CNMC issues a report concerning ADIF and ADIF Alta Velocidad’s proposals about the modification of the Railway Network Statement for 2019 (“Declaración sobre la Red 2019”).

Written on 23 Jul 2019

The CNMC report regarding ADIF and ADIF Alta Velocidad's proposals for the modification of the Railway Network Statement for 2019 ("Declaración sobre la Red 2019") has been recently published. After this report, the only thing still pending is the adoption of the final version of this document by the ADIF's Board of Directors.

On 8 October 2018, proposals issued by ADIF and ADIF Alta Velocidad (ADIF AV) for modification of the railway network statements of 2019 were entered into the CNMC register. These statements are documents drafted by the railway infrastructure managers in which: (i) general rules, deadlines, procedure and criteria relating to fees systems and allocation of capacity are detailed, as well as (ii) any other information that could be necessary for submitting an application for allocation of capacity.

Pursuant to Article 32 of Law 38/2015, of 29 September, of the Railway Sector, CNMC must inform of these proposals for modification of the railway network statements. This being the case, once the consultation process provided for by law had finished, ADIF and ADIF AV submitted the received allegations to CNMC on 10 May 2019. After this, the entity published the Agreement of 25 June 2019 regarding a report of the above-mentioned managers’ proposals for the modification of the railway network statement for 2019 (“Declaración sobre la Red 2019”).

This modification is one of the proceedings that should be tackled inside the liberalization of national traveler’s services process that began with the adoption of Royal Decree-law 23/2018, of 21 December, that transposed into Spanish law the “political pillar of the Fourth Railway Package”. This is not the first time that an attempt has been made to initiate the process of railway liberalization in Spain, as is well known. Back in 2014, the Government revealed the idea of granting one single license so that just one operator could compete against Renfe Viajeros in providing national traveler’s services in the corridor of Levante. Nevertheless, the attempt was thwarted, and now the process has been taken up again, and should end on 14 December 2020, the date from which access to the infrastructure in the service schedule should begin.

One of the main news items that was introduced in the document, as will be analyzed later, consists of permitting infrastructure managers to sign framework agreements that ensure a certain capacity in a multi-year period, in contrast to the annual allocation of train paths. In this sense, ADIF AV has elaborated a framework agreement offer for the following corridors: (i) Madrid (Puerta de Atocha) – Barcelona (Sants); (ii) Madrid (Chamartín) – Levante (Valencia Joaquín Sorolla y Alacant Termino); and (iii) Madrid (Puerta de Atocha) – Sur (Sevilla Santa Justa y Málaga María Zambrano), as they are the major itineraries of the Spanish railway system. On these corridors, running capability is grouped into 3 packages (A, B and C) which entail indicative schedules ensuring an adequate turnaround of rolling material that maximizes their utilization. These packages correspond to the following profiles of railway operators:

  • Package A: it entails a similar capacity to the services currently provided by RENFE, which is consistent with the continuity of the railway offering at the time of market liberalization.
  • Package B: it offers a national dimension and the possibility to compete in different variables, particularly, in frequency, in order to attract business sector clients.
  • Package C: it is aimed at a smaller operator or at a niche market operator.

One of the criteria that ADIF should take into account when allocating the train paths to be included on each corridor will be the greater intensity in the utilization of each path over a 10-year period. This framework capacity offer to the railway companies has been positively valued by the CNMC.

If this structure is implemented, competition between at least two new operators for each corridor with different business models will be allowed. This number could be even higher in the case of compatible access applications.

What’s more, the framework capacity requests that railway companies submit will be considered adequate without the request being linked to the proposed structure, and they will be able to present requests for each of the three packages, which makes this system even more flexible.

CNMC considers that, in case there is not enough capacity to accommodate all the framework capacity requests, capacity packages should be assigned to different railway companies, so that they will not be part of the same corporate group, and their partners will not have control or exercise decisive influence in several capacity tenderers.

Given the tight deadlines for submitting requests, ADIF AV will have to admit requests presented by those candidates that do not have a railway license or specific authorization, but that prove at the time of submitting an application for capacity that they are in the process of obtaining one. ADIF AV has set as a deadline to submit such framework capacity requests of 31 July 2019. Nonetheless, CNMC has advised, given the implications and their difficulty, to extend it to 31 October 2019.

Additionally, as has been anticipated, the statement of framework capacity includes a draft agreement that the tenderer railway company and the infrastructure managers could sign. It will last for 5 years, and is renewable. Infrastructure managers will have to communicate to the CNMC those framework capacity agreements to which it subscribes railway companies in order for them to be analyzed by such entity and, if appropriate, approved.

Regarding sanctions, the proposal of statement of framework capacity and the framework agreement draft include their classification and amount. The CNMC considers that the final amount of the sanctions has to be located on the high rank of the reflected sums.

On the other hand, ADIF AV has considered relevant that several lines and stations have been defined as congested, which allows for the development of measures of capacity expansion. Specialization of certain high-speed lines have also been proposed in order to facilitate the liberalization process and optimize their use according to the services for which they were built. Another included concept is “coordinated stations”, which are defined as those stations with travelers with high demand for quality of service where a high occupation and stationing demand is expected on their lines, for which a detailed planning of the stationing capacity and an intensification of the information and general train coordination are needed.

With regard to the fees and prices applied to the basic, complementary and auxiliary services proposed by ADIF and ADIF AV, the proposal for applicable fees to different services, its eventual orientation and its applied reasonable profit have not been justified. Consequently, CNMC advises that this situation be reflected in the final version of the railway network statement for 2019.

Finally, on the occasion of the next market liberalization, ADIF AV foresees the introduction of changes to the electrical energy supply service.

In view of the main aspects analyzed in this report, it only remains to wait for ADIF and ADIF AV to approve the final document of the railway network statement for 2019.