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Open access operators could pay public service obligation levy

03 Mar 2017

UK: The Department for Transport has begun a two-month consultation on proposals to introduce a public service obligation levy which open access passenger operators would pay to support loss-making franchised services deemed to be socially and economically desirable.

This follows the Competition in passenger rail services in Great Britain report published by the Competition & Markets Authority in March 2016, which suggested that passengers might benefit if there were more on-rail competition between licensed operators on some inter-city routes.

Franchised operators currently contribute towards long-term fixed infrastructure costs through track charges, and where costs exceed revenue they receive a subsidy to support socially-desirable services. In contrast, open access operators only pay access charges relating to the short-run costs they impose, but also have limited access to the network as a result of the regulatory requirement that new open access services should not be ‘primarily abstractive’ of revenue from franchised operators.

Franchised, international and freight services would not pay the proposed levy, and DfT would generally exclude any open access services which would no longer be economically viable if required to pay it.