4.12 Under the 1993 Railways Act, operating companies can apply to ORR to use capacity on the network which is not being used by other operators. The regulator recently approved an application from an operator to run services on the West Coast Main Line between London and Blackpool and is currently considering four applications to run services on the East Coast Main Line.
4.13 There can be a tension between protecting returns to the taxpayer from franchises and promoting competition and choices for passengers on the network. The regulator has to weigh up, based on its analysis of evidence presented by all parties, whether the proposed benefits to passengers from introducing additional competition on the East Coast Main Line are sufficient to justify the forecast shifts of revenue from the franchisee to the open access operator. We understand that it is unlikely that a decision will be reached this year.
4.14 Under the InterCity East Coast franchise agreement, the Department decided to share the risk of lost revenue due to additional competition from open access operators with the operator, partly because it felt that leaving this risk with operators would result in lower bids. The Department carries most of the risk so it could receive significantly lower than expected premia in the event of additional competition. There is also a risk that the operator may not be able to continue running the franchise.
4.15 The Competition and Markets Authority is looking at open competition on the railways and has identified a range of options to improve it. The Authority stated that it does not envisage any changes would take place before 2023 at the earliest, when the current phase of the franchising programme is complete.