Is rail freight an essential service

1
Is rail freight an essential service?

• Paul Fearon
• Chief Executive Officer
• Essential Services Commission

2
ESCs purpose and objectives

• The Essential Services Commission is Victorias
  independent economic regulator. The ESCs primary
  objective is to protect the long term interests
  of Victorian consumers with regard to the price,
  quality and reliability of essential services.
• Under the Victorian Rail Access Regime the ESC is
  Victoria's economic regulator of rail and rail
  terminal access.
• The objectives of the ESC under the Rail
  Corporations Act
• To ensure users have fair and reasonable access
  to declared rail transport services.
• To promote competition in rail transport services
  to achieve an increased use of, and efficient
  investment in, rail infrastructure.

2
3
Regulation of rail access in Victoria

• ESCs regulatory role
• Approval of access arrangements every 3 to 5
  years for the two rail networks and two terminal
  operators.
• Dispute resolution for access seekers.
• Key features of the Victorian rail regime
• Access arrangements specify terms and conditions
  for a 3 to 5 year period.
• This includes the fit for purpose track
  standard and a revenue cap.
• Prices must satisfy principles in the Pricing
  Order.
• Discrimination between users of like-for-like
  services is prohibited.

3
4
ESC submission to the Rail Freight Network Review

• Two key issues need to be addressed in ensuring
  an efficient and sustainable network that meets
  the needs of rail freight customers (and the
  wider community)
• Appropriate network configuration and performance
  standards.
• Ensuring access prices at an affordable level.
• These aims entail a number of specific
  requirements that need to be met
• An appropriately prioritised program of
  maintenance works
• Efficient procurement of services
• Efficient line configuration
• Subsidy arrangements tied to incentive
  arrangements.

4
5
Rail Freight Network Review

• Directions for the access regime from the RFNR
• There be only a dispute resolution function
  (negotiate/arbitrate)
• There be a one stop shop for track access

5
6
Forthcoming review

• The ESC understands that it may be requested to
  review the regime and is expecting to receive
  terms of reference for the Review shortly.
• Background to this reference is
• Government response to VCEC report on congestion
  committed to reviewing regime by mid-2009
• COAG commitment to review regime in similar
  timeframe
• Key questions
• Is regulation needed for some or all facilities?
• Can it be more light-handed? How?
• How to implement RFNR recommendations?

6
7
Concluding points

• Future emphasis of the access regime expected to
  differ from the traditional focus on the
  protection of customers from monopoly power, with
  greater emphasis on
• Ensuring competitive neutrality in the provision
  of services.
• Providing the maximum possible incentive to grow
  freight traffic.
• Providing ongoing incentives for efficient levels
  of maintenance and operating expenditures.
• Encouraging a financially viable railway, that
  provides an appropriate and affordable level of
  service.

7