Updated 7 January 08.40
Transport secretary Heidi Alexander has sounded a note of caution over future open access services, and has issued new advice to the Office of Rail and Road, which decides whether to grant licences.
She emphasised in her letter that the formal guidance had not changed, but added that ‘I hope it will be helpful to the ORR by setting out my expectations’.
Since the early days of privatisation, the main test for open access has been that a new service will not ‘abstract’ revenue from operators with government contracts, which were known as franchises until 2020.
Such a loss of revenue could have cost taxpayers money, because franchise holders enjoyed a degree of commercial protection.
Since Labour announced that it intended to renationalise the remaining former franchises, which now operate under National Rail Contracts, private sector owning groups have been paying much greater attention to open access opportunities, particularly as Labour had said before the July election that ‘wherever there is a case that open access adds value and capacity to the network, they will be able to continue to compete’.
But Ms Alexander has now qualified this general statement of policy, saying in her letter to the ORR that: ‘I am … aware of the additional pressures new services can create on already constrained network capacity and their impact on the value secured from public investment in infrastructure. While Open Access operators pay variable access charges to Network Rail to cover the direct costs incurred running their trains on the network, unlike government contracted operators they do not fully cover the costs of fixed track access charges.’
The ORR has already granted licences to several new open access operators, but more are being considered.
Naomi Horton, rail partner at law firm Ashurst, said: ‘Today’s letter from Heidi Alexander signals the requirement for ORR to apply a more stringent test for future privately run passenger rail open access services which takes into account rail network congestion, contribution to the upkeep of the infrastructure and an implied focus on bringing innovation and new markets, in addition to the current prohibition on such open access services “primarily abstracting” revenue from the franchised/public sector run services.
‘This will be viewed with interest and possible dismay by private sector transport operators keen to continue running rail services, since, following the passing of the Passenger Railway Services (Public Ownership) Act, this is the only way they can continue their passenger rail businesses.’
One open access operator, FirstGroup, has already lost Transpennine Express and is due to see its remaining contracts for South Western Railway, Great Western Railway and Avanti West Coast renationalised soon, but like other owning groups it has yet to comment.
Shares in FirstGroup were down by 0.73 per cent this morning.