. [9]
Worrying the DfT provided some detailed analysis of the financial effects of GC's proposed decision, but requested that this should not be made public on the grounds of its confidential nature.
So why did the ORR disagree with the DfT? Well, according to the DFT
‘DfT acknowledged that it was for ORR to decide how to balance its statutory duties in reaching a decision and that the duties might not all point in the same direction and might conflict. However, DfT questioned whether we had balanced our duties correctly in this case,
arguing that we had given too much weight to our duty to promote competition [10] bearing in mind this with in conjection with was in line with the requirements of EU Directive 2001/14/EC.
ATOC said it ‘was concerned that the criteria ORR used for the allocation of capacity, the criteria used by DfT in specifying franchises and the criteria being used by Network Rail in developing RUSs might not be the same’.
In the end the ORR concluded ‘from all the evidence and representations we have received, that the capacity for additional services on the ECML is uncertain.’ [11]
If you go through the report, nearly all the TOCs and other public bodies (with the exception of those in the North East) had some reservations the GC service. But it must be born in mind, the primary reasons for this was an affect on their performance and revenue extraction, not the benefits of opening up a new rail market or opening up competition, a requirement under EU law. And the data they used for their decisions was based on past performance, and nobody could predict with any certain accuracy what the likely market would be in the NE, and the additional economic benefits.
Grand central presented evidence from Tees Valley Regeneration that suggested that the gross value added (the total wider and direct economic benefit) from the Sunderland service was £37m per year for four services per day rising to £55m per year for six services per day.
These are of course positive externalities and not accounted under the objections by the other TOCs, but ORR agreed with the conclusions of GC, especially as ‘Sunderland, Teesside (via Eaglescliffe) and Bradford are among the largest conurbations in England with poor or no direct services to London’.
Grand central went on further and said York passengers would benefit from a 50% reduction in ticket costs – although of course they have put their ticket prices up in the peak since or intend to. [12]
However the DFT concluded in a later report ‘based on analysis carried out by its consultants, Jacobs, 95% of Grand Central’s revenue would be abstracted, primarily from GNER but also from other passenger train operators’ [13]
All these processes are hugely expensive and you can see why rail can end up very expensive. It’s nothing to do with maintaining the track or running a service. It wouldn’t surprise me if the cost of these management processes [within the railway] exceeds GC’s revenue for many years.
Of course this was all before Grand central collapse in reliability and breakdowns, which has meant that if the trains haven’t been cancelled or substituted for sub 100mph stock. GCs services were running at a rate of less than 60% on time, according the latest edition of Rail magazine. Pathing late running trains through the ECML is especially problematic on the two track sections between Doncaster and Grantham, because of the intermediate stations and freight provision, and of course through the Welwyn bottleneck and approaching King’s Cross.
But this brings deeper questions about competition on the railways, and whether in effect there can actually be any for passenger services on single routes, given the limitations of ORCATS, performance and infrastructure provision. Can there really be competition on lines or is this even desirable, given the management costs alone? And can the railway really expand under this structure for the cost benefit and wider benefits of the population give then changing economic and environmental climate?
[1] Page 53, Application by Grand Central for track access 2004
http://www.rail-reg.gov.uk/upload/pdf/202.pdf
[2] Page 55, Application by Grand Central for track access 2004
[3]
http://www.rail-reg.gov.uk/upload/pdf/s17-gcen_gner.pdf
[4] Page 26, Application by Grand Central for track access 2004
[5] Page 25, Application by Grand Central for track access 2004
[6]
http://www.rail-reg.gov.uk/upload/pdf/ecml_dec_230306.pdf
[7]
http://www.rail-reg.gov.uk/upload/pdf/ECML_reasons_doc.pdf
[8] Page 12, ECML reasons.
[9] Page 18. ECML reasons
[10] Page 19, ECML reasons
[11] Page 44, ECML reasons
[12] Page 54, ECML reasons
[13] Page 70, ECML reasons
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So in conclusion
1. Click this link
http://www.grandcentralrail.co.uk/tickets.html
2. Print it out
3. Use it as your "ticket" at a station with a barrier.
4. Pay during your train journey.
Questionable logic, considering anyone could put up a website (or interpret a website) and walk through any ticket barrier, then avoid paying. I realise Yorkie etc are not wanting to avoid paying, but some people do.
The whole point of ticket barriers is they enhance revenue collection.
.
