Key messages in this chapter
Operations costs are those incurred in „operating‟ the infrastructure such as for
signallers and control staff. Network Rail‟s main proposal in this area is to implement a new way to run its infrastructure, often referred to as the Network Operating Strategy (NOS), which changes signalling control so that more signals can be operated from a small number of operating centres.
The operational benefits of this strategy have the potential to be wide ranging, including reduced safety risk and better management of disruption, with the latter meaning that passengers and freight users should have shorter delays and more accurate information when things go wrong. It should also result in lower costs as fewer posts will be needed.
We have reviewed Network Rail‟s proposals against domestic and European
benchmarks. We have also conducted our own assessment of whether the strategy can deliver the proposed benefits.
Network Rail will compare favourably with international benchmarks once the strategy is implemented. The company is at an early stage but the timescales are underpinned by a sensible rationale and consistent with other infrastructure companies that have done something similar. However, the level of efficiency for activities outside signalling are below benchmarks with other UK regulated industries and we think this can be improved.
We have assumed that approximately £2bn of expenditure is required for CP5 with a cumulative efficiency of 17% in England & Wales and 18% in Scotland, which is an increase from the SBP of four percentage points in England & Wales and three percentage points in Scotland, to bring it in line with domestic benchmarks. We think Network Rail can achieve this through, amongst other things, better management of inflation and better management of occupational health.
The main issues raised in the consultation responses to the draft determinations were: the appropriateness of assuming top down efficiencies for non-signaller spend; the appropriateness of assuming efficiencies resulting from cross cutting issues; the pace for delivering cost reductions; and the safe implementation of the strategy. We
considered these and concluded that they do not change our original decisions in the draft determination.
Introduction
7.1 Network Rail has started to implement a long-term operating strategy that is introducing modern technology to operate the rail network more efficiently. It will centralise control so that more signals can be operated by fewer people and at fewer locations. This is expected to facilitate better decisions about managing the train service. For example, better technology and wider coverage of control should help staff to reduce the knock on effects caused by an incident and quickly get services back up and running. In addition to improved reliability the new technology should help Network Rail to plan capacity better meaning that more trains could be
introduced. Passengers should also receive better and more timely information about their journey.
7.2 To make this happen, signals need to be controlled remotely which requires
widespread deployment of advanced signalling technology across the network. This is planned to be done alongside other renewals, but in order to deliver the strategy an increase in the volume of signalling work of around 20%160 is needed in CP5.
Alongside this signalling work Network Rail plans to centralise staff into fewer operating centres (Figure 7.1) and introduce modern systems to manage train
movements. A number of new centres will be built and a new system to manage traffic will be introduced. Eight of the proposed centres have already been built with the remainder due to be completed over the next two years. All of this combines to allow Network Rail to progressively change the way it operates the network over the next 15 years. It will be done in stages as signalling control is activated at the new centres and staff relocate to them.
7.3 The costs of this work are spread around Network Rail‟s business, for example updating signalling is part of the signalling renewals expenditure. Both the costs and benefits will influence other elements of the settlement, such as volumes of signalling renewals and levels of train service reliability. These are considered in the relevant chapters of this determination.
7.4 The main financial benefit will be lower operations expenditure as fewer posts will be required to manage the network. This chapter explains our examination of the
operating strategy and presents our conclusions on assumed levels of efficient operations expenditure required for CP5.
7.5 Approximately 70%161 of operations costs are affected by the operating strategy. We have assessed all operations costs but with a particular focus on those affected by the strategy.
160 As set out in Network Rail‟s business case supplied in support of the SBP.
7.6 From our early consultations it is clear that the industry is broadly supportive of the strategy, although it is at an early stage and several parties have expressed caution. The RMT set out general opposition to various elements of the SBP, including the operations strategy. Network Rail is working with the main unions in developing the strategy and we explain in chapter 11 our conclusion that there is nothing in the determination that prevents Network Rail complying with Health and Safety law.
Figure 7.1: New operating centres proposed in the SBP*
* SEUs are the signalling equivalent units which can be used as way of illustrating the span of control for each operating centre