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Friday, 10 July 2015

A new track for KiwiRail II

In the document dump from the Treasury this week comes the revelation that they advised the government to shut down all or part of KiwiRail's network and services. The government wisely rejected this advice. Once again, this emphasises that the way we've structured rail transport in New Zealand is not working.

Here's the way things work at the moment:

  • New Zealand Railways Corporation, now a statutory corporation, owns the land underneath the railway lines and a lot of other land leased to KiwiRail's customers. This is to keep the value of the land off KiwiRail's books.
  • KiwiRail, which is a 100% State-owned enterprise. KiwiRail owns all the railway infrastructure network, locomotives, wagons, workshops, ferries, signalling and control systems to run the rail network. While freight and ferries are the mainstay of KiwiRail's business, KiwiRail has two business units running passenger services as well - Tranz Metro in Wellington and KiwiRail Scenic Journeys for the remaining (three) long-distance passenger services. Tranz Metro receives subsidies from the Greater Wellington Regional Council (GWRC) which also owns a lot of its rolling stock.
  • TransDev, which runs Auckland's metro commuter network on KiwiRail's tracks using their electrification; it receives subsidies from Auckland Transport to do this.
  • Dunedin Railways, which runs the famous Taieri Gorge Railway out of Dunedin and other services. It owns the remaining portion of the Otago Central Railway from Taieri to Middlemarch, and runs trains on KiwiRail's network.
  • A host of other smaller non-commercial operators, mainly in the heritage space.
  • Regulatory oversight is by the New Zealand Transport Agency, which issues rail licenses to rail operators. The Transport Accident Investigation Commission (TAIC) provides investigatory services in the event of accidents.
In my view, it would be much better if we took a leaf from Queensland's book. In Queensland the state government has retained ownership of the state rail network (which incidentally is built to the same track gauge as New Zealand, and manages to operate high-speed trains - showing that the claim so-called "narrow gauge" is slower is nonsense), for which it charges the freight operators a fee to use. The State of Queensland then privatised the rail freight operations but kept rail passenger services in public ownership. We probably don't need to go quite as far, but I do think you could apply the mixed-ownership model to KiwiRail once we've got the model sorted.

How could a future model for rail transport in New Zealand look, if we adopted the Queensland model? Here's what I think:
  • KiwiRail retains the rail freight and ferry operations, owning locomotives, wagons and workshops to provide these services. At some later date, 49% of KiwiRail could be floated on the NZX.
  • The Railways Corporation is dissolved and merged with NZTA.
  • The entire rail network - including track, train control, communications, maintenance, and signaling, is transferred to NZTA. NZTA charges all rail licensees for using the network on the same basis as Road User Charges (RUCs).
  • Tranz Metro could be contracted out to a new operator, probably at GWRC's choosing, much like Auckland's commuter network.
If KiwiRail no longer operates on part of the network, NZTA will be able to lease lines to other operators, and facilitate interchange of wagons.