THE DEPARTMENT for Transport is consulting on the possible introduction of a public service obligation levy to be payable by open access operators.

The move follows a recommendation from the Competition and Markets Authority for more open access operation on the UK network but which the CMA said should be accompanied by reforms to access charges. The introduction of a PSO levy would see open access operators contribute, where they are able to, towards socially and economically important but ultimately unprofitable services.

Reform of track access charges, which was also recommended, falls under the purview of the Office of Rail and Road, and ORR is proposing changes in this area for Control Period 6 (2019-24).

DfT says introduction of a PSO levy would ‘go some way’ to address Government’s concerns about some open access applications and their impact on rail investment and franchised operators. The principles developed for the levy include delivery of better outcomes for passengers, protection for taxpayers, transparency, flexibility and resilience to future changes in the market and capacity.

The plan is that the levy will be capped at the aggregate cost to Government of providing subsidy franchises, although it is noted that given the current level of open access operation and future rights granted it is not expected to reach this figure.

Options set out in the consultation include a levy based on a metric such as distance or passenger numbers, a levy recovering profit above a fair rate of return threshold or a specific percentage thereof, or a levy charged as a proportion of revenue.

The levy is intended to complement ORR’s charging framework, and DfT says it is ‘minded to consider’ that if a market is determined by the ORR as unable to bear full fixed track access charges then it would be unlikely to face the levy; calculation of the levy is also likely to be ORR’s responsibility. The levy is not expected to be applicable to franchised passenger services, international services or freight operations.

The consultation period runs until 21 April 2017.