Information paper - Estimating the direct cost of rail access - 31 January 2024

The pricing principles of the NSW Rail Access Undertaking include a floor test which sets a minimum access price based on the “direct cost” of access.  This direct cost is the infrastructure provider’s cost that would be avoided if one train did not run.  The access price paid for that train should not be less than this amount.

Measuring the direct cost is not straightforward.  In 2000, the Queensland Competition Authority published a working paper “Usage-related infrastructure maintenance costs in railways” that provided engineering-based estimates of the direct cost.

Recently, IPART employed regression analysis to estimate the direct costs for coal trains.  The data on gross-tonne-kilometres and maintenance costs for several coal rail networks was sourced from regulatory reports made by ARTC and Aurizon networks to the ACCC and the QCA, respectively. This work is summarised in this information paper.

This work establishes a plausible range for the direct cost rate, in units of dollars per gross-tonne-kilometre (GTK), that could be used in regulatory floor tests under the NSW Rail Access Undertaking.  The regression results are expressed in 2020 dollars.

Direct costs are expressed as a rate of dollars per thousand gross-tonne-kilometres (gtk), and these can be directly compared to access prices if they are expressed in the same units.

We welcome your comments on the proposed method used to calculate direct costs and the suitability of the range for use in assessing compliance with the NSW rail Undertaking requirements.  These can be made here until March 31, 2024.