Business, Freight News, Logistics

Brussels brings Brits and French to book over Channel Tunnel charges

[ June 24, 2013   //   ]

The European Commission has sent a “reasoned opinion” – a formal request to the UK and French governments over what it describes as excessive track access charges for through freight and passenger in the Channel Tunnel. It said that the charges were discouraging the use of the Tunnel for freight, with an average of only six freight trains using it every day. Only 43% of the Tunnel capacity is used, with high charges encouraging operators to keep freight on the roads and stifling growth in the rail sector.

The Commission raised this issue informally with the two Governments in 2011 but nothing had been resolved, it said. The Governments now have two months to respond and, if they fail to do so, the Commission may bring both cases to the EU Court of Justice.

Vice-President of the European Commission Siim Kallas said: “‘The Channel Tunnel is not being used to its full capacity because of these excessive charges. As a result, more freight is being carried on lorries instead of by rail, freight operators and their customers are being over-charged.”

The Commission says that EU rules require track access charges to be set on the basis of direct/marginal costs as a result of operating a train service, although an exception is made for specific investment projects only, allowing higher charges to be set on the basis of the long-term costs of such projects.

However, the current track access charges for use of the Channel Tunnel infrastructure do not appear to be based on direct costs or the long term investment costs of building the Tunnel, argues the Commission, which says that numerous stakeholders have complained that the charges for use of the Channel Tunnel are far too high – at least €3,645 per train (one way). Rail freight traffic is also declining. Only 2,325 freight trains passed through the tunnel in 2012, down from 2,388 in 2011 and 2,718 in 2008.

The Tunnel has its own rail regulator – the Intergovernmental Commission (IGC). While this should monitor competition and take decisions on its own initiative to solve market problems effectively, in particular as regards the compatibility of charges with EU rules, the IGC, as it is currently set up, does not have the power to adopt decisions on its own initiative without a complaint, says the European Commission.

EU legislation also requires the independence of the regulator from railway operators and infrastructure managers but the IGC is not independent, being made up of representatives appointed by the UK and French governments.

The 1987 usage agreement between Eurotunnel and certain operators , which allocates capacity to certain train operators for 65 years, is also too long to be permitted under EU rules.

Member States were required to implement the provisions of the First Rail Package by 15 March 2003. The first round of infringements was taken against 24 Member States, including France and the United Kingdom in 2008, however, those letters did not address the specific issues relating to the Channel Fixed Link. In 2011 the Commission raised this issue with France and the United Kingdom, and had hoped it could be resolved through informal negotiations however, contacts to date have not resolved the non-compliance.

The formal request to France and the United Kingdom to comply with EU rules comes in the form of a “reasoned opinion”. France and the United Kingdom have two months to respond to today’s reasoned opinion. If they fail to do so, the Commission may bring both cases to the EU Court of Justice.


We’re no ordinary railway, says Eurotunnel

In its response, Eurotunnel partly sidestepped the issue, pointing out that the Commission’s action was targeted at the member states and not at the company. It also described the Channel Tunnel as an integrated transport system rather than a conventional railway and that also differed from all other European railway infrastructure in that it was entirely privately funded, was 15 billion Euros. This is different to all other European railway infrastructures, which are financed by states.

It also put the blame for the lack of through Channel Tunnel traffic on major railway operators’ difficulties in their domestic markets, which had led them to abandon cross-Channel traffic.

Eurotunnel also warned that changes to the Concession that were unfavourable to the interests of the 300,000 small shareholders would force the Eurotunnel Group to seek a legitimate indemnity from the member states.

Possibly in anticipation of the Commission’s move, on 30 May Eurotunnel launched a subsidy scheme to help through-rail freight operators launch services through the Channel Tunnel. ETICA (Eurotunnel Incentive for Capacity Additions) helps with marketing and service start-up costs and the cost of controls at Frethun, rather than Tunnel access charges which, contrary to some views, are very competitive, says Eurotunnel.

The ETICA mechanism will be available to all railway operators and will provide a one off financial support for start-up investments, for one year. It will be fully funded by Eurotunnel, with no public subsidy, but is based on the EU’s Marco Polo aid system, conforms to European Directives and does not change the access charges set out in the Network Statement.

The one-off payments will be available for new rail services launched up to the end of 2014 and are for services of at least weekly frequency that do not currently use rail through the Channel Tunnel. Operators will also have to provide an undertaking that they will operate the service for at least three years.

Grants would be around €150,000 per weekly return service.


User groups welcome Brussels’ move

The Freight Transport Association (FTA) welcomed the Commission’s action, pointing out that the decision was based in part on the findings of its own report ‘The impact of Eurotunnel tolls on through rail freight’ commissioned by FTA in June 2011 to analyse the effect of Eurotunnel’s freight charges on the transport industry. FTA sent the report wto the European Commission with the request to open an inquiry on the freight tolls and pricing strategy claiming that these breached EU rail freight directives.

The report, prepared by MDS Transmodal, showed that the Tunnel was not being utilised to anywhere near its full potential because of the high cost to rail freight operators, and concluded that if tolls were cut by 75% the number of trains (including piggyback) would rise to around 41 each way. The transfer of around 640,000 unit loads per annum to rail could save around 250,000 tonnes of CO2 a year.

FTA Rail Freight Council has been campaigning against the Eurotunnel’s pricing regime and the association has long been calling on Eurotunnel to address the excessive tolls that they have imposed on rail freight.

Chris Welsh, FTA General Manager of Global & European Policy added: “FTA now calls upon the governments to change the existing arrangements, in order to promote the use of rail freight through the Channel tunnel, which would help meet the Commission’s objectives of moving freight off roads and on to rail.”

And Rail Freight Group chairman Tony Berkeley said: “We are pleased that the European Commission is taking forward these infringement proceedings against the two governments for their failure to introduce a structure fully compliant with the European legislation, to which they have signed up ten years ago. In addition, the two government should do all they can to remove other barriers to service growth, in particular new charges imposed by French Government owned operator SNCF or RFF for ‘security’ checks and ensure that all operators get fair and equal access to the network in France.’

“The potential for rail freight growth through the Tunnel is huge, but it needs a concerted effort by both governments, regulators and others to make it happen.”