Cabinet Decides Metro Rail Ownership & Operating Model

Cabinet today approved a new ownership and operating model for metro commuter rail services in Auckland and Wellington.

While KiwiRail owns the trains, it is not necessarily the case that they will operate the services. So that will mean private sector involvement in the running of services, including in Wellington where Kiwirail presently runs the Metro line.

So Veolia may have the chance to run Wellington as well although tendering out won’t be mandatory as regions were considered by Cabinet to be best placed to make the decision. The government believes the “prospect of competition” alone should drive improvements.

The introduction of private sector and competitive elements into the delivery of metro services “can contribute to generating value for money and improving service levels and should be incorporated where appropriate.”

The government also considered it was important that Auckland and Wellington had similar models unlike the present system. KiwiRail currently operates the commuter rail services in Wellington, while private company Veolia operates them in Auckland.

The new rolling stock purchased by Government will be held in special KiwiRail subsidiary companies and leased to train operators who provide the service.  KiwiRail will be able to bid to operate the services alongside other train operators, but all bidders will face the same price to lease the trains, and to access the track.

Transport Minister, Steven Joyce, says this ensures that while KiwiRail owns the trains, it is not necessarily the case that they operate the services. They will have the opportunity to bid, but it is the regional transport authorities alongside NZTA who will determine the successful operators.

The plan provides a strong base for “quality commuter services” as new government-funded electric rolling stock arrives in both cities.

The minister of transport’s paper to Cabinet says that it has become apparent that an earlier priority than finalising funding and ownership arrangements is the need to clarify how Metro rail services should be procured and delivered. Addressing procurement and delivery matters was “key to achieving value for money and improving customer service.”

“The model builds significantly on the best of what we already have in place, and will ensure the operation of commuter rail services is contestable, so that we get the best possible service for commuters at the best possible price.

That is appropriate as it is the regional organisations and NZTA that provides the public transport subsidies that make the services viable.”

The paper says key public policy objectives should be to:

• increase economic growth and productivity by reducing congestion on urban roads and more efficient utilisation of the transport network
• to provide transport choices for users to integrate rail with other modes of transport
• to reduce the environmental impact of the transport system.

The parties who pay for rail services such as passengers and taxpayers should expect value for money and quality services.. Regions needed clear rights to access the rail network and metropolitan rail rolling stock, such rights negotiated and specified in agreements with appropriate parties.  The paper said Kiwirail’s ownership and rail service functions should be kept financially separate

Mr Joyce says train operating contracts will be performance-based, utilising some of the best practice internationally to ensure punctual reliable services.

“Performance-based contracts ensure the train operator is rewarded for providing reliable services and penalised when they don’t.  We will ensure that operators have sufficient control over their operations to ensure they can be held accountable for performance.”

The minister’s paper says the model needs four key features:

All parties involved in purchase and delivery need clear roles, says the paper:

• The operation and maintenance is contestable

• A strong focus on performance-based contracts with appropriate transfer of risks

• A strong focus of transparency

Here’s how the set up will work:

The Auckland and Wellington regions will be responsible for planning, specifying and purchasing the Metro rail services.

The NZTA will play a pivotal role in making sure the model works. Besides monitoring the services, it has a direct interest in managing regions’ requests for funding and metro rail service levels. It was also best placed to assess the relative benefits of spending on Metro rail compared to other public transport.

Kiwirail will provide the infrastructure.

The ministry of transport represents the government’s wider transport policy interests while the Crown company monitoring unit looks after the government’s ownership interest in Kiwirail.

Still to be worked out are a number of issues

• The respective rights to rail infrastructure of Metro rail and freight

• The respective costs of providing access to both Who paus for what level of access

• The lease arrangements covering maintenance requirements, rolling stock etc

• The level of renewal activity on the Metro network and how it should be funded

• How regional council requirements are taken into account in the development of Kiwirail’s asset management plans

Full Cabinet paper is here. This announcement is one of the important decisions we’re awaiting. Next will come our much-waited  announcement addressing  the procurement of new electric trains for Auckland, and there will also be an announcement on the outcomes of the current official’s review of KiwiRail’s wider operating and company structure.