1968 Coal Train at Padiham. Courtesy of Geoff Marsh

Energy bills to rise as coal train charges set to be increased by 25%

Published 25th April 2013

Rail Regulator challenged by railfreight industry over legality of price increases

The railways were developed as a result of the industrial revolution and the ever growing need to transport heavy minerals such as iron ore and coal from mining areas to the factories and power stations. These in turn further fed the demand for coal and railways so it was seemingly an inexorably entwined relationship which has lasted just over 200 years.

Coal was one of the staple revenue earners for the railways but as industry has changed, demand for coal has dropped, especially in the last 30 years and consequently, the conveyance of coal by rail has declined from pit to power station.

The Office of the Rail Regulator (ORR) and Network Rail (NR) have to agree fundamental finances for the five years from April 2014 known as Control Period 5 (CP5). ORR has proposed a huge hike in access charges payable by freight companies who operate long distance coal trains to the major power stations in Yorkshire.

Energy bills to rise – or the end of coal trains?

If these charging proposals are implemented, it is likely that power bills will have to be increased to cover the extra coasts or the bulk coal trains will be consigned to history. When this information was imparted to the industry earlier this year, some companies at the ORR briefings said that as they had been given a year’s notice of the increases, it would be cheaper to use lorries so they would order some new ones and switch from rail to road.

In their own words, the ORR says that Rail freight plays an important role in Great Britain’s logistics and makes a significant contribution to the economy. Around 25% of the electricity consumed in the UK is generated by coal that has been moved by rail. A further 16% is generated by nuclear power, with spent nuclear fuel being moved by rail for disposal.

UK coal market slipping away?

The recent announcement of the closure of a Scottish colliery with nearly 600 redundancies shows how precarious the coal industry is at the moment. The memories of the decline in coal have been revived with the recent death of Mrs Thatcher and combined with the closures of the Coventry Daw Mill colliery following an underground fire and Yorkshire’s Maltby Colliery in March this year demonstrates the drop in coal production.

The Hatfield Colliery landslip has exacerbated coal problems and may well close as a result leading to more imported coal being required, imported via Immingham Docks to feed the Aire Valley power stations.

These closures mean that transporting coal by rail has declined without any increases to the rail charging regime and only leaves Kellingley and Thoresby as deep mining collieries in the UK and the fast reducing Scottish Opencast industry as major domestic coal suppliers.

Over the hills and far away?

The Scottish mines in Ayrshire could be the biggest losers if the new charges are implemented as the coal has to be transported the furthest distance to the English power stations. These trains run via the hilly Settle and Carlisle route to Yorkshire’s power stations while these could be fed from the east coast ports using imported coal.

This would reduce demand for Scottish coal further and could, combined with power stations being converted to biomass and gas powered, leave the mines without a customer and more closures.

The coal industry has an annual price review and this takes place each April and a secondary review is undertaken each September. Following the last cold three months, the demand for power has increased leaving the generating industry on the edge of being able to supply electricity.

So coal remains an essential part of the process and the proposed transport rail tariff increases might lead to become more dependent on imported coal which would surely increase in cost once domestic supplies dry up. This would also increase our energy bills as electricity generators pass on the increased costs to consumers.

How much?

The wholesale price of UK produced coal is likely to increase by £25 a ton and this would bring the best quality coal to as much as £200 a ton. This will increase the cost of running our heritage railways but this would pale into insignificance if the lights could go out next winter if coal supplies dry up and shortages have already been reported in the industry. The coal powered bits of Didcot power station closed in March, two years earlier than planned because of restrictions on how many hours they could use coal to generate and no replacement is in sight.

The McNulty Report of two years ago said that £1billion a year could be saved in the railway’s costs and this presumably is part of that process. Access charges are also being increased for moving biomass and nuclear waste by rail. The Government own Direct Rail Services (DRS) who convey the nuclear waste, are also facing huge increases for their trains which is curious as it is the Government who is also decommissioning Sellafield and other nuclear installations. As these are taxpayer funded operations, the question has to be asked; What is the point in this money go round?

They said:

The Railfreight Group said “The combined increases in freight charges, are of severe concern, and are likely to have impact on all commodity sectors not just coal. We need ORR to urgently think again about these proposals, if the worse effects on rail freight customers are to be avoided”.

ORR did not offer a comment when asked about the proposals.

Late Challenge to ORR’s statutory duties by Railfreight industry

The Railfreight industry has combined to oppose the ORR proposal and wrote a public letter to Anna Walker, Chair of ORR voicing their collective concern about the way ORR is approaching the industry’.

The proposed price increases will lead to a material loss in rail freight traffic affecting all market sectors which the signatories consider unacceptable the letter says. Controversially it also says that ORR is on the face of it, acting contrary to the ORR’s statutory duties set out in the Railways Act 1993 (as amended) to promote the carriage of goods by rail.

It is also suggested that the planned increases in charges go against clear guidance from the Secretary of State for Transport in July 2012 with regard to ORR recognising the importance of sustain efficient and commercial predictable network-wide freight operations including decisions about access rights and charging structures.

Rail.co.uk will keep you informed of how this argument plays out.


Should ORR increase the charges for trains carrying Coal, Biomass and Nuclear waste?

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