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INFORMED SOURCES November 2002

WCRM – ‘value for money' at £9.8billion, official

When the SRA said the despecced WCRM would be ‘just south of £10billion' they were talking in minutes not degrees of longitude

So, after all the speculation, the new Baseline 4 cost of the West Coast Route Modernisation is £9.8billion, made up of £7.5billion of renewals plus another £2.3billion for the upgrade to 125mile/h running throughout. Of this money, £2.1 billion has been spent to date, most of it on renewals.

It is this latter figure which is the most worrying. Having recently footplated the WCML between Euston and Manchester , I thought the infrastructure was in not bad nick, especially north of Rugby .

Relaid track and refurbished overhead line equipment were apparent. As were the ‘yellow mushrooms' of axle counter train detection systems at resignalling schemes. The new Portakabin village of Ledburn juxta Crossover nestled among the trees and components of the OHLE had obviously been replaced.

My subsequent day trip to Warrington (see below) confirmed these impressions, with consistently good ride. Yet my old-railway calibrated eye was at a loss to see where nearly £2.1 billion had been spent on renewals, let alone another £5.5billion to come.

Before the SRA Strategy was published, and on the basis of a year-old briefing from Railtrack, I estimated that around £1billion of renewals had been spent. I thought at the time we didn't seem to have got much for that money either.

In fact, unless you are a boiling frog, the whole issue of cost and value for money on the WCRM will make your brain hurt. We'll come back to it later, but for the meantime here is a graph of the cost per mile, at current money values, of WCML projects going back to the original electrification.

New baseline

Baseline 3 was the outcome of this year's Bechtel Study which came up with a cost for the full 140mile/h Monty of £13.5billion and 2006 for the start of 125mile/h running. At the briefing when the new strategy was unveiled on 9 October, SRA Managing Director Strategic Planning Jim Steer told me ‘We don't agree with the conclusions of the Bechtel study in terms of numbers or the timescale but it did unearth a huge amount of information on the project and what's needed to implement the changes'.

But since this column calculated last month that dropping the 140mile/h PUG2 would save about 30% of Bechtel's £13.5bn and that between £7-8billion would have to be spent on renewals, I reckon that they were not far out.

Anyway, what about the consultation document on ‘West Coast Strategy'? One of the few things I remember from ‘O' Level Latin (failed with ignominy) is that the way you ask a question indicates the expected answer. The expected answer from those consulted on the WCRM is ‘yes please'.

Whether anyone will stand up and protest against infringement of their rights remains to be seen. But somehow I suspect the TOCs will go gentle.

Funding

Not involved in consultation is the Treasury which, presumably, has agreed to cough up the readies. And the new strategy involves substantial additional expenditure.

Railtrack's ‘Black Diamond' review of the WCRM in December 1999 established Baseline1 at £5.8billion. Additional signalling costs plus a doubling of compensation to £600m produced a new figure (Baseline 2) of £6.3billion.

Rail Regulator Tom Winsor based his Periodic Review of Railtrack's track access charges for the five years starting 1 April 2001 on Baseline 2. This included direct grant from the SRA.

As part of the price for taking over Railtrack, Network Rail is protected against project cost overruns it has inherited through what is known as the Legacy Project Support Agreement (LPSA). Since Baseline 2 is already supported, the subsequent additional cost to be covered under the LPSA is now £3.5billion.

That sounds not too bad, until you remember that the £6.3billion was expected to pay for the full PUG2 contract and a 140mile/h railway. So, in effect, the taxpayer is paying much more for much less capability.

Anyway, back to the £9.8 billion. Jim Steer tells me that it is certainly provided for in Network Rail's financing plans. ‘That's the critical issue'. His Chairman is a bit more cautious. While overruns beyond Baseline 2 are funded, ‘in due course' the SRA will have to make the case for the extra money.

Winsor in control

Network Rail will take on debt to finance the increased costs through and the Rail Regulator's Interim Review is expected put in place access charges, or grant, at a level to service this borrowing.

Everyone is quite sure that Mr Winsor will come good in the interim review.. Adrian Montague, Network Rail's Deputy Chairman seems positively laud back about the outcome.

He believes that the absence of equity, and the fact that Network Rail is ‘debt driven' should make the conduct of the Review ‘much easier'. ‘Our interest is to ensure that the Rail Regulator has a complete, accurate and fully transparent view of the real cost of the railways' he told me. Without the distraction of shareholders equity ‘We can concentrate on the real costs'.

Indeed, Network Rail is expecting a ‘material increase' in its income. And Adrian thinks it unlikely that the Regulator would give the company less that it was asking for.

Hmm, interesting. Richard Bowker is much more in touch with the harsh reality of the post-privatisation railway and he told me, ‘Tom will ensure that whatever we specify is properly priced and is adequately remunerated by a network operator who incurs the expenditure efficiently and profitably'.

Then added the killer proviso: ‘the Regulator has a duty to ensure that Network Rail is adequately financed. He does not have a duty to give it whatever it wants'. And the Government's recent guidance to the Rail Regulator does seem to urge caution with the bawbees.

Could Tom Winsor stick some pins in the boiling frogs at Network Rail? Well, Richard Bowker made the point to me that the Interim Review will look at the ‘efficient price of maintenance and renewal'. Jim Steer was less diplomatic. ‘We've got to find lower cost ways of maintaining the network, otherwise we're going to find it very, very difficult to make the case for sustaining the railway.

And as I keep pointing out, Tom is in the last two years of his term of office and has a fiercely Calvinistic view of regulation where money is concerned.

Business case

Indeed, while the £7.5billion of renewals has been accepted by the Department for Transport and the Treasury as necessary, or, probably, unavoidable, expenditure, the SRA still has to make a business case for the £2.3billion of enhancements once the Strategy has been accepted.

Why no query over the renewals bill? According to Steer ‘If we didn't make the maintenance and renewal spend, which is a very large number, there would be no WCML'. He reckons the result would be ‘some gradual decline and after a few years it would stop running'. ‘We haven't been asked “do you want the WCML to continue”, Mr Steer said sardonically.

This is put more formally in the Consultation document. It says that there is no ‘do nothing' option for the WCML ‘unless the rapid deterioration of Britain 's premier trunk railways is considered as an option'. ‘Even the minimum level of maintenance and renewals necessary to maintain the current railway at a satisfactory level of operation represents a substantial cost' it adds.

I can see Tom Winsor exploring this minimum level in his interim review. Certainly there is no attempt to evaluate what the minimum level of expenditure might be.

I reckon there could be quite a difference. As InterCity's Director West Coast, Ivor Warburton spent heavily on his route in the 1990s and handed it over to Railtrack in 1994 free of Temporary Speed Restrictions.

Ivor's shrewd expenditure bought a double benefit, since the RT1A maintenance contracts with the Infrastructure Maintenance Companies were let were based on pre-1994 expenditure. This meant that the WCML contractors were less strapped for cash than most. And just under £2billion has been spent on renewals under WCRM.

Don't tell anyone in Government, but that £7.5billion looks generous. Take the money and run, Richard.

Benefits

Be that as it may, the SRA has had to demonstrate that the incremental expenditure over and above the cost of ‘unavoidable renewal' is justified by the additional benefits secured. This work also has to demonstrate that the enhancement options selected by SRA ‘secure the best overall ration of benefits to costs'.

Two enhancement scenarios were evaluated against a ‘Renewals only' (do-minimum) base case. These were the de-specified 125mile/h strategy, now out for consultation. and the original 140mile/h PUG2 contract as defined in Bechtel's Baseline 3 study. Gosh, how like the old days.

Apparently, the 125mile/h strategy shows a benefit:cost ratio of 2:1 making it ‘good value for money'. But the 140mile/h dream now delivers a benfit:cost ratio of than unity. These scenarios have also been tested against a ‘range of demand forecasts' and ‘in all cases' the 125mile/h strategy remains ‘good value for money' and ‘substantially better' than either 140mile/h or do minimum renewals.

Sorry to harp on about money and politics. More about railway issues next month. Meanwhile he is a quick outline of what we get for the money?

Speed down

Table 1

Source: SRA

Clearly there has been a lot of time and effort spent on recasting the controversial West Coast Main Line passenger and freight timetable to provide ‘a reasonable balance' of local, regional and intercity passenger services plus freight movements. But this balance has been tilted by the need to exploit the ‘significant investment' in Virgin's Pendolinos and Voyager trains.

In other words, Virgin doesn't lose much, Freight is better off and most of the pain is born by London and Birmingham commuters.

Virgin's original constant frequency all-day timetable was considered too inflexible by the SRA and now allows for variations in passenger demand across the day. Service frequencies will be reduced during the off peak and evening periods.

This is termed a ‘more balanced use of line capacity'. SRA claims that it produces a timetable which is both more resilient and provides ‘adequate' capacity for long distance passenger and trunk freight trains without requiring more infrastructure works.

Table 2

Hourly frequencies for InterCity West Coast

From September 2004

*One extra train Lo London in am peak hear and corresponding return train in pm peak hour.

Definitions

Peak London arrivals 08.00-10.00

London departures 16.30-19.00

Off-peak London arrivals Before 08.00 & 10,00-21.00

London departures before 16.30

Evening Times as at origin station After 19.00

Table 2 shows the cut-backs in off-peak and evening InterCity services to make paths for other users, particularly freight. Note that Birmingham will still have four 125mile/h Pendolino services all day from September 2004, and a half hourly evening service.

I have not been alone in querying whether Birmingham merits such a frequency. Jim Steer has no doubt. ‘I'd make four trains an hour to Birmingham a banker', he told me. But then he did, didn't he?

Pendolinos willing, September 2004 will also see journey time reductions on key routes. For example, the London/Birmingham time will fall from the current 90min to 73 min

There will be three Peak-hour Pendolinos a day on the London/Manchester route with one stop for a 2hr 3min timing. Shades of the Manchester Pullman . Trains running via Stoke with four stops will be timed at 2hr 11min, compared with 2hr 41min at present. Liverpool will be 2hr 19min from London .

One of the longest-standing best-ever headline times will also fall in September 2004. London Glasgow will finally crack the 5hr introduced with the Electric Scots in 1974 with 4hr 53 min promised.

Seven minutes may not seem much progress to show after 30 years However ‘when line speed enhancements North of Crewe' are completed in 2005 a further 15min may be saved.

Standard-hour freight paths are similarly classified into Peak, off-peak and evening. There is a greater number of freight paths in the evening period than during the off-peak.

This, says the SRA, creates an ‘optimal balance' between passenger and freight customer needs. However, it notes that ‘some adjustments' to access agreements will be required to enable the changes to take place. More fun for Tom Winsor.

A key issue for the freight operators is whether there will be enough daytime paths, given that their potential customers are usually 24/7 businesses.

Traction enthusiasts will like some of the implications of the strategy. There will be no paths for diesel hauled 60mile/h trains between Nuneaton and Stafford , and they will have to be re-routed. Similar issues affect daytime paths between Warrington and Carlisle .

So, doubled headed 66s all round, then? No, the SRA says diesels can't hack it. I told Ed he should have gone for 4000hp. Now, double headed 87/90s or single Class 92s seem to be indicated.

And what do we make of an alternate hour Anglos-Scottish path to being provided for high speed mail and logistics services? Rolling stock will have to match the speed characteristics of Pendolinos and Voyagers. Sounds like the Freight IC125's time has come.

Continues.........