Cost of Delay Repay to TOCs?

[js1000]

Just curious, how Delay Repay works from a financial perspective if anyone has knowledge or expertise in this area.

I've applied for Delay Repay consistently over the past year since the shambolic May 2018 timetable change in Northern England - the after affects are still being felt today. This past week has been the worst I can remember. Delays and cancellations have been so bad I am able to claim 40% of my season ticket back which is pretty remarkable.

How do the TOCs pay for Delay Repay? Is it out of the accounts? Ring-fenced delay fund from Network Rail? Paid for by the DfT etc? Also, if the TOCs profit margin is 3-5% - having to give 40% back in a monetary refund torpedoes the profit made from eight other passengers with comparable tickets down the bin? Clearly this is not sustainable.

Some TOCs now offer free tickets which seems better financially in the short term (i.e. upfront monetary refund) but not so in the long-term as those ticket will have be used > lost revenue. Obviously there is also a cost associated with processing claims. I send my weekly ticket freepost most weeks as the current Northern Delay Repay does not allow claims on multiple journeys which seems rather counter intuitive as money has to be spent on postage and processing it into the system manually.

I would have hoped that after 15 months I'd have been able to stop having to send Delay Repay claims on an almost weekly as this would have sent a strong enough message that the current level of service is inadequate and improvements would have been implemented. Northern being Northern it's probably apparent by now that they are incapable of doing this.

 

[deltic]

The amount paid out by TOCs is relatively small. According to ORR Northern received just under 250,000 claims in 2018/9 of which they approved three-quarters. So if the average pay out was £10 then the total paid is under £2m. There is a complex arrangement of internal payments between TOCs and Network Rail depending on who is responsible for any delay. In many cases the TOC will receive more in compensation from Network Rail than it will pay out to passengers. However, these payments are forecast, generally based on assumptions that all parties will improve their performance, in the franchise bids so are already taken account in the level of subsidy sought or premium paid by the TOC.

 

[js1000]

In many cases the TOC will receive more in compensation from Network Rail than it will pay out to passengers. However, these payments are forecast, generally based on assumptions that all parties will improve their performance, in the franchise bids so are already taken account in the level of subsidy sought or premium paid by the TOC.

I'd like to attest from my experience that this definitely must be an assumption as I've seen little to no improvement!

 

[JN114]

It should be recorded that while TOCs receive (far) more in schedule 8 payments than they pay out in delay repay; compensation to customers is by no means the only cost to train operators during disruption.

 

[northernchris]

According to ORR Northern received just under 250,000 claims in 2018/9 of which they approved three-quarters.

That seems a very low amount! Given the various roles of investigating, monitoring and attributing delays, Delay Repay must be quite an expensive scheme to operate

 

[Dr Hoo]

Once again it is worth setting out some fundamental building blocks:
1. Delay attribution is primarily undertaken for the purpose of understanding fairly precisely why trains are disrupted so that action can be taken to reduce the problems in future. The process began under BR and pre-dates both the performance regimes and Delay Repay. Delays are recorded in terms of time loss within track sections between reporting points.
2. The performance regimes are designed to reflect the marginal future revenue effect of performance being better or worse than 'benchmark'. The central concept being that if performance is at benchmark levels, no money will change hands. I.e. a certain level of lateness (and cancellation) is expected. The performance regimes work on lateness at monitoring points and this is NOT the same as delay. If performance is consistently better than benchmark it is expected that revenue will grow and the party responsible will earn a bonus. If it is worse than benchmark then revenue will be lost and somebody has to pay compensation. These payments do NOT include an allowance for Delay Repay obligations.
3. Delay Repay works applies at the level of individual end-to-end journeys and does not exist within the same architecture of service groups, monitoring points, etc. Whereas performance regime financial obligations are essentially calculated 'automatically', rolling up performance across an entire four-week financial period to give a net figure between an operator and Network Rail, Delay Repay may or may not be claimed. (Some operators do have a degree of 'automatic' Delay Repay for their own services with certain ticket types.)

TOCs basically take Delay Repay claims 'on the chin'. They cannot claim the money back off another party even if a delay to a journey from (say) a missed connection wasn't their fault. Obviously a TOC will have made some estimate of its exposure when it bid for the franchise but take-up rates have changed quite a lot fairly rapidly.

There is much more that could be said to nuance the above explanation but it should be a helpful start.

 

[dk1]

If the DfT want it then let them/the taxpayer pay for it. This is especially true if it's not part of the agreed franchise. 15 minutes on longer runs does seem a tad excessive to me & 30mins was more than enough a trigger point.

 

[323235]

I think in theory 15 minute delay repay is a great thing when you have a network as reliable as C2C or Merseyrail, although slightly excessive on cost ground for the odd minor 15 minute delay but not perversely excessive in those circumstances because the number of claims should in theory be manageable on a reasonably reliable network with reliable infastructure.

If delay repay is causing the train company serious financial issues then something is badly wrong and the answer isn't taxpayers bailing them out for excessive delay repay processing - it's making tough choices to make serious improvements to right operational failings, even if it's something as drastic as reversing frequency increases whilst preserving as many of the number of seats where possible to offset the negative reversal. In this instance everyone involved should take the financial hit.

Efforts should then be made to make appropriate capital investment as soon as possible to allow the original change to happen but in a more performance focused fashion.

I think 15 minute delay repay has been a step too far for some of the franchises which have serious capacity and infastructure failings that can't be solved overnight.

 

[causton]

That seems a very low amount! Given the various roles of investigating, monitoring and attributing delays, Delay Repay must be quite an expensive scheme to operate

Delay Repay is almost nothing to do with Delay Attribution.

Many passengers think Delay Repay is a much bigger issue for TOCs than it is, but the arguing over who is responsible for what delay so money can be exchanged between the TOCs and Network Rail seems to be much more of a problem for them as alluded to above.

 

[bramling]

If the DfT want it then let them/the taxpayer pay for it. This is especially true if it's not part of the agreed franchise. 15 minutes on longer runs does seem a tad excessive to me & 30mins was more than enough a trigger point.

Agree very much with this.

I can’t be bothered to claim, and in all honesty I don’t see why people should get compensation for delays which are well outside the control of the industry. And, like you say, 15 minutes is pretty minor on longer journeys. On top of all this, with facilities like RTTT it must be pretty easy to make fraudulent claims.

Personally I place a greater value on the train running right time and taking me where I want to go at the planned time. I’d rather the money paid out on DR went towards helping achieve better performance.

 

[800002]

The TOC will undoubtedly be recieving more money from NR than is being requested of it from passengers claiming 'Delay Repay'.
The various schedules of compensation due to the respective parties for all manner of things, eg: removing / restricting track access; the planned cancelling of TOC services and I also believe certain diversionary routes enforced upon a TOC; NR delay; TOC delay; 3rd party TOC delay (payable via NR, I believe, as they manage the delay attribution process), is frankly staggering.

What starts off as a single 3 minute incident can lead to a single party effectively 'owing' 100's of thousands of pounds in delay cost. The following week, they could be 'owed' most of that figure back due to another incident - take the latest hot weather and OHLE incidents as an example.

As for the money physically changing hands - I suspect only a fraction of the total amounts actually get exchanged. They give with one hand and take with the other until a more modest amout remains.

 

[bramling]

The TOC will undoubtedly be recieving more money from NR than is being requested of it from passengers claiming 'Delay Repay'.
The various schedules of compensation due to the respective parties for all manner of things, eg: removing / restricting track access; the planned cancelling of TOC services and I also believe certain diversionary routes enforced upon a TOC; NR delay; TOC delay; 3rd party TOC delay (payable via NR, I believe, as they manage the delay attribution process), is frankly staggering.

What starts off as a single 3 minute incident can lead to a single party effectively 'owing' 100's of thousands of pounds in delay cost. The following week, they could be 'owed' most of that figure back due to another incident - take the latest hot weather and OHLE incidents as an example.

As for the money physically changing hands - I suspect only a fraction of the total amounts actually get exchanged. They give with one hand and take with the other until a more modest amout remains.

The whole system is crazy and leads to a blame culture, but I realise it’s probably a necessary evil of running a privatised railway. If only the effort and money involved in all this went directly towards delivering enhancements...

 

[800002]

The whole system is crazy and leads to a blame culture, but I realise it’s probably a necessary evil of running a privatised railway. If only the effort and money involved in all this went directly towards delivering enhancements...

I concur.

One last little (personal) view:
It seems that the TOCs / FOCs manage to extract money out of NR a hell of alot easier than NR does from the TOCs / FOCs.
That's why both sides have highly paid people with an in depth knowledge of the Network Code and Track Access Agreements et Al that's probably bordering on the un-healthy.

 

[Antman]

Agree very much with this.

I can’t be bothered to claim, and in all honesty I don’t see why people should get compensation for delays which are well outside the control of the industry. And, like you say, 15 minutes is pretty minor on longer journeys. On top of all this, with facilities like RTTT it must be pretty easy to make fraudulent claims.

Personally I place a greater value on the train running right time and taking me where I want to go at the planned time. I’d rather the money paid out on DR went towards helping achieve better performance.

Because how else will NR (and on SWR it is usually NR) improve if there is no sanction. Let’s be honest, NR won’t improve unless it is forced to. and It’s a small satisfaction to. A delayed passenger who doesn’t get home to see their family or Misses bedtime to know that at least their calming beer got paid for ...

I do suspect that the TOCs do rather well out of it though. Not every passenger will claim but I bet the loadings calculator or whatever is used is weighted in their favour ....

 

[Dr Hoo]

I concur.

One last little (personal) view:
It seems that the TOCs / FOCs manage to extract money out of NR a hell of alot easier than NR does from the TOCs / FOCs.
That's why both sides have highly paid people with an in depth knowledge of the Network Code and Track Access Agreements et Al that's probably bordering on the un-healthy.

Do you have any basis for your ‘view’?
For the performance regime the money simply follows the numbers. If a party is operated at expected (benchmark) levels they owe nothing. If they are performing worse they have to pay the other. If both are performing worse the amounts are netted off, obviously.
A largely self-contained TOC will never owe Network Rail much because it’s own delay doesn’t do much harm to other operators (TOC-on-TOC). It will still suffer the consequences of its own shortcomings in the farebox (and Delay Repay) so there is still a strong incentive.
The work of handling delay attribution, performance regimes and Delay Repay is overwhelmingly carried out by ‘ordinary’ Johns and Janets just like any other railway tasks. Contrary to myths sometimes peddled it isn’t about armies of highly paid lawyers arguing the toss 24/7.