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ORR (2004) Structure of rail access charges
The Office of the Rail Regulator had committed to conduct a review of the structure of track access charges. This was to take place in between reviews of the overall level of these charges. As a preliminary step in this review, ORR sought advice on the concepts, objectives and economic principles that might underpin the review.
At a previous employer, Franck Latrémolière and Nicholas Francis led the development of a successful proposal for ORR's requirement, and the delivery of the subsequent project.
Against a background of previous research on the topic that had been dominated by debates about cost concepts (short-run, long-run, incremental, marginal costs), our approach was more practical than an application of general economic theory. We gave particular attention to the actual structure and governance of the railway industry. We specified a number of hypothetical case studies in which the structure of charges might affect the decisions made.
For each of these cases, we identified:
- The relevant "decision points": who decides what, and under what constraints? For example, how would a decision about additional services requiring additional signalling capacity be made?
- The financial effects of these decisions for relevant parties.
- How different concepts or objectives for setting the structure of charges would affect whether the decisions made are likely to be consistent with ORR's Section 4 duties.