Freight Charges Review and Freight Specific Charge Impact on Customers Maggie Simpson – Rail Freight Group 5 July 2012 Delivering Choice for Business
ORR freight charging proposals are raising serious concerns. • 10% principle. • Direct impacts. • Wider impacts. • Complexity. • What is at stake? Delivering Choice for Business
10% principle is a worrying change in regulatory policy. • Is it acceptable to ‘price off demand’? • 10% is not trivial, 10% p.a. leads to spiral of decline. • Concern over who is next – captive /non captive sectors. • Already being picked up by other policy shapers Delivering Choice for Business
Freight Specific Charge will have direct impacts on customers. • Lost business for generators, ports, coal and steel producers etc. • Potential for job losses / closures. • Rail costs only part of decision making process – tipping points. • Competitive impacts. Delivering Choice for Business
Freight Operators will be highly exposed. • Even if costs passed on, reduced volumes undermines efficiency. • Loss of bulk business impacts across all sectors • Significant financial risk exposure in companies with thin margins Delivering Choice for Business
There are wider impacts across all rail freight markets. • Charging uncertainty will prevent investment and damage confidence. • Development of new markets jeopardised e.g. biomass. • Complexity is a deterrent to new business. Delivering Choice for Business
Complex charging is a disincentive to using rail. • RAIL ROAD Current Charges Current Charges Variable Charge (by wagon VED (annual) and loco type) Fuel Duty Capacity Charge Coal Spillage Charge Freight Only Line Charge Traction Electricity Charge Schedule 4 and 8 Proposed New Charges Freight Specific Charge Capacity Utilisation Charge Geographic Charge REBS x 10 Delivering Choice for Business
Why undermine a growing sector? Intermodal % growth since 2005 35 30 25 20 % 15 10 5 S… 0 2005 - 062006 - 072007 - 082008 - 092009 - 102010 - 112011 - 12 Delivering Choice for Business
A sector with a 32% productivity gain in 7 years. KGTM Trains 35000 450000 400000 30000 350000 25000 300000 TRAINS KGTMs 20000 250000 200000 15000 150000 10000 100000 5000 50000 0 0 Delivering Choice for Business
Delivering Choice for Business Thank you Maggie Simpson maggie@rfg.org.uk
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