The NSW Rail Access Undertaking (‘the Undertaking’) provides for third-party access to certain parts of the NSW rail network. One of its functions is to limit the amount of revenue that rail owners can charge these third-party businesses to use the network. Rail owners cannot receive more revenue than the economic costs of providing the service. This requirement, known as ‘the ceiling test’, is intended to ensure that monopoly track owners provide prices and conditions of access to existing and future access seekers on reasonable terms.
IPART is required to assess the Transport Asset Holding Entity’s (TAHE) annual compliance with the ceiling test. This compliance assessment relates to the 2022-23 financial year for TAHE’s networks.
This is our second assessment of TAHE’s passenger network. Prior to last year’s review, we did not apply the ceiling test to the metropolitan passenger network. The reason was that the track owner at the time, RailCorp, was not corporatised and hence was not a separate legal entity to Sydney Trains, NSW Trains or Transport for NSW. Metropolitan passenger operations involved transfer payments between above-rail and below-rail departments of a single vertically integrated operation without any access contracts. On 1 July 2020, RailCorp became TAHE (a State-Owned Corporation). Passenger train operators now pay access fees for using TAHE’s passenger network, and the NSW RAU now applies to these transactions.
We have also completed a detailed assessment of TAHE’s Hunter Valley Coal Network against the ceiling test and a high-level assessment of TAHE’s other freight networks.
In addition to the ceiling test, rail owners must meet the ‘floor test’, which requires them to charge every access seeker fees that recover their direct costs of using the network.
The floor test is intended to ensure efficient rail owners can recover the avoidable costs of providing access to a third-party access seeker. It protects against a cross-subsidy to one access seeker from other access seekers and taxpayers. While IPART does not have a formal role assessing the floor test, we have considered whether this requirement has been met.