Division 1 – Access pricing in connection with freight services
Sustainable competitive prices
(1) The access price payable to the access provider by an access
seeker for a railway infrastructure service provided to enable the
access seeker to deliver a freight service will be determined by the
arbitrator and will depend on whether there is:
(a) a sustainable competitive price (as to which see
subsections (2) to (6)); or
(b) no sustainable competitive price (as to which see section 2).
(2) A sustainable competitive price will exist in relation to the
transportation of a particular type of freight where it can be
demonstrated that:
(a) there are no regulatory, technical or other practical
impediments to transport of the freight by a mode of transport
other than the railway or combination of such alternative
modes; and
(b) the availability or potential availability of modes of transport
other than the railway is an effective constraint on the price of
transporting such freight on the railway having regard to the
following factors:
(i) the number and size of participants in the market;
(ii) the type and volume of freight involved and any unequal
backhaul loadings;
(iii) whether there are any regulatory, technical or other
practical barriers to entry;
(iv) the extent of product differentiation in the market,
including the differences in the ancillary services and
convenience offered by different modes of transport;
(v) the dynamic characteristics of the market including any
fluctuations in demand for transportation services;
(vi) the costs and service characteristics of transporting
freight by different modes of transport (including the time
for delivery of the freight, rail rolling stock or other
vehicle axle loadings, length and speed of trains, and
AustralAsia Railway (Third Party Access) Act 1999 38
any infrastructure upgrade requirements);
(vii) contractual terms (such as duration and frequency of
service, whether for a specific volume or at call);
(viii) congestion and bottleneck inefficiencies caused by
constraining points on the road, railway or other relevant
infrastructure;
(ix) the safety requirements the different modes of transport
are required to meet;
(x) the direct and indirect costs of environmental impacts of
the different modes of transport; and
(xi) any other relevant matters.
(3) Where there is a sustainable competitive price, the access price
(AP) payable to the access provider by an access seeker for the
railway infrastructure service will be a price determined by the
arbitrator which is:
infrastructure service (see subsection (4)); and
infrastructure service (see subsection (5)),
but subject to these qualifications the price so determined will be
calculated in accordance with subsection (6).
(4) The ceiling price is to be an amount equal to the costs associated
with the operation of the required railway infrastructure needed by
the access seeker for the provision of the freight service involving
the transportation of freight on the railway between one point
(point A) and another point (point B), calculated assuming the
access seeker is the sole user of that required railway infrastructure
and calculated in a manner consistent with section 2(2)(d)
and (7)(a).
(5) The floor price is to be calculated in accordance with section 3.
(6) Subject to subsections (4) and (5), the access price payable where
there is a sustainable competitive price is to be an amount
calculated in accordance with the following formula:
Error! Bookmark not defined.AP = CRLP AB – ICAR
AustralAsia Railway (Third Party Access) Act 1999 39
Where:
AP is the access price payable by the access seeker to the
access provider for the railway infrastructure service used by the
access seeker to provide a freight service to its customers involving
the transportation of freight on the railway between one point
(point A) and another point (point B);
CRLPAB is the competitive rail-linehaul price, being the maximum
competitive price that the access provider could charge for the
transport of freight between one point (point A) and another point
(point B) on the railway having regard to the nature of the railway
infrastructure service being sought and:
(a) the prices charged (on the basis of long term efficient costs of
supply) for transporting on the railway the same or similar
freight where some other mode of transport (or a combination
of modes) provide an effective constraint on prices, taking into
account, and where appropriate removing the effect of, any
differences in:
(i) the type and volume of freight product involved;
(ii) cost or service characteristics (such as the time for
delivery of the freight, rolling stock axle loadings, train
length and train speed);
(iii) contractual terms (such as the duration and frequency of
the access contract and whether the contract involves a
take-or-pay obligation for specific volumes of freight or
some other risk allocation arrangement);
(iv) the amount of freight and the prices charged in each
direction; and
(v) the origin and the ultimate destination of the freight; and
(b) the prices charged (on the basis of long term efficient costs of
supply) for the use of alternative modes of transport (for
example, by road, sea, air or some other mode of transport or
a combination of such means) for transporting the same or
similar freight taking into account, and where appropriate
removing the effect of, any differences in:
(i) any additional handling or transportation costs required
in order to compare the total price of delivering the
relevant freight product from the linehaul point of pick-up
(of the alternative mode of transport) to the final linehaul
point of delivery of the freight product, when compared
to transporting the freight product from the linehaul point
AustralAsia Railway (Third Party Access) Act 1999 40
of pick-up to the final linehaul point of delivery via the
relevant section of the railway between point A and
point B;
(ii) the type of freight product involved, including its
handling characteristics and the volumes of the freight
product to be hauled and the contributions, if any,
required to upgrade necessary infrastructure;
(iii) contractual terms (such as the duration and frequency of
the service relating to the delivery of freight and whether
the contract for the delivery of freight involves a take-or-
pay obligation for specific volumes of freight or some
other risk allocation arrangement);
(iv) the amount of freight and the prices charged in each
direction; and
(v) the origin and ultimate destination of the freight; and
ICAR is the incremental cost (above-rail) of providing the
relevant freight service (including, if the relevant freight service is
not provided, an estimate of that cost) involving the transport of
freight between point A and point B on the railway of whichever of
the following entities that conducts freight services:
(a) the access provider;
(b) if the access provider does not conduct freight services, a
related body corporate or an associate of the access provider;
(c) if neither the access provider nor a related body corporate or
an associate of the access provider conduct any freight
services, an operator of freight services operating in
accordance with good railway industry practice,
(the relevant entity being referred to as the designated service
provider), such costs to be calculated having regard to the total
above-rail incremental costs, being the costs the designated
service provider would avoid if it did not provide the freight service,
including:
(d) operating costs, being the on-going operational costs of
providing the freight service, including the labour and material
costs that are causally related to the provision of the freight
service, including
– train crew labour costs;
– rollingstock maintenance costs;
AustralAsia Railway (Third Party Access) Act 1999 41
– fuel costs; and
– terminal handling costs;
(e) administrative costs; and
(f) an appropriate allowance for capital costs, which reflects the
opportunity costs of the relevant above-rail assets of the
designated service provider where they exist or otherwise the
acquisition cost of the relevant above-rail assets (which may
not be new assets), comprising both depreciation and return
on assets, determined in accordance with guidelines
developed and published by the regulator.
(7) The guidelines referred to in paragraph (f) above must:
(a) adopt an approach for valuing capital assets; and
considers costs could be avoided,
2. No sustainable competitive prices
(1) Where there is not a sustainable competitive price, the access price
payable to the access provider by an access seeker for a railway
infrastructure service that is provided to enable the access seeker
to deliver a freight service will be a reasonable price determined by
the arbitrator which is:
infrastructure service (see subsection (2)); and
infrastructure service (see subsection (4)),
and the price so determined must take into account the matters set
out in clause 21 of this Code.
(2) The ceiling price is to be an amount equal to whichever is the
lesser of:
(a) the costs associated with the operation of the required railway
infrastructure needed by the access seeker for the provision
of the freight service involving the transportation of freight on
the railway between one point (point A) and another point
(point B), calculated assuming the access seeker is the sole
user of that required railway infrastructure; and
AustralAsia Railway (Third Party Access) Act 1999 42
(b) the costs associated with the operation of the required railway
infrastructure needed by the access seeker for the provision
of the freight service involving the transportation of freight on
the railway between one point (point A) and another point
(point B), less an amount determined by the arbitrator to be
the aggregate of:
(i) the avoidable costs attributable to the usage of that
required railway infrastructure by all other access
holders; and
(ii) a reasonable contribution to the fixed costs of that
required railway infrastructure ("R") from all other access
holders using that required railway infrastructure,
where:
(c) R is to be an amount which is not greater than the amount, if
any, by which revenues of the access provider attributable to
access holders' (other than the access seeker's) usage of the
required railway infrastructure required by those access
holders exceeds the avoidable costs attributable to those
access holders' usage of that required railway infrastructure;
and
(d) the costs are to be on-going costs that are causally related to
the relevant required railway infrastructure, including:
(i) labour and material costs associated with the operation
and maintenance of the required railway infrastructure
(including major periodic maintenance);
(ii) an appropriate allocation of administrative costs;
(iii) an appropriate allocation of capital costs, including both
depreciation and a return on assets, determined in
accordance with guidelines developed and published by
the regulator.
(3) The costs to be applied in subsection (2) must be forward-looking
and efficient.
(4) The floor price is to be calculated in accordance with section 3.
(5) The arbitrator must, in determining a price under this section, have
regard to economic efficiency taking into account the prices being
charged by the access provider to access holders for the same or
similar services (including, if the access provider, a related body
corporate or an associate has conducted the same or similar
services on the railway, the actual prices charged in relation to
AustralAsia Railway (Third Party Access) Act 1999 43
those services).
(6) The regulator must develop and publish guidelines in connection
with the operation of this section (in addition to the guidelines
specifically required under subsection (2)(d)(iii)).
(7) The guidelines must:
(a) subject to subsection (8), adopt an approach for valuing
capital assets which reflects the Depreciated Optimised
Replacement Cost for those assets;
considers costs could be avoided; and
(c) in relation to a return on assets, have regard to:
rate for return on investments and the rate of inflation),
(8) The guidelines may, if the regulator thinks it appropriate to do so,
allow an adjustment to the Depreciated Optimised Replacement
Cost valuation of capital assets under subsection (7)(a) on account
of government-contributed assets and other government financial
assistance after taking into account any associated liabilities
assumed by the access provider, subject to the qualifications that
any such adjustment:
(a) must not, when used in calculating the ceiling prices specified
in sections 1(4) and 2(2), prevent the access provider earning
a reasonable risk-adjusted return on the capital invested in the
railway (disregarding government-contributed assets and
AustralAsia Railway (Third Party Access) Act 1999 44
other government financial assistance); and
(b) must be made on a pro-rated basis over the entirety of the
capital assets comprising the railway infrastructure facilities.
3. Access price not below economic cost
(1) The access price must not be less than the economic cost of
providing the railway infrastructure service, and accordingly the
access price calculated in accordance with section 1 or section 2
(as the case may be) must not be less (but may be greater) than an
amount which is equal to the avoidable costs (below-rail)
associated with the access provider providing access to the
required railway infrastructure for the access seeker to deliver the
relevant freight service involving the transport of freight between
point A and point B on the railway, being:
(a) labour and material costs which vary directly with the usage of
the access seeker (including major periodic maintenance);
(b) administrative costs which vary directly with the usage of the
access seeker; and
(c) capital costs which vary directly with the usage of the access
seeker, including the costs of replacing the required railway
infrastructure assets being brought forward by the operation of
the freight service (such as wear and tear of the track).
(2) The costs to be applied in subsection (1) must be forward-looking
and efficient.
(3) The regulator must develop and publish guidelines in connection
with the operation of this section.
(4) The guidelines must:
(a) subject to subsection (5), adopt an approach for valuing
capital assets which reflects the Depreciated Optimised
Replacement Cost of those assets;
considers costs could be avoided; and
AustralAsia Railway (Third Party Access) Act 1999 45
(c) in relation to a return on assets, have regard to:
rate for return on investments and the rate of inflation),
(5) The guidelines may, if the regulator thinks it appropriate to do so,
allow an adjustment to the Depreciated Optimised Replacement
Cost valuation of capital assets under subsection (4)(a) on account
of government-contributed assets and other government financial
assistance after taking into account any associated liabilities
assumed by the access provider, subject to the qualifications that
any such adjustment:
(a) must not, when used in calculating the floor prices specified in
sections 1(5) and 2(4), prevent the access provider earning a
reasonable risk-adjusted return on the capital invested in the
railway (disregarding government-contributed assets and
other government financial assistance); and
(b) must be made on a pro-rated basis over the entirety of the
capital assets comprising the railway infrastructure facilities.
AustralAsia Railway (Third Party Access) Act 1999 46
Division 2 – Access pricing in connection with passenger services
4. Access pricing for passenger access
(1) The access price payable to the access provider by an access
seeker for a railway infrastructure service that is provided to enable
the access seeker to deliver a passenger service will be a price
determined by the arbitrator which is:
infrastructure service (see subsection (2)); and
infrastructure service (see subsection (3)).
(2) The ceiling price is to be determined by the arbitrator reflecting the
highest price that could fairly be asked by the access provider for
the provision of the railway infrastructure service having regard to
the principles used to calculate the ceiling price set out in
section 2(2).
(3) The floor price for the provision of railway infrastructure services is
to be determined by the arbitrator reflecting the lowest price at
which the access provider could provide the railway infrastructure
service without incurring a loss, having regard to the principles set
out in section 3.
Division 3 – Worked examples
5. Introduction
The process an arbitrator should follow is illustrated in Attachment
A. Four worked examples are provided in this section to illustrate
application of the pricing principles. The first two examples are for
services covering freight traffics that are already hauled by the
railway (one dealing with freight originating on the railway at
Tarcoola and the other dealing with freight originating beyond
Tarcoola elsewhere on the interstate rail network). The third and
fourth examples are for new freight traffics, with and without a
sustainable competitive price respectively.
(1) Example 1 – Existing freight traffic (originating at Tarcoola)
operation of general freight services over the length of the railway
(Tarcoola to Darwin), with the freight services (and the freight)
having their origin at Tarcoola and their ultimate destination at
Darwin. The freight services will be expected to attract existing
freight from the incumbent general rail freight operator but also
potentially new freight of the same type (either transferred from
AustralAsia Railway (Third Party Access) Act 1999 47
road or generated).
Following the process illustrated in Attachment A, a number of
discrete steps are required:
• For general freight services, the road linehaul rate is likely to
provide an effective constraint on the pricing of the railway for these
services, given the:
– highly competitive road market; and
– low switching costs between road and rail.
• For this example, it is assumed that this threshold test is met.
(b) What is the competitive imputation access price (CRLP AB–
• If the railway hauls the same or similar freight in the corridor, the
railway's current freight rates will be a strong guide to the
competitive rail linehaul price for the service for which access is
being sought.
– Other value-added services provided by the railway may have
to be disaggregated from the rail price delivered to the
customer (e.g. road pickup and delivery charges).
– Other adjustments might be required to account for
differences in the type of service being operated, for instance:
... time of day/peak issues; or
... conditions of contract (e.g. long-term freight haulage contract
vs. spot rates).
• Assume for this example, that existing freight of the same or similar
type was carried for an average rate of 3.5 cents per net tonne
kilometre and that this was considered to be the sustainable
competitive rail linehaul price (CRLP AB ).
• The incremental above rail cost (ICAR) represents the above rail
costs which a freight operator would avoid if it did not provide the
freight service. If the access provider conducts freight services
then it is the access provider's actual costs that are taken into
account. If the access provider did not provide freight services,
then the costs of any associated entity or of an operator of freight
AustralAsia Railway (Third Party Access) Act 1999 48
assumed that the access provider is an integrated freight operator
that provides the relevant freight services.
• ICAR would be determined with regard to the actual above rail costs
of the integrated access provider. Attachment B illustrates an
example railway owner's cost structure.
• The competitive imputation access price (2.17 c/ntk) is the
difference between the competitive rail linehaul price (CRLP AB ) of
3.50 c/ntk and the incremental above rail costs (ICAR) of 1.33 c/ntk
(1.03 + 0.3 being the sum of the incremental above rail operating
cost and the rollingstock capital charge). Expressed in terms of
cents per gross-tonne-kilometre1, the equivalent competitive
imputation access price is 0.99 c/gtk.
– It was assumed that all costs, except
administration/management costs and 50% of the terminal
costs would be avoidable with the loss of freight business.
– If the freight service for which access was being sought would
replace the entire above rail business of the access provider,
then all above rail costs are likely to be avoidable in which
case, ICAR increases to 1.55 (1.25+0.30) and the access price
falls from 2.17 c/ntk to 2.00 c/ntk (0.89 c/gtk).
• The access proposal is expected to generate 2 billion ntks (or 4.4
billion gtks).
• Stand-alone operating costs for the freight task are taken to be $20
million, which is less than operating costs of the total railway of $24
million allowing for minimum requirements of the access seeker as
a stand-alone operation (see Attachment C).
• It is assumed that track depreciates with use and a depreciation
charge of 0.05c/gtk has been applied (i.e. the usage of the service
of 4.4 billion gtk x 0.05c/gtk). Other infrastructure is depreciated on
a time basis assuming a 50 year life. The total depreciation charge
is $15.7 million.
1 Gross tonne kilometres (i.e. net tonne kilometres plus the tare weight of the rollingstock) is a
more common measure of usage for access pricing purposes as it more accurately reflects
cost causality for an infrastructure owner than ntk and is generally more easily measured by
an independent track owner.
AustralAsia Railway (Third Party Access) Act 1999 49
• The replacement value of the railway from Tarcoola to Darwin
might be $1500 million, which might correspond to a written-down
value of $1000 million.
– The interest charge after tax is $180 million (assuming an
allowable rate of return of 18%) which grosses up to $281.25
are $316.95 million as shown in Attachment C.
• The ceiling price for the access proposal would be 15.85c/ntk or
7.20c/gtk (@2.2 ntk:gtk).
• The floor price is the incremental below rail cost, i.e. the below rail
costs which could be avoided if it were not for the use of the
network by the freight service seeking access.
– Typically, this will include both maintenance costs and capital
consumption costs attributable to the individual service.
Some operations (signalling) costs may also be avoided
depending on the nature of the train control operations and
the nature of the service for which access is being sought.
Guidelines on the method to be used to calculate the floor
price will be developed and published by the regulator.
– In Attachment B, the track variable cost, i.e. the component of
infrastructure maintenance which varies directly with the
usage of the access seeker, is 0.07 c/gtk ($6m/8800m gtk). In
this example there are no directly variable operations (train
control) and administration costs.
– The capital costs which will vary directly as result of the
access seeker's usage will relate to components of
infrastructure where renewal is typically related to use (as
opposed to time). For higher density lines, this will typically
include rails, sleepers and ballast. Assuming a track
replacement cost of $500,000 per kilometre (including rails,
sleepers and ballast but excluding initial formation works and
structures), and an economic life of 1 billion gross tonnes,
gives a depreciation charge of 0.05 c/gtk. Assuming an
equivalent interest charge, gives a total incremental below rail
cost of 0.17 c/gtk (0.07+0.05+0.05).
AustralAsia Railway (Third Party Access) Act 1999 50
• The final access price is determined as the CIPR price (0.99 c/gtk)
the ceiling price (7.20c/gtk).
(1A) Example 1A – Existing freight traffic (originating beyond
Tarcoola elsewhere on the interstate rail network)
operation of general freight services over the length of the railway
(Tarcoola to Darwin), with the freight services (and the freight)
having their origin beyond Tarcoola elsewhere on the interstate rail
network and having their ultimate destination at Darwin. For the
purposes of this example, the freight services (and the freight) will
be taken to have their origin in Adelaide. The freight services will
attract existing freight from the incumbent general rail freight
operator operating services between Adelaide and Darwin but also
potentially new freight of the same type (either transferred from
road or generated).
Following the process illustrated in Attachment A, a number of
discrete steps are required:
• For this example, it is assumed that this threshold test is met.
(b) What is the competitive imputation access price (CRLPAB -
• The sustainable competitive rail linehaul price for transport of the
freight between Tarcoola and Darwin (CRLPAB), is a function of
the relevant market price (e.g. the transport of freight between
Adelaide and Darwin) and the cost of transporting the freight to and
from the relevant points on the railway (i.e. Tarcoola and Darwin).
• An arbitrator must consider comparable freight services (using the
railway and any alternative transport modes, such as road) in order
to determine CRLPAB. For the purposes of simplification, and for
this example only, it is assumed that road is ignored and existing
freight of the same or similar type was being carried on the railway
by the access provider between Adelaide and Darwin for a rate of
3.5cents per net tonne kilometre and this is the price on which
CRLPAB is based. If the relevant access proposal was to generate
2 billion ntk on the railway (Tarcoola to Darwin in this example) and
3 billion ntk in total between Adelaide and Darwin, the relevant
market revenue is $105 million (3.50c/ntk x 3 billion ntk).
AustralAsia Railway (Third Party Access) Act 1999 51
• To determine the maximum competitive price (as required by
section 1(6) of the pricing principles) for access to the railway
between Tarcoola and Darwin, the lowest cost of transporting the
freight to and from the relevant points on the railway must be
calculated. This cost would be assessed by reference to the
access provider's own costs of transporting the freight to and from
the relevant points on the railway or some other means, whichever
cost was lower. For this example, the access provider's avoidable
cost of transporting the freight to and from the railway are taken to
be the lowest cost.
• If the freight in question originated in say Sydney, the relevant
market revenue would be between Sydney and Darwin. CRLPAB
would be calculated by subtracting from the relevant market
revenue the lowest cost of transporting the freight to and from the
relevant points on the railway, which might be the access provider's
own costs between say Adelaide and Tarcoola and some other
(lowest) cost between Sydney and Adelaide.
• The access provider's avoidable cost between Adelaide and
Tarcoola is the sum of the above rail train operations cost (assume
$12.9 million, i.e. 1.29c/ntk, as outlined in the calculation of ICAR
below, multiplied by 1 billion ntk) and the below rail access charges
payable by the access provider in respect of the use of the railway
between Adelaide and Tarcoola (say $7.1 million).
• CRLPAB is then $85 million ($105 million less $20 million) or
4.25c/ntk ($85 million/2 billion ntk).
• The incremental above rail cost (ICAR) represents the above rail
costs which a freight operator would avoid if it did not provide the
freight service. If the access provider conducts freight services
then it is the access provider's actual costs that are taken into
account. If the access provider did not provide freight services,
then the costs of any associated entity or of an operator of freight
assumed that the access provider is an integrated freight operator
that provides the relevant freight services.
• ICAR would be determined with regard to the actual above rail
costs of the integrated access provider in operating the freight
service between the relevant points on the railway (in this example,
between Tarcoola and Darwin). Attachment H illustrates an
example of the access provider's cost structure as a railway
owner/operator. In this example, the incremental above rail cost
(ICAR) would be 1.29c/ntk (0.99 + 0.3 being the sum of the
incremental above rail operating cost and the rollingstock capital
charge).
AustralAsia Railway (Third Party Access) Act 1999 52
• The competitive imputation access price (2.96c/ntk) is the
difference between the competitive rail linehaul price (CRLPAB) of
4.25c/ntk and the incremental above rail costs (ICAR) of 1.29c/ntk.
Expressed in terms of cents per gross-tonne-kilometre the
equivalent competitive imputation access price is 1.35c/gtk.
• The calculation of the ceiling price is as in Example 1. The stand
alone cost for a general freight service of 2 billion ntk on the railway
between Tarcoola and Darwin is taken to be 7.20c/gtk.
• The calculation of the floor price is as in Example 1. The floor price
is taken to be 0.17c/gtk.
• The final access price is determined as the CIPR price (1.35 c/gtk)
the ceiling price (7.20 c/gtk).
(2) Example 2 – New freight traffic – sustainable competitive price
operation of a new mineral freight service over 300 kms of the
railway. Again, following the process illustrated in Attachment A, a
number of discrete steps are required:
• Developments in road transport technologies have meant that road
transport is now a viable competitor for the transport of bulk mineral
flows in non-urban areas.
– Various examples now exist in the Northern Territory and
Queensland where large volumes of mineral traffic are hauled
by road (several hundreds of thousands of tonnes over
several hundred kilometres).
– Where sufficient differences in the characteristics of the haul
exist, cost modelling could be undertaken to develop
alternative road costs for the freight service for which access
has been sought.
... The cost of any road upgrades required would need to be
factored into the analysis.
AustralAsia Railway (Third Party Access) Act 1999 53
... The costs would include capital charges for the vehicles over
their economic life (which may be the economic life of the
mine rather than the engineering life of the vehicles).
• Assume for this example, that the competitive alternative price was
determined to be 4.0 cents per net tonne kilometre which was
considered to be an effective constraint on the pricing of the
railway, having regard to the:
– relative costs of transport by road and rail; and
– low switching costs between road and rail.
(b) What is the competitive imputation access price (CRLPAB—
• Because it is a new traffic, CRLPAB will be determined with regard
to the competitive alternative mode.
– Rail rates charged to existing customers might however assist
the arbitrator in making judgements about adjustments for
contract conditions, service quality factors etc.
• Assume for this example that the CRLPAB was 4.0 c/ntk.
• The incremental above rail cost (ICAR) represents the costs that a
freight operator would avoid if it did not provide the freight service:
– If the access provider conducts freight services then it is the
access provider's actual costs that are taken into account. If
the access provider did not provide freight services, then the
costs of any associated entity or of an operator of freight
assumed that the access provider is an integrated freight
operator that provides the relevant freight services.
– In this case, ICAR would still be based on the integrated
access provider's actual costs, but adjusted for the avoidable
resources assuming it did not undertake the freight service.
– The avoidable resources required (i.e. locomotives, wagons,
train hours etc) are valued using a set of unit costs (developed
from the railway's accounts). Attachment D provides example
unit costs.
– The derivation of ICAR for the new traffic example is shown in
Attachment E. It was assumed that some additional terminal
costs would be required (@ $0.50 per tonne) but no additional
shunting or administration/overhead costs would be incurred.
AustralAsia Railway (Third Party Access) Act 1999 54
• The competitive imputation access price (2.23 c/ntk) is the
difference between the competitive rail linehaul price (CRLPAB) of
4.00 c/ntk and the incremental above rail costs (ICAR) of
1.77 c/ntk. Expressed in terms of cents per gross-tonne-kilometre
the equivalent competitive imputation access price is 1.24c/gtk
(2.23/1.80).
• The replacement value of the 300 kms of the railway being used by
the new traffic might be $200 million, which might correspond to a
written-down value of $160 million.
– The interest charge after tax is $29 million (assuming an
allowable rate of return of 18%) which grosses up to $45
are $47.7 million as shown in Attachment F.
• If the new traffic was to generate 1 billion ntk, the ceiling price
would be 4.77 c/ntk or 2.65 c/gtk (@1.8 ntk:gtk).
• Following the example in the previous section, the floor price is
0.17 c/gtk.
• The final access price is determined as the CIPR price (1.24 c/gtk)
the ceiling price (2.65 c/gtk).
(3) Example 3 – New freight traffic – no sustainable competitive
price
This example similarly assumes that the access proposal relates to
the operation of a new mineral freight service over 300 kms of the
railway. Again, following the process illustrated in Attachment A, a
number of discrete steps are required:
AustralAsia Railway (Third Party Access) Act 1999 55
• Assume for this example, that the competitive alternative was
considered not to be a substitutable service and did not provide an
effective constraint on the pricing of the railway, i.e. no sustainable
competitive price exists.
(b) What is the ceiling price?
• The replacement value of the 300 kms of the railway
being used by the new traffic might be $200 million, which
might correspond to a written-down value of $160 million.
– The interest charge after tax is $29 million (assuming an
allowable rate of return of 18%) which grosses up to $45
are $47.7 million as shown in Attachment G.
• If there are multiple users of the relevant railway infrastructure, the
arbitrator may choose to determine an amount "R", being a
reasonable contribution to shared costs from those other users.
– The contribution to "R" from any single access holder would
not exceed the amount by which their access revenue
exceeds their avoidable costs and would not be less than the
additional costs they impose from their use of the relevant
railway infrastructure.
– Assume for this example that the arbitrator determined that
amount to be $23.85 million (50% of the stand-alone cost).
• If the new traffic was to generate 1 billion ntk, the ceiling price
would be 2.39 c/ntk or 1.33 c/gtk (@1.8 ntk:gtk).
(c) What is the floor price?
• Following the calculations from the previous example, the
incremental below rail cost is 0.17 c/gtk.
(d) What is the final access price?
• The arbitrator would then set an access price between the ceiling
price (of 1.33 c/gtk) and the floor price (of 0.17 c/gtk).
AustralAsia Railway (Third Party Access) Act 1999 56
• When determining the final access price, the arbitrator may take
into account a range of factors considered relevant, such as
– the potential impact on the access provider's legitimate
business interests, having regard to the access provider's
investment in above-rail rollingstock and infrastructure; and
– the potential for the new entrant to create additional economic
value (as opposed to merely transferring value from the
access provider).
AustralAsia Railway (Third Party Access) Act 1999 57
ATTACHMENT A. PROCESS FOR DETERMINING THE ARBITRATED
ACCESS PRICE
Are there any regulatory,
technical or other practical
impediments to transport
by an alternative mode?
Is there an alternative mode
of transport which provides
an effective constraint on the
railway’s pricing?
What are the prices charged for
the same or similar freight
hauled on the railway?
What are the prices charged
for alternative modes for
transporting the same or
similar freight?
What adjustments
are appropriate?
What adjustments
are appropriate?
What is the competitive
linehaul price?
What is the incremental
above rail cost?
What is the competitive
imputation access price?
What is the incremental
below rail cost?
What is the stand-alone
cost of the relevant
infrastructure?What is a reasonable
contribution to fixed costs
from other access holders
using the required railways
infrastructure?
Arbitrator determines the CIPR
price not less than the floor price
or greater than the ceiling price
final access
price?
If sustainable
competitive price
If not sustainable
competitive price
access price
ceiling?
floor price?
competitive
imputation
access price?
Is that a
sustainable
competitive
price?
No
No
Yes
Yes
NZ1001-83.ppt
Floor
Price
What is the access
pricing ceiling?
What is the floor price? What is the floor price?
What is the stand-alone
cost of the relevant
infrastructure?
What is the access
pricing ceiling?
Arbitrator determines the price
not less than the floor price or
greater than the ceiling price
AustralAsia Railway (Third Party Access) Act 1999 58
ATTACHMENT B. RAILWAY OWNER'S COST STRUCTURE (TARCOOLA
TO DARWIN)
Existing fleet
Locomotives 15
Wagons 600
Trains per week 10
Above rail services ($ pa)
Train crew $6,000,000
Fuel $16,000,000
Locomotive maintenance $8,000,000
Wagon maintenance $7,000,000
Terminal and shunting operations $8,000,000
Administration/management $5,000,000
Total above rail services $50,000,000
Below rail services
Train control (Darwin – Tarcoola) $1,000,000
Variable infrastructure maintenance (Darwin – Tarcoola) $6,000,000
Fixed infrastructure maintenance (Darwin – Tarcoola) $14,000,000
Administration, management $3,000,000
Total below rail services $24,000,000
Total $74,000,000
Net tonne kilometres 4,000,000,000
Gross tonne kilometres 8,800,000,000
Above rail operating costs (cents per ntk) 1.25
Incremental above rail operating cost (cents per ntk)1 1.03
Total operating cost (cents per ntk) 1.85
Average operating revenue per ntk (CRLP AB ) 3.50
Total operating revenue $140,000,000
Surplus to common costs, rollingstock capital and track2 $99,000,000
Surplus to common costs, rollingstock capital and track (cents per
ntk)
2.47
Annual capital charge (per locomotive) $266,667
Annual capital charge (per wagon) $13,333
Annual capital charges for locomotives $4,000,000
Annual capital charges for wagons $8,000,000
Total rollingstock capital charge $12,000,000
Remaining surplus to common costs and track $87,000,000
Total rollingstock capital charge (cents per ntk) 0.30
Incremental Above Rail Cost (ICAR) (cents per ntk) 1.33
Total above rail cost ($50m) less admin/management ($5m) and 50% terminal
costs ($4m) divided by ntk (4b).
Revenue ($140m) less incremental above rail costs ($41m).
ATTACHMENT C. CEILING PRICE (COMPETITIVE MARKET)
Stand-alone
Cost
Train control (Darwin – Tarcoola) 1,000,000 1,000,000
Track variable (Darwin – Tarcoola) 6,000,000 3,000,000
Fixed infrastructure maintenance (Darwin – Tarcoola) 14,000,000 14,000,000
Administration, management 3,000,000 2,000,000
Total below rail services 24,000,000 20,000,000
Depreciation – track (0.05 c/gtk) 2,200,000
Depreciation – other infrastructure ($300,000/km@50 yrs) 13,500,000
Return on investment ($180m@18%/0.64) 281,250,000
Total below rail capital charges 296,950,000
Total stand – alone cost 316,950,000
Usage (ntk pa) 2,000,000,00
Ceiling price (c/ntk) 15.85
Ceiling price (c/gtk@2.2 ntk:gtk) 7.20
AustralAsia Railway (Third Party Access) Act 1999 60
ATTACHMENT D. RAILWAY OWNER'S UNIT RATES
Cost Area Cost Driver Unit rate
Train crew train hour $150.00
Fuel 000 gtk $2.50
Locomotive maintenance loco kms $1.50
Wagon maintenance 000 wagon kms $80.00
Train control (Darwin—Tarcoola) route kms $300.00
Track variable 000 gtk $0.50
Fixed infrastructure maintenance track kms $5,000.00
Administration, management % mark up on
other operating
costs
8%
Terminal operations per tonne $4.00
Shunting per tonne $4.00
ATTACHMENT E. NEW TRAFFIC EXAMPLE
Operating assumptions
Freight task (tonnes pa) 2,500,000
Average haul (kms) 300
Net tonne kms pa 750,000,000
Av. Gross trailing load (per train)1 6,000
Train load (net tonnes per train) 4,560
Number of trains pa 548
Locomotives per train 3
Wagons per train 60
Round-trip cycle time (hrs) 24
Cycles per week 7
Locomotive fleet requirement 7
Wagon fleet requirement 132
Train hours pa 13,158
Gross tonne kms pa (000) 1,351,974
Wagon kms pa (000) 19,737
Locomotive kms pa 986,842
Incremental above rail costs Cost driver Unit rate Total cost pa
Train crew train hour $150.00 $1,973,700
Fuel 000 gtk $2.50 $3,379,935
Locomotive maintenance locomotive $1.50 $1,480,263
Wagon maintenance 000 wagon $80.00 $1,578,960
Administration, management % mark up 8.0% 0
Terminal operations per tonne $0.50 $1,249,440
Shunting per tonne 0
Incremental operating costs $9,662,298
AustralAsia Railway (Third Party Access) Act 1999 61
Incremental capital charges locomotives $266,667 $1,866,669
wagons $13,333 $1,759,956
Total incremental above rail cost 13,288,923
Incremental above rail cost (c/ntk) 1.77
Incremental above rail cost (c/gtk)
(@1.80 ntk:gtk)
0.98
Note: 1. Gross trailing load is the gross weight hauled behind the locomotive(s)
and is the sum of the weight of the freight and the tare weight of the wagons (it
excludes the weight of the locomotives).
ATTACHMENT F. CEILING PRICE (NEW TRAFFIC—COMPETITIVE
MARKET)
Relevant
Infrastructure
Train control (Darwin – Tarcoola) 1,000,000 133,333
Track variable (Darwin – Tarcoola) 6,000,000 800,000
Fixed infrastructure maintenance (Darwin – Tarcoola) 14,000,000 1,866,667
Administration, management 3,000,000 400,000
Total below rail services 24,000,000 3,200,000
Depreciation – track (0.05 c/gtk) 900,000
Depreciation – other infrastructure ($300,000/km@50 yrs) 1,800,000
Return on investment ($160m@18%/0.64) 45,000,000
Total stand-alone cost 47,700,000
Usage (ntk pa) 1,000,000,00
Ceiling price (c/ntk) 4.77
Ceiling price (c/gtk @1.8 ntk:gtk) 2.65
AustralAsia Railway (Third Party Access) Act 1999 62
ATTACHMENT G. CEILING PRICE (NEW TRAFFIC—NO COMPETITIVE
MARKET)
Relevant
Infrastructur
e
Train control (Darwin – Tarcoola) 1,000,000 133,333
Track variable (Darwin – Tarcoola) 6,000,000 800,000
Fixed infrastructure maintenance (Darwin – Tarcoola) 14,000,000 1,866,667
Administration, management 3,000,000 400,000
Total below rail services 24,000,000 3,200,000
Depreciation – track (0.05 c/gtk) 900,000
Depreciation—other infrastructure ($300,000/km@50 yrs) 1,800,000
Return on investment ($160m@18%/0.64) 45,000,000
Total stand-alone cost 47,700,000
Contribution from other users ("R") 23,850,000
Total Cost 23,850,000
Usage (ntk pa) 1,000,000,0
Ceiling price (c/ntk) 2.39
Ceiling price (c/gtk @1.8 ntk:gtk) 1.33
AustralAsia Railway (Third Party Access) Act 1999 63
ATTACHMENT H. RAILWAY OWNER’S COST STRUCTURE (ADELAIDE
TO DARWIN)
Existing fleet
Locomotives 23
Wagons 900
Trains per week 10
Above rail services ($ pa)
Train crew $9,000,000
Fuel $24,000,000
Locomotive maintenance $12,000,000
Wagon maintenance $10,500,000
Terminal and shunting operations $8,000,000
Administration/management $5,000,000
Total above rail services $68,500,000
Below rail services
Track access charges (Adelaide to Tarcoola) $14,200,000
Train control (Darwin-Tarcoola) $1,000,000
Variable infrastructure maintenance (Darwin-Tarcoola) $6,000,000
Fixed infrastructure maintenance (Darwin-Tarcoola) $14,000,000
Administration, management $3,000,000
Total below rail services $38,200,000
Total $106,700,000
Net tonne kilometres 6,000,000,000
Gross tonne kilometres 13,200,000,000
Above rail operating costs (cents per ntk) 1.14
Incremental above rail operating cost (cents per ntk)1 0.99
Total operating cost (cents per ntk) 1.78
Average operating revenue per ntk 3.50
Total operating revenue $210,000,000
Surplus to common costs, rollingstock capital and
track 2
$150,500,000
Surplus to common costs, rollingstock capital and track
(cents per ntk)
2.51
Annual capital charge (per locomotive) $266,667
Annual capital charge (per wagon) $13,333
Annual capital charges for locomotives $6,133,000
Annual capital charges for wagons $12,000,000
Total rollingstock capital charge $18,133,000
AustralAsia Railway (Third Party Access) Act 1999 64
Remaining surplus to common costs and track $132,367,000
Total rollingstock capital charge (cents per ntk) 0.30
Incremental Above Rail Cost (ICAR) (cents per ntk) 1.29
Notes:
Total above rail cost ($68.5m) less admin/management ($5m) and 50%
terminal costs ($4m) divided by ntk (6b).
Revenue ($210m) less incremental above rail costs ($59.5m).
AustralAsia Railway (Third Party Access) Act 1999 65
1 KEY Key to abbreviations
amd = amended od = order
app = appendix om = omitted
bl = by-law pt = Part
ch = Chapter r = regulation/rule
cl = clause rem = remainder
div = Division renum = renumbered
exp = expires/expired rep = repealed
f = forms s = section
Gaz = Gazette sch = Schedule
hdg = heading sdiv = Subdivision
ins = inserted SL = Subordinate Legislation
lt = long title sub = substituted
nc = not commenced
2 LIST OF LEGISLATION
AustralAsia Railway (Third Party Access) Act 1999 (Act No. 25, 1999)
Assent date 21 May 1999
Commenced 2 September 1999 (Gaz S37, 1 September 1999)
AustralAsia Railway (Special Provisions) Regulations 2000 (SL No. 61, 2000)
Assent date 10 January 2001
Commenced 14 February 2001 (Gaz G6, 14 February 2001, p 3)
Amending Legislation
Amendments of AustralAsia Railway (Special Provisions) Regulations (SL
No. 20, 2001)
Assent date 19 March 2001
Commenced 19 March 2001
Corporations Reform (Consequential Amendments NT) Act 2001 (Act No. 17, 2001)
Assent date 29 June 2001
Commenced s 17(1) and (6): 1 July 2001; rem: 15 July 2001 (s 2, s 2
Corporations Act 2001 (Cth Act No. 50, 2001) and Cth Gaz
S285, 13 July 2001)
AustralAsia Railway (Third Party Access) Amendment Act 2003 (Act No. 59, 2003)
Assent date 15 December 2003
Commenced 21 July 2004 (Gaz G29, 21 July 2004, p 7)
Consumer Affairs and Fair Trading Amendment (National Uniform Legislation) Act 2010
(Act No. 41, 2010)
Assent date 8 December 2010
Commenced 1 January 2011 (Gaz S71, 20 December 2010)
AustralAsia Railway (Third Party Access) Act 1999 66
Oaths, Affidavits and Declarations (Consequential Amendments) Act 2010 (Act No. 40,
2010)
Assent date 18 November 2010
Commenced 1 March 2011 (s 2, s 2 Oaths, Affidavits and Declarations
Act 2010 (Act No. 39, 2010) and Gaz G7, 16 February 2011,
p 4)
Penalties Amendment (Miscellaneous) Act 2013 (Act No. 23, 2013)
Assent date 12 July 2013
Commenced 28 August 2013 (Gaz G35, 28 August 2013, p 2)
Local Court (Related Amendments) Act 2016 (Act No. 8, 2016)
Assent date 6 April 2016
Commenced 1 May 2016 (s 2, s 2 Local Court (Repeals and Related
Amendments) Act 2016 (Act No. 9, 2016) and Gaz S34,
29 April 2016)
Interpretation Amendment Act 2021 (Act No. 28, 2021)
Assent date 15 December 2021
Commenced 1 January 2022 (s 2)
3 ACCESS CODE
The AustralAsia Railway (Third Party Access) Code was amended by Joint Ministerial
Notice published in Gazette, S7, 17 February 2000.
The AustralAsia Railway (Third Party Access) Code was amended by Joint Ministerial
Notice published in Gazette, S15, 30 March 2001.
Under clause 48(2) of the AustralAsia Railway (Third Party Access) Code, clause 48
expired on 30 June 2001.
4 GENERAL AMENDMENTS
General amendments of a formal nature (which are not referred to in the table
of amendments to this reprint) are made by the Interpretation Legislation
Amendment Act 2018 (Act No. 22, 2018) to: ss 1, 5 and 6.
5 LIST OF AMENDMENTS
s 6 amd No. 28, 2021, s 20
s 8 ins SL No. 61, 2000, r 9
amd No. 41, 2010, s 30
sch amd SL No. 61, 2000, r 10; No. 17, 2001, s 21; No. 59, 2003, s 3; No. 41,
2010, s 30; No. 40, 2010, s 118; No. 23, 2013, s 4; No. 8, 2016, s 45