Customers balk at new rail rules

By PAM GRAHAM

Tranz Rail's biggest customers want tougher rules and an independent watchdog if the company is to have monopoly use of a state-subsidised and owned network.

The Rail Freight Action Group, which represents customers, initially welcomed the Government's plan to buy back the track and support Tranz Rail.

But it says the criteria for a "use it or lose it" test are not good enough.

Tranz Rail will lose exclusive use of a line if freight falls below 60 per cent of current levels.

The group's spokesman, Cedric Allan, said the level should be 90 per cent or even 110 per cent because the idea was to increase freight on rail.

He said an independent person was needed to adjudicate on breaches.



"We never wanted open slather," Allan said.

"We want an ability for competition when we have strong grounds to believe there is a benefit."

The track access rules for Tranz Rail and the price of that access are still being calculated.

The Treasury estimates operating expenditure and maintenance cost $85 million a year.

Tranz Rail will pay no more than $60 million plus GST in the year to June 30, 2005, $65 million plus GST in 2006 and $70 million plus GST in 2007.

The difference between the costs estimate and the charges is a subsidy to the rail system, and the maximums will be renegotiated every three years.

The fee that will be paid has fixed and variable components, and the mix between the two has not been decided.

The final charge will allow Tranz Rail to earn at least its weighted average cost of capital, which is also still to be determined.

The "use it or lose it" test has two parts, the 60 per cent test and "key performance indicators". Both have accompanying financial penalties and incentives.

The performance indicators will cover service levels, safety and customer satisfaction, and setting them is expected to be a challenging exercise for the Treasury.

The track-owning company will have a separate management and will be a Crown entity.

New Zealand Railways Corp, which now manages the interface between the Government and Tranz Rail, is a state-owned enterprise.

The agreement also tries to set up protection against a major customer withdrawing its business deliberately to force a forfeiture of track access to someone else.

Details have not been worked out.

Existing heritage operators and services such as Tranz Scenic retain their access.

The freight-use criteria will be increased.

On the Stratford to New Plymouth line, freight had to fall below 183,000 tonnes a year to trigger the lease on the land under the tracks. Under the new rules it will be 583,000 tonnes.

On the line between Murupara and Kawerau, the trigger of 40,000 tonnes a year will rise to 1.81 million tonnes.