Freight Charges Review and Freight Specific Charge Impact on - - PowerPoint PPT Presentation

Delivering Choice for Business

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 Variable Charge (by wagon and loco type) 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 Current Charges VED (annual) Fuel Duty

Delivering Choice for Business

Why undermine a growing sector?

S… 5 10 15 20 25 30 35

2005 - 062006 - 072007 - 082008 - 092009 - 102010 - 112011 - 12

%

Intermodal % growth since 2005

Delivering Choice for Business

A sector with a 32% productivity gain in 7 years.

50000 100000 150000 200000 250000 300000 350000 400000 450000 5000 10000 15000 20000 25000 30000 35000

TRAINS KGTMs

KGTM Trains

Delivering Choice for Business

Thank you

Maggie Simpson maggie@rfg.org.uk