Rolling stock acquisition for TOCs

[gsnedders]

Despite having tried to find some clear answers as to what the rules about rolling stock acquisition are now.

As I understand it, Operation Princess was somewhat scuppered by the fact that extra rolling stock needed to be approved by the SRA given Virgin Cross Country got a net subsidy.

I understand the rules have changed, but I'm not sure what they are…

• Can a TOC receiving a net-subsidy take on extra rolling stock to extend existing services?
• Can a TOC receiving a net-subsidy take on extra rolling stock to increase the number of services?
• Are there restrictions on a TOC providing a net-premium take on extra rolling stock?

In all cases, does the DfT have a say? Obviously they'll depend on coming to an agreement with a ROSCO.

 

[LNW-GW Joint]

As I understand it, the TOC needs to present a business case to the DfT for any changes over the agreed contract.
If the DfT likes the business case (ie it reduces subsidy/increases premium) then it might go ahead.
Increases of stock have been made for TOCs receiving subsidy (ie most of them), notably Northern in their last franchise, where overcrowding was an issue.
Virgin XC were refused more stock because the SRA didn't like the business case. And they were in a heavy subsidy position.
The DfT has to weigh up the performance of all the TOCs in deciding whether to be generous or not with any one.
Extra revenue support for (say) EMT might mean there is no scope for increasing the costs at (say) LM by deploying more stock.

Also, the DfT sometimes does not like the prices the ROSCOs charge, especially for ex-BR stock.
There is a very long running dispute about it.

 

[WatcherZero]

While off lease stock may be hoovered up to tackle overcrowding the Government is usually highly unlikely to approve new build stock for a subsidy receiving Toc after it has commenced due to the much higher leasing charges due to short return period and highly likelihood the government will have to commit to underwriting the leasing fees beyond the remaining length of the contract.

Generally the Government line is 'We don't interfere in the rolling stock market' (unless we are financially disadvantaged)

 

[43096]

Also, the DfT sometimes does not like the prices the ROSCOs charge, especially for ex-BR stock.

There is a very long running dispute about it.

There was a competition inquiry into the ROSCOs that found no evidence of monopoly pricing by the ROSCOs. Further, it found that the biggest barrier to better competition in the rolling stock market was the way DfT let franchises.

 

[LNW-GW Joint]

There was a competition inquiry into the ROSCOs that found no evidence of monopoly pricing by the ROSCOs. Further, it found that the biggest barrier to better competition in the rolling stock market was the way DfT let franchises.

I know, but the DfT never accepted that.
Since the IEP/Crossrail deals they have retreated somewhat from their extreme "micromanagement" style.
Part of the keenness to endorse new-build rolling stock deals is to increase the pressure on the ROSCOs over leasing costs for older stock.

 

[Bald Rick]

In broad terms any TOC has to seek approval from DfT (or the franchising authority) for any changes to its rolling stock compared to what is enshrined in the franchise agreement if it is detrimental to the subsidy or premium profile for that franchise, or indeed other franchised operators.

However, a franchisee will generally be free to lease (or buy) rolling stock if it thinks it will generate more revenue than it costs. But this at the risk of the TOC. The fact that so few TOCs have done this is a good indicator of the financial economics of the franchised railway (and short term leasing deals).

 

[glbotu]

There was a competition inquiry into the ROSCOs that found no evidence of monopoly pricing by the ROSCOs. Further, it found that the biggest barrier to better competition in the rolling stock market was the way DfT let franchises.

This is unsurprising though, because realistically, you buy trains for a route. No-one's going to lease Pacers to run a 125 mph express service and no-one wants to buy "spare" trains above what's required for operation of a service.

 

[daikilo]

This is unsurprising though, because realistically, you buy trains for a route. No-one's going to lease Pacers to run a 125 mph express service and no-one wants to buy "spare" trains above what's required for operation of a service.

Buying trains for a route is part of the problem as you then create orphans with lower or no "second-hand" value witness the TPE 185 story. Indeed, I find it amazing the ROSCOs have even allowed this to happen as they are the ones who will lose at the end of the day, and it certainly isn't helped if the DfT prefers having trains parked doing nothing whilst (peak) fare-paying passengers are standing and complaining on crowded services.