INTER-REGIONAL PUBLIC TRANSPORT INQUIRY
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18 May 2012 The Hon Andrew Gee Chairman State and Regional Development Committee Parliament House Macquarie St Sydney NSW 2000 Dear Chair, INTER-REGIONAL PUBLIC TRANSPORT INQUIRY Infrastructure Partnerships Australia (IPA) would like to thank the Legislative Assembly State and Regional development Committee for the opportunity to comment on the important area of inter- regional public transport in New South Wales. A reliable and efficient regional transport network is essential for the economic and social viability of New South Wales’ rural communities. In the context of a geographically dispersed population, transport is critical for connecting rural communities; regional businesses rely on transport to gain access to essential goods and services and individuals require transport connections to access education and critical health services. In the context of an increasingly constrained budget position and a requirement to enhance both the quality and reliability of regional and interurban rail services, it is timely to consider how substantial reforms might achieve these aims at better value for money to taxpayers and commuters. IPA notes with interest the reforms recently announced by the NSW Government under the ‘Fixing the Trains’ initiative. The restructuring of RailCorp to form two new entities – NSW Trains and Sydney Trains – achieves a number of welcome structural reforms to improve the value and quality of regional and inter-regional rail services. By structurally separating service provision and maintenance from infrastructure ownership, which remains a separate government entity, NSW Trains and Sydney Trains will be free to concentrate on service provision and customer services. Equally, by separating NSW Trains and Sydney Trains into distinct entities, the two organisations will be able to bring a renewed and dedicated focus to the improvement of urban and regional services. The State and regional Development Committee’s inquiry into inter-regional public transport is an important opportunity to understand the challenges facing the New South Wales regional rail network and to establish what reforms are needed to provide regional communities with a safe, reliable and efficient public transport network. 1
1. ABOUT INFRASTRUCTURE PARTNERSHIPS AUSTRALIA IPA is the nation’s peak infrastructure body. Our mission is to advocate the best solutions to Australia’s infrastructure challenges, equipping the nation with the assets and services we need to secure enduring and strong economic growth and importantly, to meet national social objectives. Our Membership is comprised of the most senior industry leaders across the spectrum of the infrastructure sector, including financiers, constructors, operators and advisors. Importantly, a significant portion of our Membership is comprised of public sector agencies. IPA draws together the public and private sectors in a genuine partnership to debate the policies and priority projects that will build Australia for the challenges ahead. 2. THE NEED TO IMPROVE COUNTRYLINK SERVICES CountryLink services have experienced a sustained decline in patronage over the past 15 years; annual patronage levels have dropped from 2.5 million in 1996-97 to 1.8 million in 20101. Figure 1 indicates that CountryLink has experienced a decade of patronage decline before a recent upward movement beginning in 2007-2008. Figure 1: CountryLink Annual Patronage (1994-2010) Source: RailCorp Annual Reports 1 Infrastructure Partnerships Australia 2012, Franchising Passenger Rail Services in NSW: Options for Reform 2
CountryLink’s decline in patronage levels can be linked to the declining reliability and relatively slow speed of the service provided. CountryLink aims to have 78 per cent of services arrive at their destinations within 10 minutes of the scheduled time; this on-time running target has not been reached since the 1st of August 20112. Figure 2 demonstrates that in the first three months of 2012 CountryLink have consistently performed 18 per cent below the on-time running target of 78 per cent. That means a regional rail customer using CountryLink in the first three months of this year had only a six out of 10 chance of reaching their destination within 10 minutes of their scheduled arrival. Figure 2: On-time Running for 2012 Source: CountryLink CountryLink journey times are also uncompetitive when compared with road based transport and air services. For example the CountryLink service from Sydney to Brisbane takes approximately 14.5 hours. In comparison the same journey takes approximately 11 hours by car and 90 minutes with a domestic airline. There are significant cost subsidies associated with the provision of CountryLink services, however services currently offered by CountryLink are unable to compete with the speed, reliability and comfort provided by personal vehicle or plane trips. It is clear reform is needed to ensure New South Wales taxpayers receive value for their money and regional travellers receive a reliable and efficient transport service. 3. COMPETITION BASED REFORMS IPA acknowledges the decision of the Committee not to consider the privatisation of existing government owned transport assets. However, in the context of the Inquiry’s first term of reference - how CountryLink services can be improved - IPA believes that the committee must explore how competition based reforms, not privatisation, could be used to improve the quality and efficiency of regional transport service delivery in New South Wales. The introduction of competitive tension has consistently been shown to improve the efficiency and accountability of service delivery. Yet, despite consistent empirical evidence of the advantages of contestability, relatively few public services in NSW have been subject to competitive reforms. Franchising of the CountryLink network would enable the NSW Government to introduce ‘off track’ competition, which would create incentives for the rail operator to reduce costs and improve the 2 CountryLink 2012, On-time running statistics, available at: http://www.countrylink.info/service_status/on- time_running/2011 [18 May 2012] 3
quality of service. Franchising should not be confused with privatisation. Under a franchised model, operational delivery of train services would be handed over to a private sector franchisee for a time- limited concession period after a competitive tendering process – meaning government has the opportunity to bid-up service levels whilst bidding down the cost of subsidy by the taxpayer. The New South Wales Government would retain ownership of trains, stations and rail infrastructure – and control of routes, timetables and pricing. These controls would enable the Government to safeguard against a reduction in the number of services provided to regional New South Wales, as government, under the franchisee’s operating contract, would be able to mandate the routes and timetables offered. Under the existing CountryLink model, (where only 56.3% of train reached their on-time running target in March of this year), customers have no recourse when the train runs late or even fails to arrive. Under a correctly structured franchise model, operators can be incentivised to continually improve services and value for money, but crucially, they would also face sanctions for poor performance. Continual improvement conditions can be added at the end of a contracted concession, meaning that Government over time is able to monitor and regulate the quality of the service that is provided by the private sector. Should a franchise fail to meet strict performance criteria during a contract, government would be able to exercise mechanisms to assume control of the franchise and re-tender the service. Franchising also offer opportunities to upgrade and refresh the tired rolling stock currently servicing the CountryLink network. By bundling rolling stock replacement with franchise contracts in Melbourne and the United Kingdom, governments in those jurisdictions were able to benefit from private sector procurement innovation – providing rail users with new and upgraded trains and carriages. IPA recently released a major report into reform options of rail services in New South Wales. ‘Franchising Passenger Rail Services in New South Wales: Options for Reform’, undertaken in partnership with Aegis Consulting, identified clear opportunities to significantly improve the service level and value for money of rail services in New South Wales through the introduction of competitive reforms. The report looked to international experience of rail reform processes, finding the CountryLink network “bears a range of similarities to interurban networks in Europe, North America and Asia which have been subject to successful franchising for many years.” The paper ultimately recommended that the NSW Government swiftly “commence steps toward an immediate franchising project for operation and maintenance of the CountryLink network.” The paper also found that where franchised rail services reached the end of their contracted concession, far from taking services back into public sector delivery, government’s sought to broaden and deepen franchising – recognising the effectiveness of the models deployed in increasing service quality for customers and value for money for taxpayers. A copy of IPA’s ‘Franchising Passenger Rail Services in New South Wales: Options for Reform’ report is attached as a annexure to this submission for the Committee’s convenience – the report is also available from www.infrastructure.org.au 4
Should you require further information, I invite you to contact our office on (02) 9240 2050 anytime. Yours sincerely, BRENDAN LYON CHIEF EXECUTIVE OFFICER 5
Copyright © Aegis Consulting Australia and Infrastructure Partnerships Australia Disclaimer Infrastructure Partnerships Australia and Aegis Consulting Australia provide no warranties and make no representations in relation to the information provided in this paper. They accept no liability for reliance on the information in this paper by any person or organisation. Any person or organisation using the information in this paper does so at its own risk and agrees to indemnify Infrastructure Partnerships Australia and Aegis Consulting Australia for any loss or damage arising from such use. Infrastructure Partnerships Australia 8th Floor 8-10 Loftus Street Sydney NSW 2000 T 02 9240 2050 F 02 9240 2055 W www.infrastructure.org.au Aegis Consulting Australia Pty Ltd 74/104 Miller Street Pyrmont NSW 2009 T 02 9660 1706 F 02 9660 1759 W www.aegisconsulting.com.au For more information about this report contact: Brendan Lyon Chief Executive Officer Infrastructure Partnerships Australia T 02 9240 2050 E brendan.lyon@infrastructure.org.au Adrian Dwyer National Manager, Policy Infrastructure Partnerships Australia T 02 9240 2056 E adrian.dwyer@infrastructure.org.au Vishal Beri Managing Director Aegis Consulting Australia T 02 9660 1706 E vberi@aegisconsulting.com.au Cover: © Courtesy of RailCorp
Contents INTRODUCTION 6 EXECUTIVE SUMMARY 7 RECOMMENDATIONS 11 1 PREVIOUS NSW RAIL REFORM 14 1.1 1995 National Competition Policy Reform 15 1.1.1 Background 15 1.1.2 Application of NCP to NSW Rail Sector 15 1.2 2000-2001 Response to Glenbrook Rail Accident and the 2003 Waterfall Rail Accident 16 1.2.1 Appointment of Coordinator General of Rail 16 1.2.2 Policy Responses by Government 17 1.2.3 Strategic Plan for Rail 17 1.3 2004 Creation of Railcorp and Clearways Programme 18 1.4 2008 Review of Capital and Clearways Programmes 18 1.5 2009 Re-Constitution of RailCorp 19 2 OPERATION OF PASSENGER RAIL IN NSW 20 2.1 Sydney’s Suburban Rail System 21 2.1.1 CityRail Services by Sector and Line 24 2.1.2 CityRail Rolling Stock 24 2.2 Patronage Demand for CityRail and CountryLink Services 26 2.2.1 Current Operating Capacity on CityRail Network 28 2.2.2 Patronage Growth Forecasts in Suburban Sectors 32 2.3 Operational Performance 33 2.4 Financial Performance 36 2.4.1 RailCorp Staff Resources 38 2.5 Constraints on Service Delivery 38 4
3 MODELS TO PROMOTE RAIL SERVICE COMPETITION 40 3.1 On Track Competition 41 3.1.1 Open Market or Open Access Model (On Track Competition) 41 3.2 Off Track Competition 41 3.2.1 Network Franchise Model 42 3.2.2 Sector Franchise Model 42 3.3 Application of Models Internationally 44 4 CASE STUDIES IN RAIL SERVICE COMPETITION 48 4.1 United Kingdom Experience with Open Access and Tendered Franchises 49 4.1.1 History 49 4.1.2 Overview of Open Access and Franchising Take Up 51 4.1.3 Regulatory Structure 52 4.1.4 Franchising Benefits, Costs and Lessons 54 4.2 Swedish Experience with Tendered and Network Concessions 57 4.2.1 History 57 4.2.2 Franchising Benefits, Costs and Lessons 60 4.3 Victorian Experience with Rail and Tram Franchising 61 4.3.1 History 61 4.3.2 Patronage Growth 65 4.3.3 Franchising Benefits, Costs and Lessons 66 5 COULD FRANCHISING WORK IN NSW? 68 5.1 Is Franchising an Answer to Policy Problems? 69 5.1.1 The Public Versus Private Debate 69 5.2 How (and why) would Franchising be Applied in NSW? 70 5.3 What are the Best Ways for Government to Consider Franchising? 72 5
INTRODUCTION About the authors Aegis Consulting Australia Infrastructure Partnerships Australia Aegis Consulting is an independent advisor to government, corporate and non-government Infrastructure Partnerships Australia (IPA) is organisations on: the nation’s peak infrastructure organisation. • Public Policy Evaluation & Design Our membership comprises Australia’s most senior business leaders and public sector executives from • Cost Benefit, Economic & Social across the infrastructure sector. IPA is the only body Impact Assessments that brings together the public and private sectors in a spirit of partnership, to build Australia together. • Strategy Infrastructure is the lifeblood of the national economy. • Government Relations It is the key to how Australia does business, how we compete in the global economy and how we sustain • Stakeholder & Indigenous Relations the quality of life of a growing population. Aegis specialises in preparing business cases and IPA’s mission is to develop and articulate the best options to shape government policy, regulation and public policy solutions needed to deliver the assets funding. Our consultants are subject matter experts on and services that will secure Australia’s productivity a range of policy areas including rail and road transport, and prosperity. IPA is committed to ensure that ports and freight, network and social infrastructure, governments retain all procurement options for the competition and regulation, energy and utilities, health, delivery of infrastructure. We believe that procurement environment and conservation, sustainability, tourism, models must be selected case by case, with a guiding welfare management, community services and principle of sustainably delivering better value, indigenous affairs. better quality infrastructure. Aegis was established in 2002 and has a team of consultants in Brisbane, Cairns, Canberra, London, Perth and Sydney. Vishal Beri, Managing Director of Aegis Consulting Australia, who has authored this report with Infrastructure Partnerships Australia, has been involved in competition reforms since 1996 as an adviser within government and as a consultant. 6
EXECUTIVE SUMMARY Passenger rail is the heavy lifter of the New South The low (and declining) productivity of New South Wales transport network. Wales railways mean that every man, woman and child in New South Wales contributed $345 in taxation to Under current arrangements, passenger rail services the operation of passenger rail services in 2009/10 in New South Wales are delivered by RailCorp, a and services are delivered at about twice the cost vertically integrated public sector monopoly provider of per passenger as in Victoria (see Figure 1). urban, interurban and regional passenger rail services. Every day, passenger rail in NSW carries over 830,000 The falling productivity of the New South Wales passenger journeys across 2,110 kilometres of track; passenger rail system can be explained largely by low on 1,685 individual train carriages. efficiency and changes in staffing levels and types. Between 2005/06 and 2009/10 overall headcount In the past several years, large taxpayer investments at RailCorp, including headquarters and ‘corporate’ and good network management have seen substantial staff, grew by over 47 per cent. Over the same period, improvements in the operational performance of the patronage grew by just 11 per cent; and the number of passenger rail network. However, the quality of rail front-line station staff actually declined by 22 per cent. services – and the cost at which those services are delivered – continues to point to a significant case for reform. In the context of an increasingly challenging budget and the requirement to substantially increase capital In 2005/06, RailCorp received a subsidy investment in new transport infrastructure, this paper of $6.77 per passenger journey. By 2009/10, explores opportunities to deliver enhanced service levels, new innovations and greater cost efficiency this subsidy had surged to $8.33 for every through competition based reforms. passenger journey on the network; requiring an annual taxpayer subsidy of more than $2.3 billion per annum. FIGURE 1 Comparison cost per passenger 100 Cost per passenger indexed to CityRail 90 80 70 60 50 40 30 20 10 0 CityRail Melbourne Brisbane International Trains Trains Median Source: L.E.K Consulting, Cost Review of CityRail’s Regular Passenger Services, 2008 7
Reform would provide for a significant increase in There is now a long track record of competition accountability for efficient, high quality mass transit. reforms in passenger transport, both in other Australian The use of franchise delivery models removes the and global jurisdictions. New South Wales has the current inconsistency where the public sector acts opportunity to learn from these jurisdictions, capturing as both the regulator and sole service provider. best practice and avoiding pitfalls, to drive superior efficiency and quality on passenger rail services. The current system means that when a train runs late or services fail, the best the public can expect In making its recommendations, this paper explores is an apology. three case studies of rail reform: Under a franchise, Government has an 1. United Kingdom rail franchising; enforceable contract with clear expectations 2. Swedish rail reform; and and outcomes, with financial sanctions for poor or part performance. 3. Victorian rail franchising. It is this introduction of accountability, incentives and These case studies have seen different approaches sanctions that could lead to dramatic improvements in to the structure and design of the transport services performance and efficiency in the State’s rail network. in each jurisdiction. But these structures are united by their fundamental outcome of driving contestability, accountability and efficiency into the delivery of passenger rail services. © Courtesy of RailCorp 8
There are two core models for introducing contestability This paper argues that the structure adopted in into passenger rail services: any reform of passenger rail services will be a key determinant of success. 1. On track competition Therefore this paper, argues that the This sees open access arrangements adopted, New South Wales Government should with different operators competing on the same network. On-market competition is used in form a Special Commission of Inquiry, Australia’s freight rail network, with government to investigate the application and ideal regulating access and operating rail track through structure for the reform of passenger the Australia Rail Track Corporation. rail services in New South Wales. However, it is unlikely that open access arrangements would prove suitable in the context However, experience in New South Wales and of New South Wales passenger rail services, due elsewhere has shown that inquiries alone often do to the requirement for government to ensure regular not create sufficient public awareness or momentum services throughout the day, including many that are toward meaningful reform. sub economic. Therefore this paper will not consider on-market competition models further. This paper therefore argues that ‘Sector One’ of the network, the Eastern Suburbs Railway and Illawarra 2. Off track competition lines, should be immediately put to market on a short term franchise agreement. Tendering Sector One This model sees a private operator granted an services would provide a valuable ‘demonstration’ exclusive franchise to operate all services on a franchise of services in metropolitan Sydney, to network – or a section of a network - for a defined inform the Commission of Inquiry. period of time on behalf of government. Bidders compete based on their ability to deliver the highest The CountryLink network could also provide a discrete quality of public transport service, at the least cost franchising opportunity. The network bears similarities to taxpayers. to European, North American and Asian interurban networks that have benefited from franchising for many Each of the models explored in this paper sees the years. Again, experiences on the CountryLink network public sector retain full ownership of the rail network, would inform the Commission of Inquiry and build stations and rolling stock. Indeed, fare prices, safety, knowledge should a wider franchising option timetabling and scheduling, performance monitoring be pursued. and other regulatory functions would continue to be controlled by the public sector. Rather, it is the operation The experience of reform on Sydney’s ferry network and maintenance of the passenger rail network that has also shown a much higher degree of public support would be the subject of a new, contestable and when there is an operating example of better, more cost competitive model of service delivery, which would efficient private services supporting the case for reform. see the private sector compete down the cost and bid up the quality of service under the reform models Decisions about the future shape and operational explored in this paper. Those models can also bring a strategy on the New South Wales rail network should renewed customer services focus to the operation not be delayed. Major capital investments, such as the of the State's rail system. North West Rail Link, need to be considered within the context of a long term operational strategy. That is not In considering franchise models in Sydney, the to say, however, that these decisions should be rushed. metropolitan passenger rail network could be structured Rather, a Special Commission of Inquiry and short term to support either a single whole of network operator franchising of Sector One and the CountryLink network, franchise, or alternatively, the network could be should be pursued in the short term to inform long-run separated into several different concessions, decisions about the future strategy to drive down costs supporting several alternative operators. and increase service quality. 9
The success of franchising in other jurisdictions is clear, franchising unprofitable lines has reduced operating though it is also evident that franchising has come costs on those routes by between 20 and 30 per cent. with costs and hard lessons have been learned. The The broader network has benefitted from related United Kingdom has experienced improvements in innovations in rolling stock provision, management, service quality, customer satisfaction, on time running services and ticketing. and the volume of services offered. It has also seen considerable investment in new rolling stock and better The case studies in this paper point to both the infrastructure. Franchising in the United Kingdom has successes and the lessons learned from franchising in also driven innovation – customers can now routinely Australia and Europe. New South Wales is therefore in access enhanced services including WiFi, power points, a strong position to learn from these experiences and priority and reserved seating, boosted mobile phone provide an improved reform process with appropriate signals, quiet zones, e-ticketing and customer lounges. risk sharing and enhanced accountability. The Victorian experience, too, should be widely Competitive franchising of public transport is not viewed as a success. Broadly modelled on the United a silver bullet. It still requires substantial taxpayer Kingdom franchising template, Victoria’s reforms have investment and many of the challenges that present delivered improvements in performance and significant under a traditional public monopoly model of delivery investments in new and refurbished rolling stock. still remain. However, franchising has much to offer in Like the United Kingdom, lessons have been learned terms of increased accountability, efficiency and quality. through the three evolutions of franchising in Victoria, with each evolution providing improved links between In the context of increasing network infrastructure investment and demand. costs, declining productivity and service Rail reform in Sweden differs in pace and style from quality shortfalls, franchising of passenger the other case studies in this paper, but provides a rail services in New South Wales has much strong example of how the introduction of competitive to offer in taking that State’s rail network tension can drive improved service delivery. Placing the public monopoly on a commercial footing and into the 21st century. 10
Recommendations It is recommended that the 3. Commence steps toward an immediate franchising project for operation and NSW Government: maintenance of the CountryLink network. 1. Undertake a Special Commission of Inquiry on improving quality and efficiency on the The CountryLink network also provides a discrete passenger rail network, including a detailed system that is an early candidate for franchising. investigation of the potential to franchise part It bears a range of similarities to interurban networks or all of the NSW passenger rail system to in Europe, North America and Asia which have been the private sector. subject to successful franchising for many years. The performance of the CountryLink demonstration The guiding objective of the Inquiry should be to project would inform the findings of the Inquiry identify options to achieve increased rail customer and allow the public to consider the benefits of satisfaction, at better value to government. The wider reform. Commission of Inquiry should be led by a suitably qualified individual or team of experts, and be able The Government should immediately commence to draw on sufficient resources to fully examine the preparation and market soundings for the operation necessary issues. The Commission of Inquiry should and maintenance of the CountryLink network, in also investigate the governance and regulatory advance of any wider application that might be framework that would need to be applied to recommended by the Special Commission improve the quality and efficiency of the passenger of Inquiry. rail network - including safety and contract management. Consultation with, and submissions 4. Articulate the principles that will underpin from, government agencies, industry, business, effective franchising and better quality and unions, the community and regulators should be value rail services. These principles should sought to ensure consideration of the full spectrum form the basis of the terms of reference of the of issues and opportunities. Commission of Inquiry. Based on this report’s examination of other franchising models, 2. Commence steps toward an immediate these principles should include: demonstration project for rail franchising on Sydney’s Sector One. • All existing rail assets, including below rail and above rail infrastructure and rolling stock should remain The Government should immediately commence in full public ownership and be provided to and preparation and market soundings for a limited managed by the franchisee; demonstration franchise of services on Sector One (the Eastern Suburbs Illawarra line) timed to coincide • Passenger fares should continue to be regulated by with the Special Commission of Inquiry findings, Government on a whole of network basis; (see Figure 2). A short-term demonstration will leave options open for either a whole of network franchise • Government should specify the standard operating or sector franchise in the future. timetable, clearly specifying the minimum services that are to be provided; In our analysis, we have identified Sector One as the most suitable for a demonstration project, because • Government should retain responsibility for network this sector is already operationally separate from planning. Network planning should be informed the wider CityRail network. The performance of the by an operating plan, demand analysis, customer metropolitan demonstration project would inform requirements, economic analysis, engineering the findings of the Inquiry and allow the public to analysis and risk assessment; consider the benefits of wider reform. • Rail maintenance should be bundled with passenger service contracts, with franchisees to bid for public funding for these projects. This would create incentives for the operator to plan for and undertake maintenance across the network; • The franchise contract should run for a period of between eight and ten years, with an option for a further term at the end of the initial term; and 11
• Franchise contracts should be clear and simple, with 5. Consider whether the NSW Government, as the measurable objectives that provide for continuous infrastructure owner, should assume risk in the improvement in the delivery of services. To ensure rail network and simplify the network to improve this, contracts should: operating efficiency. > Explicitly identify any government funded While franchising offers opportunities to attract Community Service Obligations that the private sector innovation, investment and efficiency franchisee is expected to deliver. into the rail network, government should at an early stage determine its own investment levels. > Include relevant, measurable and achievable Government or private investment would need to performance indicators that: be linked to network planning to have the optimal impact on operating efficiency. – are linked to customer requirements; – can be benchmarked; – can be independently verified; – support trend analysis; and – form the basis of payments or penalties to the franchisee. FIGURE 2 Recommended pathway to franchising NSW passenger rail Inform Investigate Action (3 months) (1-2 years) (2-4 years) Passenger Rail Franchising Demonstration Project Explain rationale Hold Public Inquiry Act on Inquiry for consideration into franchising Recommendations of franchising Source: AEGIS Consulting and IPA 12
13 © Courtesy of RailCorp
RAIL REFORM 14 PREVIOUS NSW © Courtesy of RailCorp. Photographer: Bob Peters
1 Previous NSW Rail Reform Before 1996, the New South Wales rail system was 1.1.2 Application of NCP to operated by a single, vertically integrated government monopoly, the State Rail Authority (SRA). The SRA NSW Rail Sector owned all above and below rail infrastructure and The New South Wales Government moved in 1996 was the monopoly provider of freight and passenger to reform the structure of the New South Wales rail services, all maintenance and all infrastructure system, in response to the National Competition Policy. functions. This saw the vertically integrated State Rail Authority structurally separated into four primary functions: During the late 1990s, the State Rail Authority was disaggregated, in line with the National Competition • State Rail Authority (SRA) to provide passenger Policy, but has since come full circle. rail services and procure and operate rolling stock. The SRA reported to the Minister for Transport, but In 2004, RailCorp was re-aggregated as the monopoly uniquely for a state authority, the Authority’s Board public sector rail corporation; and in 2009 it was could review Ministerial directions that were not in reconstituted as a statutory authority, mirroring its its commercial interests. This review capacity was a predecessor, the SRA. type of ‘shadow corporatisation’ and was intended to enable the SRA to operate as commercially as possible, within the constraints of public ownership. The SRA also had responsibility for procuring and 1.1 1995 National Competition operating rolling stock. Policy Reform • Rail Access Corporation (RAC) to own and manage rail infrastructure, such as rail track, 1.1.1 Background stations, signals, communications and related network functions. The RAC was created as a In the early 1990s, Australia’s governments embarked corporation under the State Owned Corporations on an exciting period of competition policy reform. (SOC) Act 1989 (NSW) meaning the RAC was not These reforms were spurred by the increasing directly responsible to the Minister for Transport. exposure of Australia’s economy to global competition, The Minister could direct RAC, but only with the with a resulting need to increase the efficiency of consent of the Shareholder Ministers. As a result infrastructure services. the RAC was guided first and foremost by the priorities of NSW Treasury to extract reliable Following a series of Special Premiers’ Conferences, dividends from government corporations. a committee led by academic and businessman Fred Hilmer was commissioned to undertake a major report • Rail Services Australia (RSA) to provide to the Council of Australian Governments (COAG) maintenance and related goods and services to on a reform pathway for public monopolies. In 1993, the rail industry, including SRA and RAC. RSA Hilmer’s committee produced its report, the National was created as a State Owned Corporation similar Competition Policy. It recommended a raft of reforms to RAC. Although RSA was created with the to public monopolies, including rail. responsibility of maintaining the NSW rail system to safe and reliable standards, it was intended that The underpinning principal of the National Competition over time, bundles of maintenance work would be Policy was the need to reform the structure and contestable to encourage competitive tendering by function of public monopolies to promote competitive both the RSA and the private sector. The RSA was markets for infrastructure services. A key principal was also able to compete for maintenance contracts the separation of natural monopoly infrastructure from in other Australian and international jurisdictions. contestable service delivery and maintenance functions. The RSA’s participation in other markets was encouraged by the need for it to deliver dividends to the NSW Treasury. • FreightCorp to provide safe, reliable and efficient rail freight services. FreightCorp was created as a State Owned Corporation. In 2002, the NSW Government privatised FreightCorp in concert with the Federal Government’s privatisation of the National Rail Corporation, which formed the private freight operator, Pacific National. 15
In conjunction with these structural changes, the NSW 1.2.1 Appointment of Coordinator Government developed an access regime to govern third party passenger and freight rail providers access General of Rail to the State’s rail network. The NSW Rail Access In addition to the Special Commission of Inquiry, the Regime covered above and below rail activities and NSW Government moved to immediately address set benchmarks for access pricing. Third party access structural and management problems that contributed arrangements were negotiated and managed by RAC to poor rail safety and service reliability. Accordingly, and overseen by the NSW Independent Pricing and whilst the Commission of Inquiry was carrying out Regulatory Tribunal (IPART). its investigation, in June 2000 the NSW Minister for Transport appointed a Co-ordinator General of Rail to: • Manage and co-ordinate the functions of the 1.2 2000-2001 Response to RAC, RSA and SRA; and Glenbrook Rail Accident • Review the effectiveness of the existing arrangements within the RAC, SRA and RSA. and the 2003 Waterfall In September 2000 the Coordinator General of Rail Rail Accident reported a range of findings that were echoed in subsequent reports by the Commission of Inquiry. The December 1999 Glenbrook rail accident saw The Coordinator General’s report found overall rail a fatal collision between an interurban and an system performance was poor because: interstate passenger train. The accident resulted in the appointment of a Special Commission of Inquiry • Significant growth in passenger demand had to investigate the causes of the accident and six other placed the rail system under increased pressure; incidents on the rail system. The Commission of Inquiry released a series of interim reports, with the final report • Ongoing rail infrastructure maintenance spending released in April 2001. and management by RAC and RSA had not been adequate; The report found that the rail accident was caused by failures in a number of areas including • There were inferior performance standards for the training, operational procedures, infrastructure rail industry in relation to safety and reliability and management and maintenance. The Commission performance management systems within and made recommendations about the restructuring of between RAC, RSA and SRA; the rail system and new regulations to improve safety, reliability and performance. Key recommendations • The contractual arrangements between RAC, of the Inquiry included: RSA and SRA did not adequately identify and create proper obligations and accountabilities; • The RAC and RSA should be merged into a single organisation that owns and controls infrastructure • There was poor co-ordination between RAC, access and maintenance; RSA and SRA in relation to asset management, network control and service delivery; • An Office of Co-ordinator General of Rail should be formally established to oversee the merger of RAC • Regulatory arrangements did not impose enough and RSA and related issues; discipline on RAC, RSA and SRA, particularly because RAC and RSA were not subject to the • An Office of Rail Regulator should be established control of the Minister for Transport; and to manage and enforce rail safety and related legislation; and • There was an absence of long term strategic planning by RAC, RSA and SRA in relation to capital • The control and management of timetabling, and maintenance projects required to enhance rail train movements and network control should be network performance to meet passenger growth. transferred from RAC to the CityRail network area within the SRA. In addition to maintenance and capital projects, the Coordinator General of Rail recommended a range of short, medium and long term structural and regulatory changes to address these problems. 16
In late January 2003 a train travelling from Sydney were essential to improve the safety and reliability to Port Kembla derailed at high speed on a curved of the rail system. section of track shortly after leaving the Waterfall Station with the loss of seven lives and injuries to over • Vesting control and management of timetabling, 40 passengers1. The ‘Special Commission of Inquiry train movements and network control in the SRA. into the Waterfall Rail Accident’ found the driver, while incapacitated following a heart attack, engaged a ‘deadman’ emergency brake foot pedal, allowing the 1.2.3 Strategic Plan for Rail four car Tangara train to accelerate to approximately In June 2001 the Co-ordinator General of Rail, Ron 117 kilometres per hour on a curved section of track Christie, delivered the Long-term Strategic Plan for Rail: limited to 60 kilometres per hour. Greater Sydney Metropolitan Region 3. The plan, known as the Christie Report, considered the SRA to be sole The ‘Special Commission of Inquiry into the operator of suburban and intercity passenger services Waterfall Rail Accident’ identified a series of failings in the metropolitan region; and recognised that the SRA in the SRA safety management systems and rolling now had legal responsibility for timetabling and control stock design and procurement. The report also of passenger and freight movements in the greater identified a number of cultural impediments to safe Sydney metropolitan area. operation of the rail network. Accordingly, the plan recommended that the SRA take a After the release of the ‘Special Commission of Inquiry proactive role in rail planning to ensure that RIC’s capital into the Waterfall Rail Accident’ report two senior and maintenance project activities were based on staff from the SRA (which had subsequently become SRA’s service needs. The plan also recommended that RailCorp – see Section 1.3) had their employment the Government share long term planning objectives terminated without benefits2. The subsequent absolute with the private sector, so that the private sector could risk aversion and highly prescriptive approach to dedicate resources to developing proposals and ideas procurement within RailCorp has been attributed that were best suited to deliver those objectives. to the reaction to the Waterfall rail accident. Key infrastructure concepts in the plan included the need to: 1.2.2 Policy Responses by Government • Consider metro style and other non-traditional The NSW Government responded to the approaches to rail service delivery; recommendations of the Commission and the Co-ordinator General of Rail by introducing a range • Identify and secure transport corridors for future of structural and regulatory changes including: transport network augmentation, whether for • Merging RAC and RSA into the Rail Infrastructure suburban rail or for other modes including roads, Corporation (RIC). The RIC was created as a State buses and light rail – with ease of intermodal and Owned Corporation with primary responsibility to inter-rail interchange a key consideration; and the Shareholder Ministers. However, the Minister of Transport had new powers to direct RIC. • Separate the rail system into sectors that could operate individually from each other. This was • Formally creating the Office of Co-ordinator General seen as necessary to reduce the system wide of Rail and Office of Rail Regulator to oversee the impacts of service interruptions. In conjunction with creation of RIC and manage structural and regulatory sectorisation, the plan recommended a range of changes for a transitional period after which its infrastructure enhancements to improve reliability powers would be transferred to the Rail Regulator. and safety within sectors, including line duplications, passing loops, turn-backs and improved signalling • Introducing new rail safety legislation and creating and communications. a Rail Safety Inspectorate. Some of these concepts, and projects to achieve • Committing $1.2 billion over 4 years to above them, were included in the NSW Government’s 2003 and below rail capital and maintenance projects that Long Term Strategic Plan for Rail. 1 Special Commission of Inquiry into the Waterfall Rail Accident,Final Report, Volume 1, January 2005. 2 "Sacked Waterfall disaster boss Arthur Smith rehired” Joe Hildebrand, The Daily Telegraph May 20, 2008. 3 Office of the Co-ordinator General for Rail, Long-term Strategic Plan for Rail: Greater Sydney Metropolitan Region, June 2001. 17
1.3 2004 Creation of RailCorp 1.4 2008 Review of Capital and and Clearways Programme Clearways Programmes The NSW Government regarded the separation of RIC In 2008, the now defunct Office of the Co-ordinator from the SRA as a continuing risk to the provision of General in the NSW Department of Premier and Cabinet reliable, safe services and infrastructure management. was asked to lead a whole of government review of In response the Government merged RIC and the SRA the causes and impacts of delays in the delivery of rail to create RailCorp in January 2004. This structure has capital programmes, including Clearways. been maintained since then. The review found that delays were caused by a range The Government also developed the Clearways of factors including: programme. Clearways involves separating the rail system into distinct, standalone sectors that could • Skill shortages in critical resource areas in RailCorp; operate independently, reducing the network wide impacts of failures within individual sectors. • Changes and increases to the scope of Clearways projects; The Clearways programme involved 15 projects which were designed to achieve three • Management and collaboration issues between rail agencies; separate sectors on the rail network. • Competition for scarce resources with external The Independent Transport Safety Regulator (ITSR) programs (such as Automatic Train Protection was established in July 2004 as safety regulator for and RTA level crossings); the State’s rail industry reporting directly to the Minister for Transport4. The ITSR was established in response • The unprecedented levels of capital works to findings from both the Glenbrook and Waterfall demand on the system and workforce; and Special Commission of Inquiry that there were insufficient regulatory resources in NSW to • Limited track possession time within an properly regulate rail safety5. existing live rail operating environment. The review recommended a series of solutions to address these issues; these solutions have since been implemented. 4 ITSR was renamed from the Independent Transport Safety and Reliability Regulator (ITSRR) under the Transport Administration Amendment Bill 2010. 5 Transport for NSW: National Transport Reforms(http://www.transport.nsw.gov.au/national-transport-reforms - accessed 7/10/2011). 18
1.5 2009 Re-Constitution CRIA was established to assume the role and functions previously undertaken by the RIC – with a of RailCorp regional network covering 2,391 route kilometres of operational passenger and freight rail lines and 3,134 In 2009 RailCorp was changed from a state owned route kilometres of non-operational lines6. corporation to a statutory authority, similar to the status of the State Rail Authority prior to 1996. As a Following the March 2011 State Election, the structure result RailCorp now reports directly to the Minister was altered as the new NSW Government sought to for Transport and Government, rather than to fully integrate transport planning. Individual transport shareholding Ministers. agencies, including RailCorp, transferred planning and strategic functions to the integrated transport agency, In 2010, this structure was changed in line with a Transport for NSW. Transport line agencies, such as whole of government reform, which saw RailCorp RailCorp, were freed up to focus purely on service relocated to report through Transport NSW – one provision under the new structure. Under the changes of several NSW Government ‘super agencies’. On 1 the Transport Construction Authority (TCA) – which has July 2010 the Country Rail Infrastructure Authority responsibility for the Clearways programme and other (CRIA) was constituted as a statutory corporation and major rail projects – was integrated into Transport for as a NSW Government agency under the Transport NSW under the Transport Projects Division. Administration Act 1988. FIGURE 3 Rail in NSW has been disaggregated and re-aggregated over the last 15 years 2011 1996 2010 RailCorp is Pre 1996 monopoly provider SRA is monopoly Clearways due for provider completion in 2011 Vertically integrated rail providers 2004 1996-2000 RIC and StateRail SRA separated into RAC, merged into Railcorp RSA and StateRail in Clearways introduced to response to national segregate rail lines 2001-2004 completition policy RAC and RSA merged into RIC Seminal reports on long term infrastructure need and rail line segregation Source: AEGIS/IPA 6 CRIA is the NSW Government agency which owns the non-metropolitan rail networks in New South Wales, comprising: the Country Regional Network (CRN), owned by CRIA and managed by the Australian Rail Track Corporation (ARTC); and the Leased Network (NSW Interstate and Hunter Valley Networks), owned by CRIA and leased to and managed by ARTC. At the time of writing CRIA maintenance was being taken over from ARTC by a private sector provider under a 10 year deal. 19
OPERATION OF PASSENGER RAIL IN NSW © Simon Freeman 2011 20
2 Operation of Passenger Rail in NSW Under current arrangements, RailCorp is the and Strathfield. There is also overlap in the use of train monopoly passenger rail provider in New South sets, which may travel between sectors. The majority Wales. It operates 2,110 kilometres of track, with 830 of system intersections exist between Sectors Two and kilometres in metropolitan areas and 1280 kilometres Three which have significant overlaps at key junction in non-metropolitan areas, serving over 300 stations points and overlapping operations. with 1,685 rail cars and nearly 15,000 staff, carrying in excess of 300 million passengers a year7. Metropolitan Only Sector One, comprising of the Eastern and interurban services are provided by CityRail, with Suburbs and Illawarra line, could be regarded as non-metropolitan services provided by CountryLink. operating separately from the rest of the network. Sector One enjoys minimal intersection, separate infrastructure in terms of signalling, rolling stock and other requirements – and a dedicated path through 2.1 Sydney’s Suburban the CBD, with dedicated platforms. Rail System The three rail service sectors are illustrated in Figure 4, together with planned and proposed The suburban rail system is divided and operated in short and medium term expansions in the North West, three sectors. In spite of the Clearways programme, South West and the Western Express/City Relief Line. there remains significant overlap between these sectors Figure 5 shows the broader Sydney region rail and tram at key system intersections where trains approach network including the South West Rail Link (under the central business district and city circle. These key construction), North West Rail Link (planned) and junctions include Sydenham, Redfern, North Sydney CDB Relief Line (proposed). © Courtesy of RailCorp. All rights reserved. Photographer: Phil Carrick 7 RailCorp Annual Report 2009-10 and CityRail – A Compendium of CityRail Travel Statistics, Seventh Edition, June 2010. 21
FIGURE 4 Sydney Rail System Showing Operating Sectors To Central Coast & Newcastle CityRail Operating Sectors Sector 1 Sector 2 Berowra Sector 3 Hornsby Richmond North West rail link Rouse Hill under construction Epping Chatswood To Blue Moutains ith nr Pe Blacktown Wynyard Town Hall Olympic Central Bondi Park Junction Redfern Merrylands ille nv ra G rn bu ld n d d w oo el be fie Au hfi to rw om th ew As ra Bu Green Square dc St N Li Fairfield Cabramatta Sydenham n ie ow ps m st Ca nk Liverpool Domestic Ba International Leppington Wolli Creek Glenfield South West rail link ve y sb under construction ro ve sg Re ng Kogarah Ki Macquarie Fields lla nu o Cr Sutherland Campbelltown Waterfall To South Coast To South Coast Source: AEGIS TABLE 1 Suburban Rail System Sector Rail Lines/Services Key Intersection Points with Other Sectors and Lines 1 • Illawarra suburban • Redfern • Eastern suburbs railway (Bondi Junction – Waterfall/Cronulla) 2 • South line (Circular Quay – Macarthur/Bankstown/Liverpool • Strathfield and Sydenham including Cumberland, Carlingford and Olympic Park) 3 • West/North and North Shore lines (Central – Emu Plains/ • Strathfield and North Sydney Richmond/Berowra) Source: AEGIS 22
FIGURE 5 Standardised 2011 Map Source: Prepared for Infrastructure Partnerships Australia by The Tipping Point Institute, 2011 y) Greater Metropolitan s it r ve ni Th r d et ah U M son ek d at k ( an fo re ra a da ba e M t a l lla la bb s t ee te Cr et St o ig n d ct itl r r ld re n ar e H rob ir r g W bro W gu Sa am W gat Ea Str Be to Ta fie Te ari a M r ia M le Pa ins go h a Train Network in 2021 n tl la a s a r d o h o t nd h or un ai ar ar in ex ill W M Vi D H H Diesel nd ek service le Cre or n ra l e Bo fer Te agu Lochinvar al Hunter Newcastle Co ba le i l ck ss Fa Including West Express, North-West Express, G Greta Awaba Liverpool Express & SWRL with the City Relief Line, K ff Br m ra ea n am w ic n am ca ic le Dora Creek be e en ng k Br on on dm ow W lto ew Civ i o H do on da ota st rd us rde ro kh t xt le Ca oa st i Sc an lb Morisset el Si but before a Second Harbour Crossing A w Blackalls N A Wyee Park M North Warnervale Warnervale Toronto Advance booking Bathurst Wyong required for travel Kelso on this bus service Tuggerah Raglan Ourimbah Peak Peak Yetholme Lisarow hours hours only only Central Meadow Flat Niagara Park Tablelands Mount Lambie Narara Central Wallerawang Coast ne er iv Lithgow da y R Gosford on ur by Zig Zag Point Clare W esb an k Tascott aw w Bell Co d H Koolewong on d Mount Victoria on m m Woy Woy ch ch Blackheath Ri Ri Berowra n st Medlow Bath Hornsby Hawkesbury River do Ea Mount Kuring-gai en Katoomba Mount Colah ar Normanhurst or Cl Asquith ds Blue Leura in e av Thornleigh W Mountains Waitara gr Wentworth Falls ul Wahroonga d e M riv ar Bullaburra Pennant Hills ey Warrawee D ad e on n y Ro Vi le Turramurra st Lawson Ri k ds Beecroft r g e oo ve Pymble on tr a ill ill el lle th br Ri en t H H Hazelbrook fi eg es Gordon an vi ry ho sC e le Cheltenham w dg lly us er m st ity e ie or Killara ill Sc rs ri Woodford Cu Ro Ke Ch Ca ar Sa N H ve ua ng rk u Lindfield ni q q pi North U ac Pa ac Linden Roseville Ep M M NWRL Ryde Falconbridge Extension Chatswood Springwood Quakers Hill Artarmon Carlingford St Leonards Valley Heights Warrimoo Marayong Telopea Blaxland Wollstonecraft Victoria Cross Sydney Harbour Eastwood 2nd Harbour Crossing Glenbrook Dundas Sydney Metropolitan Area Lapstone Blacktown Waverton Denistone North Sydney Circular Quay Rydalmere West Ryde Milsons Point P ins sw h d rin S M M n D s ot itt oo ill e er UW nt ry id oo St gto ng it D yH Ro ru John St Ki enr ns a ou a ss Pl Seven Hills Meadowbank Square ro iff u Parramatta River on sC Em nc di Fish Market cl W ge Toongabbie ti ng Ju on Star City Rhodes Wentworth Park Wynyard Ed Ki B Camellia Glebe Pyrmont Bay Pendle Hill Convention Jubilee Park Wentworthville Concord West Rozelle Bay Exhibition Centre Town Martin Hall Key to Lines & Symbols Westmead North Strathfield Lilyfield Paddy’s Markets Capitol Square Place St James Rosehill Leichhardt North Parramatta Hawthorne Park Sydney Suburban Train Lines Olympic Park Harris Park Street Marion Eastern Suburbs & Illawarra Line Direct services operate Redfern during special events only Taverners Hill Waterfall or Cronulla to Bondi Junction City Liverpool via Bankstown Line Merrylands Circle Liverpool to Museum via Sydenham e ill Liverpool Express Peak Hours Only Guildford Central Museum nv e Liverpool to Museum via Sydenham ra yd G Cl n on Lidcombe via Bankstown Line Yennora ur be h rw ld n Cr od Su sh n m ld is ll Pe ham an m ac ew re ld n gt us ub Lidcombe to Town Hall via Sydenham w w Hi A o na ow Bu fie om m fie St ha M N mo in d o eb to A oy Le r em rs do t th e Green Square m dc Inner West Line te Erskineville ra Fl o Li Homebush to Museum via Strathfield Pa iley l H St Se te ld ll Berala Waratah Mills St Peters es fie on i w ft r H Cumberland Line ig d ba lla r W o e Ch ton Le oo Vi ma Fairfield Arlington or hb Campbelltown to Blacktown via Liverpool m w lm h a ke nc Regents Park rk rr Dulwich Grove Mascot Be Station access La Pu Ca Airport Line Revesby to Town Hall via Airport Canley Vale fee applies at these stations Macarthur & SWRL to CBD Relief Line Sydenham Macarthur & SWRL to CBD via Sydenham Cabramatta g n a ie ry rk ill e Warwick Farm a ron ow Future Extensions on ill bu Domestic Airport ps Pa H kv go South West Rail Link Extension to Bringelly st h r m er y e ric Liverpool Bi ic th on nk Ya North West Rail Link Extension to Richmond Tempe nt Ca s w ar or ill Ca lst CBD Rail Link 2nd Harbour Crossing Extension Ba ni ul M k H sw Casula ur ee na D st So lly e South Line ol H Cr or Ea Pa H International Airport ge Leppington to Museum via Granville m h ut ss in Ro Wolli Creek Br North Shore, Western & Richmond Line Emu Plains or Richmond to Berowra via Granville,CBD & Chatswood Glenfield Arncliffe SWRL Stage 2 by w d ee s ve th k la ill ar Extension oo Banksia to el n or ro Pa son w H s Western Express Line lP Ed gto rr ve ds rw ar N sg k rly Tu Rockdale el r d Emu Plains to Central via Strathfield Pa N Re ey ve ng on ve in w xl Ri Ki rd m Kogarah pp Be Be Northern Line & NWRL Ba ds Le Northern Line & NWRL to Epping Carlton el Botany Bay Fi via Chatswood, Town Hall & Strathfield Allawah ie ar Peak Hours Only Hurstville qu rn NWRL to Sydney Terminal via Strathfield ac bu Penshurst M e Georges River gl North West Express Peak Hours Only Mortdale In NWRL to CBD via Chatswood & North Sydney to Oatley in Peak Hours Only M e ar NWRL & Central Coast to North Shore h ow Como la a Leumeah a ee gb ul nd ea lo Carlingford Line Jannali aw rin on oo ira Some off-peak Southern Highlands ym Carlingford to Clyde via Rydalmere rr Ca Cr Sutherland W M services terminate at Campbelltown G Ki Olympic Park Sprint & Special Events Services Campbelltown Direct services during special events only Loftus Engadine Intercity Train Lines Macarthur Heathcote Port Waterfall Hacking Southern Highlands Line Menangle Park Goulburn to Central via East Hills Helensburgh Diesel Menangle South Coast Line service Otford Bomaderry or Port Kembla to Central via Hurstville Stanwell Park Douglas Park Coalcliff South Pacific Ocean Blue Mountains Line Lithgow to Central via Strathfield Picton Scarborough Wombarra Newcastle & Central Coast Line Coledale Newcastle to Central via Strathfield Austinmer Thirroul Regional Train Lines Bulli Woonona Hunter Line Scone or Dungog to Newcastle via Maitland Thirlmere Tahmoor Bellambi Corrimal Rail Bus Services Couridjah Towradgi Bargo Fairy Meadow South Coast to Southern Highlands Bus Buxton North Wollongong Illawarra Bowral to Picton (Loop Line) Bus Balmoral Wollongong Bathurst to Lithgow Bus Yerrinbool Coniston Toronto to Fassifern Bus Hill Top Unanderra Lysaghts Colo Vale Southern Tram Line Kembla Grange Racecourse Cringila Highlands Dapto Dulwich Hill Line Port Kembla North Central to Dulwich Hill via Lilyfield Albion Park Port Kembla Mittagong Symbols Burrawang Robertson Oak Flats Lake Train Interchange Bowral Advance booking Dunmore (Shellharbour) Illawarra Burradoo required for travel Moss Vale on this bus service Minnamurra Exeter North Bombo Bundanoon Penrose Kiama Wingello Gerringong Tallong Berry Diesel Marulan Goulburn 23 Bomaderry (Nowra) service Southern Tablelands South Coast Copyright Netzplan October 2011
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