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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