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INFORMED SOURCES December 2001

EXCLUSIVE

WCRM finally collapses – sort-of - official

When Railtrack complained to the DTLR that the PUG2 contract was unaffordable it was told to sort something out with Virgin. It did, but the DTLR pulled the plug on Railtrack three days before the deal was due to be presented. But you can read all about it here

When I went to interview West Coast Route Modernisation General Manager Tony Fletcher, now moving on to head up WS Atkins Rail from next March, for Modern Railways 2001 WCRM review he was not a happy man. He wanted to know why Modern Railways was so negative about his project? It was getting his staff down. Why didn't we ever write good news stories?

And I had to tell him that I could only write about what was happening. And if what was happening was that the WCRM was getting increasingly pear shaped, that was what I had to write.

When we published the review in the August Modern Railways it was, of course, a well rounded tour d' horizon with some positive stuff. So we were a bit puzzled to learn that it had resulted in Fletch getting a rollocking from his bosses on the 13 th floor of Railtrack House.

But all has now become clear. On 31 July, when you were reading that WCRM Phase 1 was ‘on track for summer 2002' and Phase 2 was ‘on track for May 2005' (Railtrack's own words), Railtrack was telling Virgin that it wanted to drop the 140mile/h capability it had contracted to provide from 2005 under the PUG2 contract. Well, we got that wrong.

In fact dropping 140mile/h operation was shorthand for ‘this project is in deep trouble'. The ultimate cost of WCRM had risen to £7.5billion, with the risk of a further increase of £2.5billion.

Well, we all knew it was going to cost £10billion. But what we didn't know was that it was proving impossible to create a 125mile/h timetable for Phase 1 – ‘on track for Summer 2002' – which met all the access rights of the all the other 15 West Coast Main Line train operators. Oh yes, and Railtrack wanted to drop what it still calls ‘TCS' (Train Control System)and we know as the European Train Control System.

Robinson renegotiates

But I am getting ahead of myself. John Robinson joined the Railtrack Board in June and became Chairman on 2 July. He was the driving force behind the review of the WCRM and at the end of the month led approach to Virgin when it became clear that the project was in far deeper trouble than even Modern Railways thought.

While PUG2 was a contract between Virgin and Railtrack, it was essential to Virgin's West Coast franchise commitments. So Virgin asked the Strategic Rail Authority what it thought about Railtrack's proposition. The SRA passed the buck to the Department for Transport, Local Government & the Regions (DTLR). And in August the DTLR told Virgin and Railtrack to sort out PUG2 among themselves and come back with a solution which ministers would consider.

Before the fog of war envelops us, Table 1 gives the coordinates of the salient features on the WCRM battlefield. You have to be pedantic here, because PUG2, the ‘140mile/h plus extra capacity' contract Virgin signed with Railtrack is not the same as Phase 2 which delivers the PUG2 benefits. But PUG2 depends on Phase 2 which includes three quarters of the Core Investment Programme (CIP) work which brings the WCML infrastructure up to Modern Standards.

Hard pounding

So, on 19 and 20 September Virgin and Railtrack met on neutral territory at Hartwell House near Aylesbury to try and agree a revised PUG2. Railtrack was on the defensive because the PUG2 contract had been hand forged by the finest railway legalsmith in the land, one Tom Winsor. And the man wielding this veritable Durandal, was the finest commercial swordsman in the railway – Richard Bowker.

So Virgin drove a hard bargain. And being Virgin, while they were at it, they trampled royally on the lesser breed without the logo up and down the WCML. (Isn't this getting wee bit florid? Ed)

Alright. But the weakness of Railtrack's hand can be seen from the from the options considered at Hartwell House (Table 1)

Table 2

Doomsday costed – the Hartwell options

*Assumes Strategic Rail Authority relieved of obligation to pay <\#163>500m grant to Railtrack to fund extra slow line freight capacity.

** In practice a significant element will be represented by penalty payments to Virgin West coast

Note: all three options abandon the commitment to 140mile/h operation and installation of European Train Control System in 2005

Option 1 would mean nothing more, in terms of ‘outputs' such as extra capacity and shorter journey times, being delivered after Phase 1 in 2003. What would happen to the outstanding CIP work was not made clear.

Option 3 would deliver the Phase 2 outputs, less 140mile/h and ETCS. Virgin would get the same Phase 2 capacity enhancements on time (May 2005) but extra passenger and freight paths down the Trent Valley would not be available until Phase 2 was complete, now put back to 2008.

Which leaves Option 2, which became the Hartwell Accord. This was a classic piece of Bowker sword play with the old master Chris Green distracting our attention from the blood by pulling some amazing service enhancements out of thin air – or, more correctly, other people's access rights. Virgin's contribution to the deal was known as Project Omega.

Hartwell Accord

Broadly, the Hartwell Accord was based on deferring Phase 1, yet again, to May 2003 – effectively a year late, and reducing the scope (de-scoping) of Phase 2. In particular 140mile/h operation and the introduction of ETCS would be dropped, journey times would be slightly longer than contracted in PUG2 and the commitments on operational performance would be ‘less onerous'.

Obviously, no 140mile/h operation would mean that key journey times such as 4hr London-Glasgow and 1hr 50min London-Manchester were lost. But all the contracted journey times expected under Phase 1 would also go. But a 2hr London-Manchester timing should have been available with the modified Phase 2 in 2004.

With the commissioning of Phase 1 moved back, the loss of evening peak capacity at Euston would continue during this period.

Railtrack's commitment to a ‘super reliable railway' would also be conceded. This was based on 85% of trains within five minutes of right time (equivalent to 93.75% time + 10). Also lost would be Railtrack's commitment to a ‘conflict-free' railway between Rugby and Wembley, presumably reflecting the new on-condition approach to signal renewal ‘on-condition'.

And the commitment to higher track quality, and thus ride quality, standards would also go, while service disruption would now continue for a further two years after 2005.

So, Virgin conceded quite a chunk of its big vision for a better West Coast. In exchange for these concessions VWC would be compensated to the tune of £330million to be paid through reduced track access charges.

Timetable trouble

But, of course, Hartwell wasn't just about money, it was about power and on the privatised railway power is all about paths and timetabling. And as already mentioned the WCML timetable was in deep trouble.

Phase 2 with its 11 fast paths an hour I can understand, but the inability to timetable the 125mile/h Phase 1 service is a bit of a shocker. Apparently the proposals for the Phase 1 2002 timetable, due a year in advance, failed to materialise in June this year.

But while Hartwell would have allowed Railtrack to defer the Phase 1 launch to May 2003, this was predicated on a radical change in the post-privatisation timetable production process to overcome the present impasse. Put bluntly, Virgin's services would be first on the timing graph and the SRA would have had to cajole all the other 15 passenger and freight operators on the route into abandoning their rights and fitting their services into the remaining paths.

Virgin and Railtrack put is less bluntly. ‘New arrangements are called for when a major upgrade and, in consequence, a total timetable re-write is involved. This involves a reintroduction of <ital>old established timetabling practice <end ital> (my italics) in which long distance services (in this case VWC))are ‘put on the graph first''. This, says Virgin/Railtrack, with perhaps a hint of understatement, ‘involves the SRA agreeing some changes with existing TOCs/FOCs'.

‘Some changes' indeed. But save your apoplexy for a bit.

Omega helps the medicine down

Obviously, since Virgin's franchise commitments were back-to-back with Phase 2, de-scoping meant that the Government had to be offered some new goodies to make up for the lost benefits. Enter project Omega, stuffed to bursting with quids pro quo.

For example, despite the commercial impact of extended journey times, Virgin was prepared to live with the existing subsidy profile. But in exchange both the West coast and Cross Country franchises would have to be extended by five years to 20 years, with the franchise payment level from 2012.

Oh yes, and regulated saver fares on the West Coast would have to be re-based to the level of other Intercity franchises and the regulatory regime of Virgin Cross Country savers reviewed. To be fair, Virgin would then have been prepared to ‘discuss' its unregulated fares policy.

But the real meat of Omega is in the service changes, starting with the transfer of the Holyhead service group from West Coast to Cross Country.

Table 3

Reader Chris Garnett has permission to a touch of apoplexy over the last line of Table 3.

Meanwhile, to support the service improvement package, all Voyagers would be converted to five car formations and six Class 221 Super Voyagers and 11 Class 220 Voyagers would be ordered. This would also release the Virgin IC125 fleet early to provide a strategic reserve for other operators needing additional capacity.

Five Pendolinos would be acquired to allow the hourly trains currently terminating at Preston to be extended to Carlisle and Edinburgh alternately and a further four would be needed to offset the effect of the extended journey times on utilisation.

Infrastructure investment proposed would include electrification between Stoke and Crewe as a 140mile/h pilot scheme, providing a diversionary route and reducing the need for diesel ‘Thunderbird' locomotives. A number of small supporting schemes worth £132million to be covered by an RPP, would include two new parkway stations. Work on the Leamside Line to allow VCC services to be extended to Newcastle would be funded by a Special Purpose Vehicle.

Biting the bullet

Thus far, pure Virgin. A dazzling display of new services. But behind the razzmatazz were bullets to be bitten.

For a start, the key to the Phase 2 service was the extra capacity that would allow Virgin to run 11 trains an hour in and out of Euston from May 2005. Under Hartwell this capacity would be available a year early.

How would this be done without ETCS? Simple, says Virgin, when the Silverlink franchise expires in 2004, Virgin West Coast would take over the two Silverlink fast paths an hour via Northampton . One would become part of the four trains an hour London-Birmingham Pendolino service and the other would be extended north along the Trent Valley to Manchester .

These moves would release two spare paths an hour on the slow lines between Milton Keynes and Willesden and one path an hour in the Coventry corridor. All could be used for freight.

So that's alright then? Well, not really, because the Hartwell Accord does not provide for four-tracking of the Trent Valley (Rugby-Stafford), up which the extended Northampton trains would run hourly. ‘At best', says Virgin, ‘This would mean that no growth in freight could be accommodated'. ‘At worst', and things usually are for the worst on the WCML, ‘it could mean a reduction in the volume of existing freight services'.

Oh, sorry, you can all go apoplectic now.

To be fair, this was written while Virgin and the WCRM timetablers were still examining whether timetable adjustments could solve the capacity issue. But commonsense suggests that four tracking is the only long term solution. It is now forecast to cost an £900m(including a 40% risk contingency) and, of course, the Government would have to pay.

In fact just before his company went into Administration, Railtrack Chairman John Robinson warned Virgin Group Commercial Director Richard Bowker that a new track access agreement implementing Hartwell could not be signed with Virgin without the approval of freight operators EWS and Freightliner. That could have been a show stopper.

Aborted

So you can see that getting Railtrack off the PUG2 hook would have cost us (as taxpayers) a lot of money and upset the Freight boys, Silverlink and GNER just for starters. It was due to be presented to the DTLR on 8 October, only for Transport Secretary Stephen Byers to put Railtrack into administration the day before.

It was presented to the DTLR on 12 October, just as Administrators Ernst & Young had a team climbing over the WCRM at £250 per man per hour. The DTLR passed the buck to the SRA. By 1 November Railtrack had told the SRA that it no longer stood by the Accord and after a meeting of the SRA Board, Chairman Sir Alastair Morton told Byers that the deal seemed exceptionally favourable to Virgin, that it should be binned and the best thing was to sort out the compensation.

So why have I covered Hartwell at such length? For starters it takes us even further into the black hole that is the WCRM. But more important it highlights the issues which the Government will have to resolve if Railtrack's successor Company Limited by Guarantee (CLG), known to Informed sources as NuTrak, is to be transferred out of receivership.

It must be awfully tempting for Government and the Adminstrators to dump PUG2 and leave Virgin to take its chance with Railtrack PLC's other creditors. But while I know everyone hates Virgin, show me another franchise, let alone a pair, with a fraction of the vision for expanding services and doubling ridership backed by new train fleets in the metal. Yet already S&P has put the bond issue to fund the Pendolino fleet on credit watch.

Complicating matters is the fact that Richard Bowker in his new job as SRA Chairman will be quarantined from any involvement with Hartwell or its successor for some months. Fortunately, the Regulator may be the Brave Horatius who can buy time for the WCRM through Licence Condition 7, which requires Railtrack to meet the reasonable requirements of its customers. And since the current level of track access charges include £5billion for the WCRM the WCML can expect quite a few requirements reasonably.

But overall, as my favourite poet wrote:

This is the midnight –let no star

Delude us – dawn is very far.

Continues.........