PART 6—MISCELLANEOUS
45A—Power to vary guidelines
(1) The regulator may, from time to time as the regulator thinks fit, vary or revoke guidelines developed and published by the regulator under this Code, or develop and publish new or substitute guidelines.
(2) The regulator should, in developing (or varying) guidelines under this Code, take into account interface issues that may arise under a corresponding access regime (insofar as this may be relevant and insofar as this is consistent with, and not in derogation of the operation of, the other provisions of this Code).
46—Segregation of access provider's accounts and records
(1) The access provider must keep accounts and records of its business consisting of the provision of railway infrastructure services in relation to the railway so as to give a true and fair view of that business as distinct from other businesses carried on by the access provider or any related body corporate or associate of the access provider.
(2) The accounts and records must comply with any guidelines developed and published by the regulator and be kept in a way that gives—
(a) a comprehensive view of the access provider's legal and equitable rights and liabilities in relation to railway infrastructure services;
(b) a true and fair view of—
(i) income and expenditure derived from, or relating to, railway infrastructure services; and
(ii) assets and liabilities of the access provider's business so far as they relate to railway infrastructure services; and
(c) sufficient information to enable the pricing principles to be applied in a reasonable manner.
(3) The access provider must cause to be kept in a similar way similar accounts and records in relation to the business of any related body corporate or associate of the access provider to whom a railway infrastructure service is provided by the access provider.
47—Removal and replacement of arbitrator
(1) The regulator may remove an arbitrator from office if the arbitrator—
(a) becomes mentally or physically incapable of carrying out the arbitrator's duties satisfactorily;
(b) is convicted of a crime;
(c) becomes bankrupt or applies to take the benefit of a law for the benefit of bankrupt or insolvent debtors; or
(d) has a direct or indirect interest in the outcome of the dispute or matter under arbitration.
(2) If an arbitrator resigns, is removed from office or dies, the regulator may appoint another person to take the place of the arbitrator.
48—Amendment of Code
(1) This Code may be amended by the Northern Territory Minister and the South Australian Minister jointly as prescribed.
(2) This clause expires on 30 June 2001.
Note—
Clause 48 has expired.
49—Prescribing of matters for purpose of Code
(1) The Northern Territory Minister and the South Australian Minister jointly, by notice in the Gazette, may prescribe matters—
(a) required or permitted by this Code to be prescribed; or
(b) necessary or convenient to be prescribed for carrying out or giving effect to this Code.
(2) Without limiting the generality of subclause (1), the Ministers may prescribe—
(a) amendments to this Code;
(b) a date on which clause 48 is to expire;
(c) the parts of the railway to which this Code from time to time applies; and
(d) provisions about the inspection of registers maintained under this Code (including about fees for such inspections).
50—Review of Code
(1) The Northern Territory Minister and South Australian Minister jointly may, at any time, review the operation of this Code but, in any case, must do so—
(a) firstly, not later than 30 June in the 3rd year of operations of the railway; and
(b) secondly, not later than 12 months before the expiration of the period for which the Commonwealth Minister has specified under section 44N of the Trade Practices Act 1974 of the Commonwealth that the access regime, of which this Code is a part, is to remain in force.
(2) To enable the Ministers to perform their function under subclause (1), the regulator must prepare such reports to the Ministers as the Ministers may require.
(3) The Ministers must, in relation to a review under subclause (1)(a) or (b)—
(a) —
(i) by notice published in a newspaper circulating generally in Australia, invite interested persons to make submissions in relation to the review within a period stated in the notice; and
(ii) give consideration to any submissions made in response to an invitation under subparagraph (i); and
(b) —
(i) in the case of the Northern Territory Minister—cause a report on the outcome of the review to be laid before the Legislative Assembly of the Northern Territory within 12 sitting days after the completion of the review; and
(ii) in the case of the South Australian Minister—cause a report on the outcome of the review to be laid before both Houses of the South Australian Parliament within 12 sitting days after the completion of the review.
(4) The regulator must, at the intervals referred to in subclause (10), review the revenues paid or payable by access holders to the access provider for railway infrastructure services where no sustainable competitive prices exist (relevant revenues), being revenues derived under either:
(a) awards by arbitrators to the extent the awards involve the application of section 2 of the pricing principles; or
(b) access contracts to the extent that the regulator considers sustainable competitive prices did not or do not exist in relation to the transportation of the freight the subject of those access contracts,
and determine whether the relevant revenues paid or payable by such access holders (the relevant access holders) for those railway infrastructure services are excessive having regard to the factors referred to in subclause (5).
(5) In determining whether the relevant revenues are excessive the regulator must have regard to the following:
(a) the relevant revenues are to be measured against the costs associated with the required railway infrastructure required by the relevant access holders including an appropriate commercial return on the required railway infrastructure used by the relevant access holders in the circumstances referred to in subclause (4) (the relevant required railway infrastructure);
(b) the investment in all of the railway infrastructure facilities by the access provider or any other person and all of the revenues earned by the access provider from the provision of railway infrastructure services including, if the access provider, a related body corporate or an associate has conducted transportation services on the railway, revenues at market rates in relation to those services;
(c) an appropriate commercial return on the relevant required railway infrastructure, determined having regard to—
(i) the appropriate risk premium associated with the construction, development and operation of the railway infrastructure facilities, based on both of the following:
(A) the expected risks prevailing as at the date of commencement of construction of the railway by the access provider; and
(B) in respect of any expansion or extension of the railway after the date of commencement of construction of the railway by the access provider—the expected risks prevailing as at the date of the commencement of construction of that expansion or extension; and
(ii) the relevant financial market rates (including the risk free rate for return on investments and the rate of inflation) prevailing at the time of the regulator's review;
(d) when comparing the relevant revenues to the costs under paragraph (a), the regulator must subtract from those costs an amount determined by the regulator to be the aggregate of—
(i) the avoidable costs attributable to the usage of the relevant required railway infrastructure by all other access holders (being avoidable costs of the kind referred to in section 3 of the pricing principles); and
(ii) a reasonable contribution to fixed costs of the relevant required railway infrastructure (R) from all other access holders using that required railway infrastructure, where R has the same meaning as in section 2(2)(c) of the pricing principles.
(6) The costs to be applied under subclause (5) must be efficient.
(7) For the purposes of determining expected risks under subclause (5)(c)(i), the regulator must have regard to information provided by the access provider with respect to the contents of any financing plan of the access provider.
(8) If the regulator determines that revenues are excessive under subclause (4)—
(a) the regulator must promptly give the access provider written notice of the regulator's determination, including the reasons for his or her determination;
(b) within 2 months of receiving the regulator's determination under paragraph (a), the access provider must prepare and submit to the regulator for approval a plan under which the access provider will reduce future relevant revenues so that such revenues are not excessive (having regard to the matters referred to in subclause (5)), when measured over the next regulatory review period (the remedial plan);
(c) the regulator will consider the remedial plan submitted to it with a view to reaching agreement with the access provider on the terms which are acceptable to the regulator for the remedial plan;
(d) if the regulator and the access provider agree on the terms of a remedial plan, the access provider must implement that plan;
(e) if the regulator and the access provider are unable to reach agreement on a remedial plan that is acceptable to the regulator within 1 month of receiving the remedial plan, the regulator must make a determination under subclause (9) and the access provider must observe the terms of that determination.
(9) If subclause (8)(e) applies, the regulator will make a determination to regulate prices, and/or to establish conditions relating to prices or price fixing factors in relation to the future provision of railway infrastructure services in any manner the regulator considers appropriate, including—
(a) fixing a price or the rate of increase or decrease in a price;
(b) fixing a maximum price or rate of increase or decrease in a maximum price;
(c) fixing an average price for specified railway infrastructure services or an average rate of increase or decrease in an average price;
(d) specifying pricing policies or principles;
(e) fixing a maximum revenue in relation to railway infrastructure services,
provided the effect of the determination is limited to reducing revenues of the type referred to in paragraphs (a) and (b) of subclause (4) derived from railway infrastructure services so that the total of such revenues so derived do not result in excessive revenues (having regard to the matters referred to in subclause (5)), when measured over the next regulatory review period.
(10) The regulator's reviews under subclause (4) are to be conducted in relation to the following periods:
(a) the first review must be in respect of the period ending on 30 June in the 10th year of operations of the railway;
(b) the second review must be in respect of the 5 year period commencing immediately after the end of the period of the first review; and
(c) the third and subsequent reviews must be in respect of successive 5 year periods.
SCHEDULE
Access Pricing Principles
Division 1—Access pricing in connection with freight services
1—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 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—
(a) not more than the ceiling price for the provision of the railway infrastructure service (see subsection (4)); and
(b) not less than the floor price for the provision of the railway 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:
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 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;
— 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
(b) provide guidance on the timeframes within which the regulator 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—
(a) not more than the ceiling price for the provision of the railway infrastructure service (see subsection (2)); and
(b) not less than the floor price for the provision of the railway 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
(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 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;
(b) provide guidance on the timeframes within which the regulator considers costs could be avoided; and
(c) in relation to a return on assets, have regard to—
(i) the appropriate risk premium associated with the construction, development and operation of the railway infrastructure facilities, based on both of the following:
(A) the expected risks prevailing as at the date of commencement of construction of the railway by the access provider; and
(B) in respect of any expansion or extension of the railway after the date of commencement of construction of the railway by the access provider—the expected risks prevailing as at the date of the commencement of construction of that expansion or extension; and
(ii) the relevant financial market rates (including the risk free 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 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;
(b) provide guidance on the timeframes within which the regulator considers costs could be avoided; and
(c) in relation to a return on assets, have regard to—
(i) the appropriate risk premium associated with the construction, development and operation of the railway infrastructure facilities, based on both of the following:
(A) the expected risks prevailing as at the date of commencement of construction of the railway by the access provider; and
(B) in respect of any expansion or extension of the railway after the date of commencement of construction of the railway by the access provider—the expected risks prevailing as at the date of the commencement of construction of that expansion or extension; and
(ii) the relevant financial market rates (including the risk free 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.
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—
(a) not more than the ceiling price for the provision of the railway infrastructure service (see subsection (2)); and
(b) not less than the floor price for the provision of the railway 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)
This example assumes that the access proposal relates to the 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 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.
• 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 (CRLPAB).
• 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 services operating in accordance with good railway industry practice would be taken into account. For this example, it is 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 (CRLPAB) 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).
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.
• 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.
• 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 million (assuming an effective tax rate of 36%) before tax. Guidelines on the method to be applied in calculating the stand-alone cost will be developed and published by the regulator.
— Total stand-alone below rail costs of the relevant infrastructure, including operations and maintenance costs, 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).
• The final access price is determined as the CIPR price (0.99 c/gtk) but is to be not less than the floor price (0.17 c/gtk) or more than the ceiling price (7.20c/gtk).
(1A) Example 1A - Existing freight traffic (originating beyond Tarcoola elsewhere on the interstate rail network)
This example assumes that the access proposal relates to the 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.
• 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).
• 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 services operating in accordance with good railway industry practice would be taken into account. For this example, it is 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).
• 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) but is to be not less than the floor price (0.17 c/gtk) or more than the ceiling price (7.20 c/gtk).
(2) Example 2—New freight traffic—sustainable competitive price
This example 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:
• 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.
… 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.
• 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 services operating in accordance with good railway industry practice would be taken into account. For this example, it is 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.
• 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 million (assuming an effective tax rate of 36%) before tax. Guidelines on the method to be applied in calculating the stand-alone cost will be developed and published by the regulator.
— Total stand-alone below rail costs of the relevant infrastructure, including operations and maintenance costs, 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) but is to be not less than the floor price (0.17 c/gtk) or more than 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:
• 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 million (assuming an effective tax rate of 36%) before tax. Guidelines on the method to be applied in calculating the stand-alone cost will be developed and published by the regulator.
— Total stand-alone below rail costs of the relevant infrastructure, including operations and maintenance costs, 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).
• 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).
ATTACHMENT A. PROCESS FOR DETERMINING THE ARBITRATED ACCESS PRICE
ATTACHMENT B. RAILWAY OWNER'S COST STRUCTURE (TARCOOLA TO DARWIN)
Existing fleet
Locomotives
Wagons
Trains per week
Above rail services
Fuel
$16,000,000
$7,000,000
Terminal and shunting operations
Administration/management
$5,000,000
Total above rail services
$50,000,000
Below rail services
$1,000,000
Variable infrastructure maintenance (Darwin—Tarcoola)
$14,000,000
$3,000,000
$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 (CRLPAB)
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)
Annual capital charge (per wagon)
Annual capital charges for locomotives
$4,000,000
Annual capital charges for wagons
Total rollingstock capital charge
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
Equivalent access charge (cents per ntk)
2.17
Approximate equivalent gtk charge (@2.2 ntk:gtk)
0.99
Notes:
1. Total above rail cost ($50m) less admin/management ($5m) and 50% terminal costs ($4m) divided by ntk (4b).
2. Revenue ($140m) less incremental above rail costs ($41m).
ATTACHMENT C. CEILING PRICE (COMPETITIVE MARKET)
Stand-alone Cost
2,000,000
20,000,000
2,200,000
13,500,000
Return on investment ($180m@18%/0.64)
281,250,000
Total below rail capital charges
296,950,000
316,950,000
2,000,000,000
15.85
Ceiling price (c/gtk@2.2 ntk:gtk)
7.20
ATTACHMENT D. RAILWAY OWNER'S UNIT RATES
Cost Area
Cost Driver
Unit rate
train hour
$150.00
Fuel
$2.50
loco kms
$1.50
000 wagon kms
$80.00
route kms
$300.00
Track variable
$0.50
Fixed infrastructure maintenance
track kms
$5,000.00
% mark up on other operating costs
8%
Terminal operations
$4.00
Shunting
$4.00
ATTACHMENT E. NEW TRAFFIC EXAMPLE
Operating assumptions
Freight task (tonnes pa)
2,500,000
Average haul (kms)
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
Locomotives per train
Wagons per train
Round-trip cycle time (hrs)
Cycles per week
Locomotive fleet requirement
Wagon fleet requirement
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 hour
$150.00
$1,973,700
Fuel
$2.50
$3,379,935
locomotive kms
$1.50
$1,480,263
000 wagon kms
$80.00
$1,578,960
% mark up
8.0%
Terminal operations
$0.50
$1,249,440
Shunting
Incremental operating costs
$9,662,298
Incremental capital charges
locomotives
$1,866,669
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
133,333
800,000
1,866,667
400,000
3,200,000
900,000
1,800,000
Return on investment ($160m@18%/0.64)
45,000,000
47,700,000
1,000,000,000
4.77
Ceiling price (c/gtk @1.8 ntk:gtk)
2.65
ATTACHMENT G. CEILING PRICE (NEW TRAFFIC—NO COMPETITIVE MARKET)
Relevant Infrastructure
133,333
800,000
1,866,667
400,000
3,200,000
900,000
1,800,000
Return on investment ($160m@18%/0.64)
45,000,000
47,700,000
Contribution from other users (R)
23,850,000
Total Cost
23,850,000
1,000,000,000
2.39
Ceiling price (c/gtk @1.8 ntk:gtk)
1.33
ATTACHMENT H. RAILWAY OWNER'S COST STRUCTURE (ADELAIDE TO DARWIN)
Existing fleet
Locomotives
Wagons
Trains per week
Above rail services
$9,000,000
Fuel
$24,000,000
$10,500,000
Terminal and shunting operations
Administration/management
$5,000,000
Total above rail services
$68,500,000
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 track2
$150,500,000
Surplus to common costs, rollingstock capital and track (cents per ntk)
2.51
Annual capital charge (per locomotive)
Annual capital charge (per wagon)
Annual capital charges for locomotives
$6,133,000
Annual capital charges for wagons
Total rollingstock capital charge
$18,133,000
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:
1. Total above rail cost ($68.5m) less admin/management ($5m) and 50% terminal costs ($4m) divided by ntk (6b).
2. Revenue ($210m) less incremental above rail costs ($59.5m).
Legislative history
Notes
• Please note—References in the legislation to other legislation or instruments or to titles of bodies or offices are not automatically updated as part of the program for the revision and publication of legislation and therefore may be obsolete.
• Earlier versions of this Act (historical versions) are listed at the end of the legislative history.
• For further information relating to the Act and subordinate legislation made under the Act see the Index of South Australian Statutes or www.legislation.sa.gov.au.
Principal Act and amendments
New entries appear in bold.
Year
No
Title
Assent
Commencement
AustralAsia Railway (Third Party Access) Act 1999
12.8.1999
2.9.1999 (Gazette 2.9.1999 p1046)
—
notice (Gazette 17.2.2000 p964)
—
(27)
Alice Springs to Darwin Railway (Access Provisions) Regulations 2001 (Gazette 29.3.2001 p1524)
—
29.3.2001: r 2
—
notice (Gazette 30.3.2001 p1533)
—
30.3.2001
Statutes Amendment and Repeal (Simplify) Act 2019
3.10.2019
Pt 7 (s 17)—3.10.2019: s 2(1)
Provisions amended
New entries appear in bold.
Entries that relate to provisions that have been deleted appear in italics.
Provision
How varied
Commencement
s 2
omitted under Legislation Revision and Publication Act 2002
s 9
inserted by 27/2001 r 3(a)
29.3.2001
Sch
cl 1
amended by Gazette 17.2.2000 p964 cl 1
cl 3
cl 3(1)
access holder
amended by Gazette 17.2.2000 p964 cl 2(1)
corresponding access regime
inserted by Gazette 17.2.2000 p964 cl 2(2)
interface issues
inserted by Gazette 17.2.2000 p964 cl 2(3)
railway infrastructure facilities
substituted by Gazette 17.2.2000 p964 cl 2(4)
regulator
substituted by Gazette 17.2.2000 p964 cl 2(5)
required railway infrastructure
inserted by Gazette 17.2.2000 p964 cl 2(6)
cl 3(3)—(5)
inserted by Gazette 17.2.2000 p964 cl 2(7)
cl 5
substituted by Gazette 17.2.2000 p964 cl 3
cl 6
cl 6(1)
amended by Gazette 17.2.2000 p964 cl 4(1), (2)
cl 6(2)
amended by Gazette 17.2.2000 p964 cl 4(3)
cl 8
substituted by Gazette 17.2.2000 p964 cl 5
cl 8(2)
amended by 25/2019 s 17
3.10.2019
cl 9
cl 9(1)
amended by Gazette 17.2.2000 p964 cl 6(1)
cl 9(3)
inserted by Gazette 17.2.2000 p964 cl 6(2)
cl 10
cl 10(1)
amended by Gazette 17.2.2000 p964 cl 7(1)
cl 10(2)
amended by Gazette 17.2.2000 p964 cl 7(2), (3)
cl 10(2a)
inserted by Gazette 17.2.2000 p964 cl 7(4)
cl 10(4)
amended by Gazette 17.2.2000 p964 cl 7(5), (6)
cl 10(5a)
inserted by Gazette 17.2.2000 p964 cl 7(7)
cll 12A and 12B
inserted by Gazette 17.2.2000 p964 cl 8
cl 13
amended by Gazette 17.2.2000 p964 cl 9
cl 15