The Public Service Obligations in Transport Regulations 2023

Public service compensation for directly awarded contracts

10.—(1) With the exception of a public service contract awarded under regulation 14 (award of contracts under competitive procedure), every public service contract awarded and general rule effected under these Regulations must, in order to demonstrate that overcompensation has been avoided, comply with this regulation.

(2) The compensation paid to a public service operator must not exceed the amount that is the net financial effect on that operator of compliance with the public service obligation.

(3) The net financial effect must be assessed by comparing the situation where the public service obligation is met with the situation which would have existed if the obligation had not been met.

(4) In order to increase transparency and avoid cross-subsidies, where a public service operator engages in other activities as well as the compensated services subject to public transport service obligations, the accounts of the public services must be separate from those of the other activities and, where applicable, the accounts of each compensated service separated so as to meet at least the following conditions—

(a) the operating accounts corresponding to each of these activities must be separate and the proportion of the corresponding assets and the fixed costs must be allocated in accordance with generally accepted accounting practice and tax rules in force,

(b) no variable costs, contribution to fixed costs or profit connected with any other activity of the public service operator may be charged to the public service in question, and

(c) the costs of the public service must be balanced by operating revenue and payments from public authorities, without any transfer of revenue to another sector of the public service operator’s activity.

(5) The method of compensation must promote the maintenance or development of—

(a) effective management by the public service operator, and

(b) the provision of passenger transport services of an appropriately high standard of service quality.