Recommendations for the setting of track access charges published

The Centre on Regulation in Europe (CERRE) has published a report outlining a series of recommendations to guide the European Commission, infrastructure managers and regulators for the setting of track access charges on 2 May. In doing so, it looked specifically at direct cost of wear and tear, congestion and scarcity and mark-ups to maintain efficiency of infrastructure use.

The report examined systems in place in four European member states: Great Britain, Sweden, France and Germany. It provides an overview of the situation in the case study countries and a review of the different approaches.

Conflicting objectives

European rail policy has significantly evolved over the past years towards an integrated European railway area, however, when it comes to track access charges there is a large variety of methods and charges, CERRE pointed out.

“Track access charges involve conflicting objectives: particularly between the efficient use of existing capacity and the recovery of costs. Each EU member state, depending on the infrastructure historically in place, attaches varying degrees of importance to these objectives thereby creating a complex multiplicity of systems.”

Direct costs

The most important costs to be reflected in track access charges are wear and tear and congestion or scarcity costs, the report concludes. “Econometric evidence shows that wear and tear charges are generally too low (except in France). Given that these costs vary according to the characteristics of the train and the track, and that available econometric evidence is scarce, engineering models can play a strong role to help define these.

“Where routes are operating at a level close to capacity, the report recommends a combination of congestion and scarcity charging. This would constitute an additional source of revenue for infrastructure managers and incentivises train operators to economise on the use of scarce capacity.”

Mark-ups

Mark-ups also are becoming a very substantial element of track access charges, it reads. “The picture for commercial passenger services is rather complex: in the absence of on-track competition, mark-ups require sophisticated differentiation by route and timing to avoid the operation of fewer services.

“For passenger services under Public Service Obligations, mark-ups are largely a political decision. Nevertheless, the report recommends that these services should at least cover their avoidable costs, and that these should be charged for by a two-part tariff. Finally, with regards to freight services, mark-ups would ideally vary by commodity, given different price elasticities.”

Further conclusions

The report further concludes that benchmarking could help establish efficient costs. Both financial and reputational incentives may be important in ensuring managements work hard to achieve this cost efficiency, CERRE argues. “However, there remains an issue of incentives for operators to work with infrastructure managers to reduce total infrastructure costs. The option of sharing infrastructure cost risk should be considered.”

The report finally concludes that charges for rail infrastructure are only economically optimal if other transport modes are appropriately charged. “Efficient pricing cannot be addressed for one transport mode in isolation. Progress needs to be made on all transportation modes simultaneously. Without this, track access charges will not necessarily improve the efficiency of the transport system, they may even hinder it.”

Also read:

CERRE compares track access charges of railways in 4 European countries