Rail Freight Group and other
rail freight petitioners, and English Welsh and Scottish Railway
Ltd
234. Lord Berkeley presented the petitions of
six rail freight Petitioners: the Rail Freight Group, Freight
Transport Association, Hutchinson Ports UK Ltd, Quarry Products
Association, Freightliner Group Ltd and Mendip Rail Ltd. We are
grateful to the freight Petitioners for organising themselves
and presenting their cases efficiently and clearly.
235. The Petitioners told us that they welcomed
the ORR's decision on the access option and saw it as being "fair
and reasonable and in line with its duties under Section 4 of
the 1993 Railways Act" (para 8653). They further recognised
that the Promoters had "come a long way since the start of
the process in Parliament" and paid tribute to "their
willingness to make changes as a result of the representations
made by the rail freight industry" (para 8654).
236. However, the Petitioners had a few outstanding
issues to raise, mostly related to infrastructure works. The Petitioners
asked us to require the Promoters to commit to building several
specific pieces of infrastructure that would be beneficial to
freight traffic. The Promoters noted that they had already committed
to building the Acton dive-under[34]
and argued that they should be able to retain some flexibility
as to what infrastructure is built and noted that the ORR's decision
on the access option did not require them to build any specific
infrastructure, but was based on output and required them to meet
a Public Performance Measure of 92%. They argued that detailed
design had not yet been undertaken and it might transpire that
certain works would not be needed. In this event they did not
want to be already committed to spending funds on expensive, unnecessary
infrastructure. The Petitioners also asked us to ensure that the
capacity and gauge upgrade works to enable two-way freight traffic
on the Ipswich-Peterborough-Nuneaton corridor are completed before
Crossrail works on the Great Eastern Route begins. On a different
note, the Petitioners asked that clauses 40-41 be removed from
the Bill.
237. We recognise the importance of rail freight
to the UK economy, as indeed does the Promoter, who told the Petitioner
that "there is no issue between us over the importance of
rail freight and making appropriate provision for growth in rail
freight" (para 8677). Both Promoter and Petitioner are in
agreement that it is necessary to balance the various competing
interests seeking to use the rail infrastructure and that the
appropriate means to do so is via the normal regulatory processes
for the rail industry.
238. We do not require the Promoter to commit
to building the specific infrastructure works as requested by
the Petitioners. Doing so would deny the Promoter the understandable
freedom they argue for and could lead to a waste of funds. Furthermore
we do not wish to modify in any way the decision of the independent
rail regulator. However, on Tuesday 6 May we did ask the Promoter
to give an undertaking to give further comfort to rail freight
Petitioners. The Promoter agreed and on Wednesday 7 May gave an
undertaking in the following terms:
"I undertake on behalf of the Promoter that
any subsequent decisions by the Promoter not to carry out all
of the proposed infrastructure works authorised by the Crossrail
Bill will be taken on the basis that, as determined by the Office
of Rail Regulation using the Crossrail model, it should not have
an overall negative impact on the capability of the existing rail
network to handle the current and forecast growth in rail freight
traffic to 2015—as accepted by the ORR in its decision dated
14 April 2008 to grant an Access Option to Crossrail".
239. In response to the Petitioners' other concerns
we accept the Promoter's argument that the Peterborough-Nuneaton
works are not required in order to make Crossrail workable and
that they are the subject of Transport Innovation Fund funding
and as such that it would be inappropriate for us to make them
the subject of a Crossrail undertaking.
240. Clauses 40-41 were raised by these Petitioners
and also by English Welsh and Scottish Railway Ltd (EWS). EWS
accepted that there was a need for clause 40, which has the specific
function of providing a mechanism for reconciling disputes in
the case of certain railway assets, but argued that clause 41(3)
was unnecessary. Clause 41(3) gives the Secretary of State the
power, on request or otherwise, to direct the arbitrator as to
what result the arbitration is intended to achieve. The Petitioners
argued that an arbitration clause could adequately replace clause
41(3) and looked to us to require its removal from the Bill.
241. In response to this the Promoter provided
us with a note which explained the purpose of clauses 40 and 41[35].
The purpose of clause 41(3) was explained in this note in the
following terms:
"The Secretary of State may … under
clause 41(3), specify the results to be achieved by arbitration
… This is to avoid the possibility that the result of the
arbitration frustrates the ability of the Nominated undertaker
to deliver essential Crossrail works, which have been authorised
by Parliament".
242. The note went on to explain that the Promoter
is clear that "it does not intend that clauses 40 and 41
will apply to railway operators on the Network Rail network".
This is because clause 40 should not supplant or override the
allocation of access rights under the Railways Act 1993 and clauses
40 and 41 do not directly empower the Secretary of State in making
a direction to modify any access arrangement directed by the ORR
under the Railways Act.
243. The note gave an example of when the powers
contained in clause 41(3) might be used. The example involved
the Crossrail works as Farringdon station which will involve a
"complex interface with other works, such as Thameslink,
and non-regulated asset controllers, such as London Underground".
244. The Promoter mentioned in their note that
they were "considering whether it is appropriate to, during
the later stages of the Bill process, make it explicit that clause
40 or 41 should not be invoked by either party where the matter
may be referred to the ORR for determination in accordance with
its statutory duties or functions". We would strongly support
such a move and believe that it would give further comfort to
those Petitioners who raised the issue.
245. English Welsh and Scottish Railway Ltd also
asked us to require the Promoters to commit to building some specific
infrastructure, and we are not acceding to that request for the
reasons specified above, and raised an issue over compensation
in respect of losses incurred during construction.
246. The Network Code is the financial mechanism
that generally operates between railway operators. As the Petitioners
explained to us, the standard procedures provide for certain circumstances
in which no compensation is payable. The Petitioners argued that
those procedures "were never intended to address the construction
of a new railway and railway of the sort which will be involved
in the construction of Crossrail" and that as a consequence
of this "one would expect there to be special provision made
to ensure that all losses lie with the Promoters rather than some
of them being picked up by the railway operators" (para 9683).
247. The issue is this—the Network Code
provides for compensation for losses arising from a 'network change'
and for losses arising from a lesser change that lasts over six
months (even if it does not meet the definition of a network change).
The majority of Crossrail works will involve changes "in
or to any part of the Network (including its layout, configuration
or condition)". As a result these will be 'Network changes'
for the purpose of Part G of the Network Code and the compensation
mechanism in Part G will therefore be engaged in respect of the
majority of the works. However, the Petitioners wanted to be compensated
for all losses arising from construction—in other
words they wanted an extension to the industry mechanism.
248. The Petitioners accepted that over 80% of
the losses that they might incur during construction of Crossrail
were recoverable under current railway industry provisions and
this figure is likely to prove conservative. In the circumstances
we are not minded to require the Promoter to pay compensation
for all potential losses as the Petitioners requested us
to do. Industry mechanisms should be used and we believe that
those mechanisms provide adequate protection to the Petitioner.
249. Furthermore, we note that a consultation
process is currently underway at present within the industry relating
to Part G of the Network Code and that it is open to the Petitioner
to make representations.
32 
