South East Europe Rail conference - Frank Jost


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South East Europe Rail conference - Frank Jost

  1. 1. South East Europe Rail& Public Transport DevelopmentWhen will the West Balkansput on the green signal?Belgrade, 5 June 20131
  2. 2. Topics• market access in the region• Recast of market access legislation(Directive of 2012)• Rail freight networks (2013/2015)• 4th railway package (proposal 2013) 2
  3. 3. Opportunities• Local entrepreneurs are ready to expandbusiness or enter the market• Network statements published• international services are a market gap asmany of them disappeared / are notattractive• Regional ports and big shipping points• Competent personnel available• Institutions in place 3
  4. 4. Threats• Conflict of interest (owner vs financier vsreferree)• Mix of financial streams / liabilities• Lack of managerial independence• Courts decide too slowly• Politics are defensive - no policy activemarket opening4
  5. 5. Topics• market access in the region• Recast of EU market access legislation(Directive of 2012)• Rail freight networks (2013/2015)• 4th railway package (proposal 2013) 5
  6. 6. Rail: what do we want to achieve ?• opening of the rail transport market tocompetition• Non-discriminatory access for all• Competitivity of the services on quality andprice• Maintaining high safety levels• Quality of infrastructure6
  7. 7. Market share of all but the principal railway undertakings(freight) in %0102030405060FIIELTLUSKSIESPTBEATHUFRLVITDEDKNOBGPLNLSEEEUKRO7
  8. 8. Problems addressed in the recast• Infrastructure financing and charging• Low level of investment in rail infrastructure• Absence of medium to long term development strategies• Inadequate level and structure of charges• Competition:• Insufficient transparency of market conditions• Persistent discriminations in access to the infrastructure• Difficult access to rail-related services (charging/allocation)• Regulatory oversight:• Lack of independence• Lack of competences• Lack of means• Insufficient cooperation with counterparts8
  9. 9. Recast - overview• Quality of rail infrastructure• Contractual agreements of 5 years• Financial balance in 5 years• quality of rail infrastructure – incentives and ind• Access conditions• Rail regulator – the advocate to fair access conditions• Terminal operator – transparency and independence• International traffic• Aligning rail border crossing agreements• IM s associating on capacity allocation and charges• Rail regulatory bodies• No early termination,• no conflict of interest (cool-off period, ownership of incumbent)• Network of regulators, but no EU regulator• Binding rules for mutual assistance9
  10. 10. Topics• Review of TEN – transport• Recast of market access legislation• Rail freight networks• 4th railway package10
  11. 11. .General Objectives:» Reinforce cooperation at all levels alongselected rail freight corridors, especiallyamong Infrastructure Managers» Develop rail freight corridors in terms ofcapacity and standard» Provide rail freight services of good quality.Purpose:» Increase rail freight’s competitivenessand market shareRegulation on a European rail network forcompetitive freight11
  12. 12. .Path allocation process and rules:» Smooth and efficient» Open for applicants other than railwayundertakings» Good and reliable train paths» Flexibility to accommodate ad hoc trainpath applications» Transparent and easy access toinformation.Traffic management:» Sufficient priority to freight trains» Even in case of disturbances» Coordinated between severalInfrastructure Managers» Performance schemesSpecific objectives (I)12
  13. 13. .Terminals:» Adequacy between infrastructure capacityand terminal capacity» Access to ancillary services.Technical harmonisation of infrastructure:» Increase in productivity of each freighttrain» Coordinated development of harmonisedinfrastructure» Deployment of interoperability.Investments:» Coordinated among various InfrastructureManagers» Minimise disruption through coordinatedMOW workSpecific objectives (II)13
  14. 14. .Executive board.Management boardComplemented by:» Advisory Group – Railway undertakings» Advisory Group – Terminalsowners/managers.One-Stop-Shop» Contact point for applicantsGovernance structure (I)14
  15. 15. .Proposal for further corridors by MemberStates= 2 years (Art. 5(5)).Examination of proposals by EuropeanCommission= 9 month (Art. 5(6)).Establishment of Freight Corridor byMember States= 2 years (Art. 5(7))Time schedule for furthercorridors15
  16. 16. .Cooperation and exchange of information.In case of complaint or own initiative» Consultation and information request» Provision of information» Transfer of information.Request, provision and transfer ofinformation also applies to associations ofinfrastructure managersMonitoring by regulatory bodies16
  17. 17. Topics• Market monitoring• Recast of market access legislation• Rail freight networks• 4th package17
  18. 18. Characteristics of the Railway Sector• Passenger modal share static at 6% (despite rapid growth in highspeed rail)• Consumer satisfaction poor (rail services ranked 27th of 30 serviceindustries)• Public infrastructure investment  25 billion Euro in 2009• Public subsidy for PSO of 21 billion Euro in 2009• Internal market still fragmented along national lines• Long and costly authorisation procedures for rolling stock andundertakings18
  19. 19. Why do we need to act?• Improve competitiveness of rail with other modes in order toincrease the market share of the most environment-friendlymode of transport• Spend public money more efficiently on public rail transportservices• Encourage market entry by reducing administrative and technicalbarriers• Open domestic rail passenger transport to competition• Encourage market entry and ensure non – discrimination througha better governance of the infrastructure  Fourth package to complete the market opening process andprovide for legislative stability and business development visibilityHow do we move forward?19
  20. 20. How was the package prepared ?• Consultation of a high number (nearly 500) of stakeholders• Eurobarometer survey: 25.000 citizens in 25 Member States• Stakeholders workshops and conferences• External support study• Stakeholders studies and position papers• 3 Impact assessments20
  21. 21. .Independence of infrastructure mger.Single EU safety certificate forundertakings.EU vehicle authorisation.EU Railway Agency - ERTMS tests.PSO: competitve tendering.Domestic pax market opening4th package21
  22. 22. New ERA Regulation single safety certificates and vehicle authorisations (with a rightto charge the applicants for issuing them) strengthened control by ERA over NSAs and NoBos (right toaudit and inspections) removal of unnecessary national rules compatibility of national calls for tenders for ERTMS withtechnical rules (as this is not currently performed satisfactorilyin MS e.g. NL)22
  23. 23. Rail Safety DirectiveProposal for a Recast23
  24. 24. National rules (art. 8) Removal of Annex II:Member States may set up new national rules only if current safetymethods are not covered by a CSM or as an urgent preventive measure.Draft to be submitted. Procedure in ERA regulation. Member States should keep their system of national rules updated, deleteobsolete rules and keep COM and ERA informed.ERA can invite a MS to remove a national rule. Member States should not adopt new national rules or set up projectsthat increase the diversity of the present system.24
  25. 25. • Single Safety Certificate (art. 10-11) Railway Undertakings have to apply for a Single Safety Certificate toERA, valid at the EU level ERA grants the Single Safety Certificate if the RU has established itsSafety Management System (SMS) in accordance with all requirements RU informs NSA 3 months before start of operation. NSA can expressdoubts and inform ERA that takes necessary measures ERA and NSAs shall cooperate in the supervision of the Single SafetyCertificate25
  26. 26. Rail Interoperability DirectiveProposal for a Recast26
  27. 27. Current vehicle authorisation Implementation of EU law: different transposition timetablesand interpretations in the MSs Roles and responsibilities: different interpretations National rules: mission, unclear, inapproriate, non-transparent TSIs: to be extended to off-TEN, open points to be closed Autorisation process: long, uncertain, expensive;unnecessary repetition of tests and verifications
  28. 28. Placing in Service of Vehicles (Article 21) Railway undertakings are responsible for the placing in service ofvehicles. Therefore, railway undertakings must check the technicalcompatibility of the vehicle with the route and the safety integration ofthe vehicle into the system it is meant to operate in. Railway undertakings must communicate their decisions on the placingin service of vehicles to the Agency, the infrastructure managers and thenational authorities concerned.28
  29. 29. Impact assessment –opening of domesticpassenger rail markets29
  30. 30. The EU railway market:Commercial services (1/3 of EU passenger-km)Public service obligations (2/3 of EU passenger-km)A variety of market structures across Europe:30
  31. 31. The consultation:Consultation process: railway stakeholders, Eurobarometer, SocialDialogue Committee, Committee of the RegionsMain results:• 71% of Europeans in favour of more competition in rail• 60% of rail stakeholders in favour of a combination of both openaccess and competitive tendering for PSOs• 55% rail stakeholders favour "Open access subject to viability ofPSCs"• Social Partners prefer rather more investment in rail• Regional authorities polarised concerning market access31
  32. 32. Analysis of impactsMain impacts of preferred option:• Benefits of up to 29 billion EUR – up to 43 billion EUR ifcombined with vertically seperated structures• Transitional phases soften social impact as 30% of rail workforceto leave in the next 10 years• Savings of 20% for public authorities• Prices and fares – downward pressure on fares in commercialservices32
  33. 33. Governance of the InfrastructureManagerand theOpening of Domestic Passenger Markets33
  34. 34. A better governance for infrastructureEfficiency challenge:• Infrastructure manager as natural monopolies may lackresponsiveness to customers needs• Insufficient incentives for infrastructure managers (IM) to reducecosts and improve services• Lack of cross-border co-operationEqual access challenge:• Conflict of interest of integrated IMs, having to grant non-discriminatory access to new entrants and, at the same time,take account of interests of a rail holding• Discrimination opportunities• Lack of financial transparency/cross - subsidisation34
  35. 35. Governance Proposals• All infrastructure management functions in the same hands(unified IM)• Coordination body for infrastructure managers and users• Establish EU network of IMs for international coordination• Institutional separation of infrastructure and transport operationsby 2019 to remove conflicts of interest• Possibility to keep integrated structure for a transitional periodand under strict independence rules (based on the experience ofthe ITO model in Energy)35
  36. 36. Governance Proposals (I)• Art. 63(1) of Dir. 2012/34/EU: Rendez-vous clause• Art. 7: Infrastructure managers to fulfil all necessary functions• Art. 3(2): Definition of the functions: development, operation,maintenance• Art. 7: Preferred model institutional unbundling, no return tointegration after entry into force of the Directive• Art. 7a: Effective independence of an IM within a verticallyintegrated undertaking: legal independence, no mutualshareholding, strict rules for financial relations36
  37. 37. Governance proposals (II)• Art. 7b: Independence of staff and management:- Following closely Annex V of COM189(2006) and Chinese walls ofDirectives 2009/72 and 2009/73- In addition rules on remuneration of managers• Art. 7c: Verification of compliance- Upon request of a MS or ex officio, Commission verifies whether 7a and 7bare implemented and this ensures level playing field and absence ofcompetition distortion• Art. 7d: Coordination Committee for the network• Art. 7e: European Network of Infrastructure Managers37
  38. 38. Domestic Rail Passenger Market Proposals• Art. 10: Open access for all EU operators to all markets, includingdomestic passenger markets• Art. 11: Right of access may be limited to protect economicequilibrium of public services• Test to be done by regulators, as for international services• Article 38(4): Time frame for economic equilibrium test• Art. 13a: Possibility of integrated ticketing schemes betweenpassenger operators, in a way that does not distort competition38
  39. 39. Completing the Single EuropeanRailway Area to foster Europeancompetitiveness and growth39
  40. 40. Social dimension of the initiative• Railway undertakings account for some 800 000 worker• More indirect employment in manufacturing, rail-related services• Impact of the measures will depend on interaction of theexpected efficiency gains (up to 20%) with high number ofretirements due to rapid ageing of the rail workforce.• 30% of rail workforce to retire in the next 10 years with risks ofshortage .• New entrants are sources of job creation (e.g. 1.000 employmentwith the launch of NTV in Italy)• Transfer of workers between PSC contractors required in specificconditions but MS always permitted to impose40
  41. 41. Amendment of Regulation 1370/2007Definition of Public Service Obligations (PSO)/scope ofPublic Service Contracts (PSC)• Competent authorities (CA) to define objectives of publictransport policy in public transport plans• PSO to be consistent with public transport plans41
  42. 42. Amendment of Regulation 1370/2007Definition of Public Service Obligations (PSO)/scope ofPublic Service Contracts (PSC)• Specifications of PSO and their scope of application tocomply with various criteria (mainly based on Treatyprinciples) in view of achieving objectives of publictransport plans: Appropriateness (suitable means?) Necessity and proportionality (services envisaged and provided bythe market not sufficient?)42
  43. 43. Amendment of Regulation 1370/2007Definition of Public Service Obligations (PSO)/scope ofPublic Service Contracts (PSC)• Specifications of PSO and related compensation of the netfinancial effect of complying with them to: Achieve public transport policy objectives most cost-effectively Financially sustain provision of public passenger transport in the longterm• Stakeholders to be consulted on draft public transport planand draft PSO specification43
  44. 44. Amendment of Regulation 1370/2007Definition of Public Service Obligations (PSO)/scope of PublicService Contracts (PSC)For rail only:• Compliance with assessment based on criteria andprocedure controlled by rail regulatory body• Maximum annual volume of PSC (in terms of train-km)higher value of either 10 million or 1/3 of total national railpassenger transport volume under PSC44
  45. 45. Amendment of Regulation 1370/2007Award of PSC• Deletion of Art 5(6) mandatory competitive award for railtransport• Other possibilities of direct award (internal operator, smallscale contract, emergency measure) are not modified• Threshold for small scale PSC in rail: €5.000.000• CA to make available all relevant information forestablishing a bid (passenger demand, costs, revenues,rolling stock specifications, etc.)45
  46. 46. Amendment of Regulation 1370/2007Award of PSC• Mandatory tendering for rail from 3 December 2019• Transitional period until 31 December 2022 for rail PSCdirectly awarded between 1 January 2013 and 3 December2019• In order to increase competition CA may decide beforelaunching the tender procedure to limit the number ofcontract lots to be awarded to the same railwayundertaking46
  47. 47. Amendment of Regulation 1370/2007Framework conditions• Competent authorities to ensure fair access to rolling stock sothat new entrant operators are able to take part in tenders• Where there is no well functioning market for rolling stock, CA totake the residual value risk of the rolling stock, if operatorsintending to participate in tender request this.• CA can choose most appropriate means to comply with thisrequirement while respecting EU law (state aid rules): managing its own fleet, providing a bank guarantee, take-over guarantee• Commission to adopt implementing measure defining details ofprocedure to be followed (introduction of committee procedure inRegulation - SERAC) 47
  48. 48. Amendment of Regulation 1370/2007Framework conditions• Enhanced transparency on date and duration of awarded PSC inannual reports of CA for better bidding capacity management ofRU• To ease social impact of opening cross-sectorial legislation (e.g.Directive 2001/23) or CA determine transfer of workers betweenPSC contractors (no legislative modification)48
  49. 49. Thank you for your attention49