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It looks as though EWS is on its own – but they are fighting hard
One of my Top Ten immediate issues in last month's column was the withdrawal of Government subsidy from Channel Tunnel freight services from the end of November . Since then neither DfT nor Eurotunnel have changed their position.
Since the Tunnel opened, cost of passenger and freight access charges has been met by the UK and French Governments through the Minimum Usage Charge (MUC) paid to Eurotunnel. This is worth £52 million a year to the freight operators and ends on November 30.
After that EWSI and SNCF have to pay the access charge themselves. This would make EWSI's international traffic uncompetitive.
DfT Rail sees charging as a purely commercial matter between Eurotunnel and EWSI. A spokesman emphasised that e Government remains ‘clear' that future freight services through the Channel Tunnel need to be provided on a commercial basis.
He added, ‘for the past 12 years, the Government has subsidised EWSI's operation through the tunnel. Last year alone this cost the taxpayer £26 million. We have already extended this support once, and we cannot do so again for State Aid reasons'
But Government is deeply involved in the issue. Access charges for passenger and freight traffic through the Tunnel are enshrined in the Rail Usage Contract (RUC) signed by the British Railways Board, French Railways and Eurotunnel on 12 May 1987 .
This gave the two national operators 50% of the Tunnel's capacity. Much has changed since it was signed.
When EWS bought Railfreight Distribution (RfD), part of the deal was the acquisition of RfD's rights to operate through the tunnel under the RUC. This was through a back-to-back agreement between BRB, European Passenger Services (Eurostar) and Eurotunnel.
This means that, contractually, EWSI is at one remove from Eurotunnel. So when it became clear that international freight would be uneconomic when the MUC ended, EWSI had to give formal notice to the BRB (which still exists in a residuary role for things like the Channel Tunnel contracts), that it would have to withdraw from the back-to-back agreement. It was the BRB Residuary which then gave notice to Eurotunnel and SNCF that freight operation under the RUC would end on 30 November.
“Closing the Channel Tunnel is a more serious problem for UK transport and politics to be left to a company struggling for its life against its creditors. We urge you and the French Government to take what actions it can to ensure continuation of services and to ensure that these are put on a long term viable basis.” Rail Freight Group in a letter to Transport Secretary Douglas Alexander |
Unfortunately, the RUC will remain in force for some years after the ending of the MUC. As explained last month, the MUC included a £20 million a year top-up, so the actual tolls to be charged to EWSI and SNCF after 30 November would be £32 million a year. This is equally unaffordable when spread over only five trains a day each way carrying 1.5 million tonnes of freight a year.
So EWSI applied directly to Eurotunnel for open access rights from 1 December, with the new rates to be negotiated. Where the RUC equates to £8000 per train, EWSI reckons £300 per train is nearer the mark.
Eurotunnel thought about it and then refused to discuss open access on the grounds that EWSI was still bound by the obligatory charges in the ongoing RUC. EWSI replied that if Eurotunnel wouldn't negotiate an open access agreement it would make a formal complaint to the Regulator.
When ORR was established, the Rail Regulator was also International Rail Regulator. But in December last year, The Channel Tunnel (International Arrangements) Order 2005 came into force. This order abolished the International Rail Regulator and designated the Intergovernmental Commission ( IGC ) ‘as the regulatory body for the Channel fixed link'.
This Order is clear that while Eurotunnel's shuttle service is exempt from open access competition, ‘this Regulation applies to the use of those parts of the Fixed Link necessary for the delivery of … international freight services by railway undertakings'.
These ‘parts' are termed ‘The Common Section' to which ‘international groupings shall have access and transit rights ... on equitable and non-discriminatory conditions' for ‘international freight services'. Even better for EWSI and SNCF, Article 11 of the Order says that Eurotunnel ‘must aim to guarantee the optimum competitiveness of international rail freight and ensure the efficient utilisation of the Trans-European Rail Freight Network'.
As you might expect, and reflecting GNER's court case against ORR, the Order requires that charges must comply with Chapter II of Directive 2001/14/EC. In other words they must be based on avoidable costs.
All this means that a freight operator can appeal to the IGC if it believes Tunnel charges are so high as to make international rail freight uncompetitive. In this event the IGC ‘shall take a decision and take action to remedy the situation within a maximum period of two months from receipt of all relevant information'.
And that is where the future of the international freight business rests. DfT Rail and Eurotunnel are still refusing to budge, while EWSI continues to press both of them to make a concession.
ut, more important, on 11 September, EWSI made a formal complaint to the IGC , under The Channel Tunnel (International Arrangements) Order 2005. about Eurotunnel's refusal to discuss open access terms. The IGC acknowledged the complaint on 19 September, but there has been no follow up for supplementary information. Note that the IGC must ‘take a decision and take action to remedy the situation within a maximum period of two months from receipt of all relevant information'