Hitachi response to further representations from Abellio East Midlands Limited (redacted) – 24 November 2020
| Date | 24 November 2020 |
| Section | Depot access applications and decisions |
1
24 November 2020
James Osborn
Executive, Access and Licensing
Office of Rail and Road
25 Cabot Square
London
EC14 4QZ
Dear James
Ref: APPLICATION BY HITACHI RAIL LIMITED UNDER SECTION 17 OF THE RAILWAYS ACT 1993
We have now had the opportunity to consider the documents provided to you by Abellio East
Midlands Limited (“EMR”) and provided to us under your letter of 12th November 2020. Accordingly,
as requested, we are pleased to set out below our comments on the documents provided by EMR.
Notwithstanding the considerable extension of time afforded to EMR to prepare a response to our
section 17 application, we are very disappointed to conclude that the documents provided by EMR do
not, in our view, provide the ORR or Hitachi Rail with the necessary level of openness and transparency
on the make-up of the charges proposed in the enclosed Depot Access Agreement (DAA).
In particular, the documents provided do not demonstrate how the DAA charges reflect the cost to
EMR of providing access and/or providing the supply of those services, plus a reasonable profit. The
ORR’s guidance issued in connection with the Railways (Access, Management and Licensing of Railway
Undertaking) 2016 at paragraphs 3.4 to 3.6 is clear as to the expectations placed on facility owners:
“3.4 Paragraph 1(6) of Schedule 3 of the 2016 Regulations requires that the charge imposed for track
access and the supply of services within these service facilities must not exceed the cost of providing
it, plus ‘a reasonable profit’. We expect the service provider to be able to demonstrate how charges
reflect the cost of providing access to its service facilities and/or the supply of services within those
facilities, if requested.
[…]
3.6 Service providers may publish their charges in different ways, but we expect them to be open and
transparent about charges for services.... “
Cost build-up
To illustrate this significant concern we have highlighted the following example drawn from the two
key documents provided by EMR: (1) “NL S17 – Price list for NL IEP Services for 30.10.20.xlsx” (“NL
Price List”) and (2) “NL S17 20200901 Cost Structure analysis for 30.10.20.xlsx” (“NL Cost Structure
Analysis”). The issue described below is applicable to all charges included in the NL Price List.
The NL Price List provides at column ‘M’ the ‘Unit Price per job’ in respect of each task identified in
columns ‘B’ and ‘C’. Columns ‘N’ and ‘O’ provide a breakdown for the Unit Price per job by identifying
the ‘Direct Costs per job’ and the ‘Overheads per job’; thus together the ‘Direct Costs per job’ and the
‘Overheads per job’ make up the total ‘Unit price per job in column ‘M’.
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