A true single European railway area

The association of European Rail Infrastructure Managers (EIM) believes that the recast of the First Railway Package is crucial to the future of an effective rail network across Europe

The association of European Rail Infrastructure Managers (EIM) believes that the Recast of the First Railway Package currently under discussion by EU institutions is a great opportunity to boost rail and turn it into a more competitive mode of transport. This can be done by establishing a clear framework for the sustainable financing of the European rail network, clarifying rules for infrastructure charging, enhancing the independency of infrastructure managers and reinforcing the powers and competences of national regulatory bodies.

What is the First Railway Package?
The First Railway Package is a set of EU directives adopted in 2001, which was designed, amongst other things, to liberalise rail freight, to establish a transparent regulatory framework for the allocation of capacity and charging for access to rail infrastructure across the EU, and to create a framework for the licensing of train operators in each member state. Notwithstanding its ambitious goals, for various reasons, the First Railway Package failed to sufficiently achieve its declared objective of market opening.

In 2008 the European Commission reported the following shortcomings:
• A lack of independence of some infrastructure managers
• A failure in some member states to set up an independent regulatory body with the necessary powers
• Discrimination in the provision of rail related services, such as fuelling, shunting, or services in stations
• Insufficient implementation of the provisions on track access charging, such as the absence of a performance regime
• A lack of stable financing for infrastructure managers enabling them to adequately maintain rail infrastructure, reduce costs and deliver a high performing rail network.

To tackle these and other key problem areas, in September 2010, the Commission published its long waited proposal for amending the First Railway Package (recast). EIM welcomes this proposal of the Commission as well as its objectives to promote the development of an effective rail infrastructure network, to establish an attractive and genuinely open rail market, to remove administrative and technical barriers and to ensure a level playing field with other transport modes.

Contents of the proposal
The Commission’s proposal provides for a far-reaching revision and covers a particularly wide range of issues. Therefore, it is important to have a clear overview of the contents of the proposal to understand what is at stake.

The recast sets out a number of new obligations for EU member states and Iinfrastructure managers, including the obligation for infrastructure managers to balance accounts over a period of no more than three years, and accounting separation for transport services by railway undertakings and management of railway infrastructure, and for rail passenger and freight services. Further, it includes the obligation for infrastructure managers to develop a business plan incorporating investment and financial programs; and a detailed list of information to be published in the network statement including information on access and charging in relation to both infrastructure and service facilities; the network statement is to be published in at least two official EU languages.

The recast also propoes the obligation for infrastructure managers to develop and maintain an inventory of assets with their current valuation as well as details of expenditure on renewal and upgrading of infrastructure; and the obligation for infrastructure managers to publish regulatory accounts.

Lastly, member states will have to publish a rail development strategy covering a period of five years; and member states must also conclude contractual agreements with infrastructure managers providing for state funding over a period of no less than five years. The proposal of the Commission sets out a detailed list of the basic principles and parameters of such contractual agreements among which (i) a set of user-oriented performance targets and (ii) a mechanism that ensures that cost reductions are passed on to users.

Charges and competition
The recast proposal also focuses considerably on charging for rail infrastructure. While the fundamental principle of cost-based charging is not altered, the Commission provides an explicit list of costs categories (e.g. network-wide overhead costs or capital costs) which shall not be taken into account by infrastructure managers when levying infrastructure charges.

The proposal also contains several additional measures, including the possibility for infrastructure managers to levy mark-ups if the market can bear it and in accordance with specific criteria, the requirement to internalise the costs of railway traffic noise, the requirement to grant trains equipped with ETCS running on lines equipped with national systems a temporary reduction of infrastructure charges.

Additionally, the recast covers competition related issues, such as rights of access to infrastructure for freight and international passengers and the rights of access to rail related services. It also reinforces the independence of the essential functions of infrastructure managers.

Last but not least, the recast also includes measures reinforcing the independence, competences, and powers of regulatory bodies.
Of all the issues listed above, charging and financing are of particular importance to infrastructure managers.

The importance of charging for rail infrastructure
Infrastructure charges are a key factor determining the competitive position of rail in relation to other modes of transport. Infrastructure charges should be set according to harmonised principles set out in EU legislation but should not be at the same level in every member state, owing to the differences existing in national policies.

In order to ensure the competitiveness of rail, charges should be predictable and could take into account environmental factors so as to meet the challenge of climate change by ensuring a sustainable mobility.

Charging and financing are two sides of the same coin. The level of infrastructure charges depends on the funding that infrastructure managers receive from their member state. infrastructure managers can afford to set lower charges if they receive a proportionate amount of funding.

Towards sustainable financing
EIM sees financing as currently the most critical problem for many infrastructure managers. Imbalances between costs and funding generated indebtedness, with growing historical debts and increased deficits. The current public financial constraints are progressively worsening the situation. New framework conditions and instruments are urgently needed to ensure a sound and sustainable financing of the European rail network.

EIM has long argued that multi-annual contracts or agreements (MACs), along the lines of the Commission proposal, are a key tool for Infrastructure ianagers to develop a long-term vision and strategic planning, and can help in building a win-win situation between governments and infrastructure managers. As well as ensuring the long term financial stability of infrastructure managers, they increase cost efficiency and predictability.

The future
The European Commission proposal to Recast the First Railway Package still has a long journey to travel until it translates into concrete measures at national level. At the time of writing, the EU Council of Transport Ministers has just adopted a “general approach”, based on a political compromise proposed by the Hungarian EU Presidency, which entails downplaying somewhat the Commission’s ambition to increase the commitment of members states to reform the railway sector and to create a truly European railway area.

Notably, the Council agreed that MACs shall cover a period of three years rather than five as proposed by the Commission. Besides, Rail Infrastructure Development Strategies shall be merely indicative and limited to the maintenance, renewal and development of infrastructure. In EIM’s view, this represents a truly disappointing outcome.

Discussions in the European Parliament are also not progressing as expected. Initially foreseen for July, the vote in the Transport Committee has recently been postponed to October. Ms Serrachiani, the Member of the European Parliament responsible for this dossier, described the proposal of the Commission as insufficiently ambitious and is pushing for full ownership unbundling, stronger commitment from member states (e.g. MACs to cover a period of seven years), enhanced levels of independency of regulatory bodies, and clear rules on track access charging. According to the new timetable, the European Parliament is due to finalise the first reading of the recast at a plenary meeting in November. This will be followed by a second reading by both institutions, which may well take up another year or more, especially if a conciliation procedure is required to close the gap between the European Parliament and the Council.

EIM firmly believes that an ambitious recast is crucial to the future of Europe’s rail network. Currently the position of the European Parliament seems to be on a clear collision course with the position agreed by the Council. Reconciling both positions in second reading will therefore be a challenging task. EIM will continue to feed into the political debate in order to ensure the adoption of a regulatory framework which best contributes for the creation of a true single European railway area.

For more information
www.eimrail.org