Select Committee on the Crossrail Bill Minutes of Evidence

Examination of Witnesses (Questions 8840 - 8859)

  8840. As your Lordships know, in granting the Access Option the Rail Regulator has stipulated that the access rights can only be utilised by Crossrail if it can be objectively demonstrated through modelling that, assuming, the existing rights of other passenger operators are preserved; the existing rights of freight operators; and certain paths identified in respect of freight growth, as explained below, are protected; and the test, as I showed your Lordships earlier, is an objective test. I have set out in my note just for convenience paragraphs 77-80 of the ORR's final decision, which is a passage I put to Mr Bennett just before lunch, so I am not going to read it out, but it is the objective test that has to be met. Going to paragraph 80, the sting is in the tail of paragraph 80. If we do not show compliance with the objective test "Crossrail rights could be lost ... ". If a standard is not met the ORR's decision is final to remove the rights.[15]

  8841. Indeed, if your Lordships look at any greater length through the decision you will see there are a whole series of matters relating to what is called "change control mechanisms"; which are the series of protocols which allow a determination to be made as to whether there are conflicts within the network between the different users, and how those conflicts are to be resolved. There are a series of stringent provisions in the change control findings of the ORR which will penalise Crossrail and take away rights if there are conflicts which are created by Crossrail which are incapable of resolution. So there is protection not only in the objective standard of the 92 per cent PPM, but there is also protection in the conflicts which Crossrail create and cannot be resolved—that is, conflicts with existing operators, both passenger and freight. Those conflicts are resolved against Crossrail. There is multiple protection in the proposals which will be directed by the ORR.

  8842. As we have said, the 92 per cent figure has to be obtained which means that Crossrail can only use its Access Option if it meets the 92 per cent and that certain other paths are not materially adversely affected by the service. If it fails to meet the 92 per cent because there are conflicts it cannot run the service that it wishes to run. That could not be clearer, in my submission, from the ORR's decision.

  8843. It is clear from the modelling work that has been carried out to date that, to meet the 92 per cent target, further infrastructure will have to be provided. That figure is based on the figure which CLRL put to the ORR which was the lowest acceptable figure; and indeed it was accepted that we should be aiming higher. For example, Mr Morris on page 65 of the transcript of the hearing before the ORR was saying that 95 per cent should be sought, but 92 per cent was the absolute lowest that was acceptable in the modern world.[16] That was the position of Crossrail. It was not forced on Crossrail; it was a position that Crossrail considered to be the responsible approach.

  8844. There may be reference by EWS, and indeed I think Lord Berkeley mentioned it earlier or at least Mr Bennett did, of the lower figure of 71 or 72 per cent shown on modelling as of the date of the hearing; but you have already seen the context of that when I put questions to Mr Bennett. The lower figure, the 72 per cent, comes becomes this is the first iteration of the modelling. That will be improved in due course. Mr Burns made it clear in the passage at page 64, on the screen, which I have also quoted in paragraph 25 of the note to your Lordships, that improvements were expected, and it was not unreasonable to proceed on the basis that the 92 per cent was reasonably and perfectly achievable.[17]

  8845. In the passages I showed your Lordships earlier and which I have quoted in paragraph 26 of my note, Mr Burns showed that the 70-odd per cent was the first iteration. Further iterations would be carried out, and that this was the perfectly acceptable basis from which to work. You have already seen the Chair's summary of the position, and again I have set that out in the note, where it was quite clear that the Regulator understood the position at which the modelling had reached, that it was an early stage. Further improvements were to be made, and the question which the Regulator had to address was: "Well, at this stage was it reasonable to grant an option and, if so, on what terms?" Then you have seen how that is translated through into both the provisional and then the final decisions. Clearly the Regulator took the view, having heard the arguments on both sides, that it was appropriate to grant an Access Option at this stage, and that the level of uncertainty was to be catered for by the objective test, which I have already described.

  8846. As I put to Mr Bennett, many of the rail freight petitioners argued that certainty should be achieved by requiring specific infrastructure works to be secured. As you know from the passages I took your Lordships to this morning with Mr Bennett, and I have quoted two of them in paragraph 29 of my note, that consideration, should there be specific infrastructure improvements, was directly considered by the ORR and rejected in favour of the objective standard, which is now found in the final decision.

  8847. Therefore, having lost the debate on this point before the ORR, in the light of the ORR's assessment of the technical issues and modelling, the rail freight petitioners are now before your Lordships' Committee asking your Lordships to override the conclusions of the ORR on the question of the provision of infrastructure. To that extent, the rail freight petitioners urge you to do the very thing they criticised us for doing before the Select Committee in the other Place, which is to override the normal industry processes and effectively to say on the one hand, "Well, we want the industry processes because they are fair and transparent and they provide an objective approach; but, on the other hand [as Mr Bennett said] we would like the security of something else if we can get it".

  8848. In my submission, the Rail Regulator is the best placed person to balance the various interests of the competing passenger and rail freight services. Clearly the ORR has been seized of the very issues that are put now before your Lordships, has heard the technical evidence, looked at the modelling, heard the arguments and reached a clear conclusion. What is surprising in a sense is that position now adopted by many of the freight petitioners runs directly contrary to their claims for the use of the industry processes in the other Place; and I have referred in my note at paragraph 30 to Mr Smith for EWS's evidence to the House of Commons Select Committee paragraphs 14828-14830, and EWS's submissions to the ORR pages 67-71 of our exhibits.

  8849. Perhaps if you will just move forward a few pages to page 69 in these detailed submissions—this pre-dated the hearing before the ORR, these submissions were made last year—you will see that the clauses are gone through in detail and there are a series of pages doing the same, but if you look at the Requested Amendment column you will see consistently there is a reference to amending the provisions.[18] For example, you will see at 22 there is a specific reference to using the Olympics clause which we are now promoting, and if you go to the next page (070) you will see the constant request to amend so that the normal provisions can be applied, and the next page (071) you will see constant references to: "The clause should be removed, it undermines the independence of the ORR, the normal industry process", so the constant theme of the rail freight industry and EWS in particular, and no doubt you will be hearing from them tomorrow, is to use the industry processes, hence my submission that your Lordships are being asked to adopt a position which goes against the very processes which the industry has been arguing are the ones to be followed up until now. What is also surprising is that after the "minded to" decision, the provisional decision of 3 March, no one in the industry who put in written submissions to the ORR argued with any degree of firmness, or, indeed, at all, that the Regulator was wrong to go for the objective test rather than the infrastructure work requirement. We have summarised the position in paragraph 31 of the note: Mendip Rail deferred to others; EWS said it was "disappointed" in 9.2 of its letter of the 17 March—but it "nevertheless, understands ORR's proposal to condition the use of the rights on achieving certain outputs";[19] Freightliner, exhibit 4B-003, is even stronger in its letter of 16 March at paragraph 26: "We understand the reasons for the ORR's decision not to specify infrastructure ... In the presence of the specific objective capacity and performance tests, and the proposed changes to the change control mechanism in paragraph 35, we consider that the ORR's decision not to specify infrastructure to be acceptable".[20]

  8850. The Railfreight Group welcomed the 92 per cent test, and you have already seen what Lord Berkeley wrote on the Rail Freight Group because I put it to Mr Bennett before lunch. Hutchison Ports noted the lack of a requirement to provide specific infrastructure but did not argue that it was inappropriate or that it required specific infrastructure works now. Thus, it does appear to be the case that not a single one of the Petitioners now appearing before this Committee asking your Lordships to impose a commitment to carry out infrastructure works sought to argue that the ORR, after the provisional decision, not to require specific infrastructure works but to focus on an objective outputs test fortified by a change control mechanism.

  8851. CHAIRMAN: What is the machinery for the ORR now to specify certain infrastructure projects?

  8852. MR ELVIN: The ORR has made a decision as to what should go into the access option.

  8853. CHAIRMAN: I know.

  8854. MR ELVIN: The ORR now has to finalise the direction it will give as to the precise terms of the contract. So you have the decision on all the principles; the next part of the process is the drafting of the detailed direction, effectively the drafting of the final version of the contract, which the ORR has to approve and issues as a direction.

  8855. CHAIRMAN: But would that include some of these infrastructure works?

  8856. MR ELVIN: No, because the ORR has made it quite clear that the ORR is focusing upon the general output --

  8857. CHAIRMAN: But could it?

  8858. MR ELVIN: It could have done, yes.

  8859. CHAIRMAN: But it would require procedural steps beforehand?

15   Crossrail Ref: P63, The Office of Rail Regulation's decision on the application for a Track Access Option for Crossrail passenger services on Network Rail's network, Para 80, 14 April 2008 (LINEWD-34_05-112) Back

16   Crossrail Ref: P63, Evidence given by Mr Morris, Network Rail, to The Office of Rail Regulation, p65, 1 February 2008 (LINEWD-34_04C-065) Back

17   Crossrail Ref: P63, Evidence given by Mr Simon Burns, Network Rail, to The Office of Rail Regulation, p64, 1 February 2008 (LINEWD-34_04C-064) Back

18   Crossrail Ref: P63, Summary of EWS's requested amendments to the railway matters-clauses 21-32 (LINEWD-34_04A-069 to -071) Back

19   Crossrail Ref: P63, Correspondence from EWS to the ORR, 17 March 2008 (LINEWD-34_04A-112) Back

20   Crossrail Ref: P63, Correspondence from Freightliner to the ORR, 16 March 2008 (LINEWD-34_04B-003) Back

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