Commentary on Sections
Powers of Secretary of State
Section 1
7.Under section 6(1) of the Railways Act 2005 ("the 2005 Act") the Secretary of State has the power to "provide, or agree to provide, financial assistance to any person –
for the purpose of securing the provision, improvement or development of railway services or railway assets; or
for any other purpose relating to a railway or to railway services."
"Financial assistance" is further defined within the 2005 Act as including "the making of grants or loans", "the giving of guarantees" and "investment in bodies corporate".
8.The Secretary of State provides assistance to the CTRL in a number of ways. These include capital funding through a range of mechanisms including loans, Government Guaranteed bonds, securitised bonds and other debt facilities. In addition, the Secretary of State also provides revenue funding for domestic services operating on the CTRL under a franchise. Train Operating Companies ("TOCs") enter into franchise agreements with the Secretary of State and are either subsidised by DfT, or pay a premium to run train services.
9.The Act confirms – for the avoidance of doubt – that the Secretary of State can, following completion of the construction project, continue to provide financial assistance to the CTRL and the trains that run on it under the powers in the 2005 Act. It was considered that there was a sufficient level of uncertainty as to whether or not these powers applied to the CTRL that there might be an adverse impact on any value generated from a sale of the business without the Act.
Access contracts
Section 2
10.Section 2 aims to delineate more clearly the exclusion that the CTRL has from regulation by the ORR. Under the 1996 Act, the CTRL is generally excluded from the ORR's regulatory jurisdiction under the 1993 Act: any operator of the CTRL is not required to hold a licence under the 1993 Act (section 16(1) of the 1996 Act); and, as a general rule, access contracts in relation to the CTRL do not require the prior approval of the ORR (section 17 of the 1996 Act). There is an exception to this in section 17(3) of the 1996 Act, however, which this provision removes.
11.Railway facilities on the CTRL which may fall within the scope of section 17(3) of the 1996 Act include St Pancras and other stations on the new line, where they interconnect with the national rail network. Consequently, prior to this Act coming into force, access contracts in relation to these stations were susceptible to regulation by the ORR under the 1993 Act. They would also be subject to regulatory oversight by the Secretary of State, in accordance with the terms of the Development Agreement. The purpose of this section is to ensure that all access contracts in relation to the CTRL should be outside regulation by the ORR under the 1993 Act. Accordingly, section 2 repeals section 17(3) of the 1996 Act, and makes a consequential amendment to section 17(2).
Duties of Office of Rail Regulation
Section 3
12.Section 3 of the Act makes some changes to the duties of the ORR in relation to the CTRL. In sections 21(1) and (2) of the 1996 Act, the ORR was given specific duties in relation to the CTRL which were designed to ensure that the exercise of the ORR’s regulatory functions in relation to the national railway did not have an adverse impact on the construction project and the funding streams of the privately owned railway.
13.The duty on the ORR in subsection (1) of section 21 is considered to remain relevant to the operation of the CTRL under the development agreement. However, the duty in subsection (2) of section 21 is no longer applicable with the completion of the construction project and there are consequential amendments to the rest of the section.
Power of Office of Rail Regulation to charge fees
Section 4
14.In addition to the duty that the ORR has under section 21(1) of the 1996 Act, it also has regulatory functions in relation to the CTRL under the Railways Infrastructure (Access and Management) Regulations 2005 (SI 2005/3049). The ORR also has other functions under the 1993 Act that it may be called upon to exercise in relation to the CTRL. These include its Competition Act 1998 functions under section 67(3) of the 1993 Act and its general function to keep under review the provision of railway services in Great Britain in section 69 of the 1993 Act.
15.This section allows the ORR to charge those responsible for operating the CTRL a fee calculated by reference to the costs it reasonably incurs in the exercise of any such function in relation to the railway other than its competition functions under section 67(2) and (3) of the 1993 Act.
16.The section provides for the fee to be levied on an ad hoc basis by the service of a notice by the ORR, which specifies the amount of the fee and the date by which it must be paid. The section also provides for the recovery by the ORR as a civil debt of any amount outstanding after the due date and for refunds of any amounts found after payment to have been overcharged.
Meaning of Development Agreement
Section 5
17.The fifth provision within the Act amends the definition of "development agreement" in section 56(1) of the 1996 Act.
18.LCR designed and constructed the CTRL in accordance with the terms of the CTRL Development Agreement which it entered into with the Secretary of State in 1996. This agreement will continue post-construction (albeit in a revised form) and will contain the terms of the concession to operate the railway. To reflect more clearly that the agreement and provisions in the 1996 Act relate to the operational phase of the CTRL as well as its design and construction, this section amends the definition of "development agreement" in the 1996 Act to include the word "operation".
