Review of Operating Expenses

Transcription

1 Review of Operating Expenses Workstream Report 31 March 2011 Page 1 of 14

2 Table of contents 1 Executive Summary Summary of Business Case Summary of Business Case content relating to workstream Assumptions Operating and maintenance costs Summary of methodology used in Business Case Approach to review Findings Summary of joint financial model costs Comparison of joint model and business case costs Conclusion Appendices List of Figures Figure 1 Base Option Electric Train Services... 3 List of Tables Table 1 Annual Train Operating and Maintenance Costs per 3-Car EMU... 3 Table 2 Annual operating cost for the new stations on the CBD Rail Link... 3 Table 3 EMU assumptions as per the Business Case for the CBD Rail Tunnel... 6 Table 4 Summary of operating and maintenance costs in 2016/17 financial year... 6 Table 5 Comparison of train operating costs... 8 Table 6 Comparison of infrastructure operating costs... 8 Table 7 Total Impact on Annual Operating Expenses... 9 Document history Author Agency Version Date Comments Katherine Taylor MOT March 2011 drafted Katherine Taylor MOT March 2011 Revised Katherine Taylor MOT March Edited with WG comments i

3 1 Executive Summary 1. The Business Case for the CBD rail tunnel the Business Case) outlines the operating costs for the network once the tunnel is operational. During 2010, the Auckland Regional Transport Authority (ARTA) and the Ministry of Transport (MoT) undertook work to agree the operating costs of the Auckland metro rail network. The Joint Auckland Transport (AT)/MoT financial model was agreed late in The purpose of this workstream was to review the numbers presented in the Business Case by the APB&B Study Team and compare them to the Joint AT/MoT financial model. This comparison highlighted several areas where operating costs were underestimated in the Business Case. The overall finding is that the workstream estimate operational costs will be approximately $8.9 million per annum higher than the Business Case, meaning operating costs in 2021 when the tunnel opens will be $18.1 million per annum above operating costs for existing service aspirations. Additional costs are incurred in 2030 when a further tranche of EMUs are introduced. 3. The operating costs are based on the Business Case assumptions and standard estimates of train operations. Further information that results in changes to these assumptions including detailed timetabling may result in changes to the estimated operating costs. 1

4 2 Summary of Business Case 2.1 Summary of Business Case content relating to workstream 4. This section summarises the information on operating and maintenance costs of the Auckland metro rail services and network provided by the APB&B Study Team. Information is drawn from Appendix F of the Business Case, which outlines the assumptions underlying the work and estimated costs for operating and maintaining the metro rail network once the tunnel is opened. Additional information (Appendix A) was also supplied in response to a request from the workstream Assumptions 5. Several operating assumptions are outlined in the Business Case. Prior to the opening of the CBD Rail Link, metro rail services will be operated by 3-car or 6-car EMUs (i.e. an all-emu fleet). That 57 3-car EMUs (171 cars) will be procured in the current procurement process. The CBD Rail Link will be passenger only and operated by EMUs (maximum 6-car). 10 additional EMUs would be required in the do minimum by 2023 to increase all peak services to 6-car services. The CBD Rail Link will require an additional 24 3-car EMUs (72 cars) at opening. An additional 26 3-car EMUs (78 cars) will be required by 2030, in the CBD rail tunnel scenario. 6. The APB&B Study Team investigated various service patterns, including sensitivities around minimum EMU requirements. These patterns were generated for the purposes of assessing patronage impacts and have not been subject to detailed operational simulation or timetable development. The base service pattern for the CBD rail tunnel scenario is shown in Figure Changes to the service pattern assumptions, including detailed timetabling, may result in changes to the operating costs. 2

5 Figure 1 Base Option Electric Train Services Operating and maintenance costs 8. Table 1 outlines the operating and maintenance costs for the EMUs assumed in the Business Case. Assuming an additional 24 3-car EMUs when the CBD rail tunnel opens, the Business Case assumes an additional $9.2m per annum in train operating and maintenance costs. In 2030 when an additional 26 3-car EMUs are required, the train operating and maintenance costs will be an additional $19.3m per annum. Table 1 Annual Train Operating and Maintenance Costs per 3-Car EMU 2 Item Rate Annual Kilometres operated by each 3-car EMU 80,000 Annual Energy and maintenance costs per 3-car EMU at $2.75 per $220,000 km Annual Facilities (Cleaning, stabling etc) costs per 3-car EMU $85,000 Annual Train Crew costs per 3-car EMU $80,000 Total $385, Infrastructure operating and maintenance costs are split between station costs and network costs. The three station costs are based on the current operating costs for Britomart Station and are shown in Table 2. The total annual operating cost is $6.5m. Table 2 Annual operating cost for the new stations on the CBD Rail Link Station Aotea K Rd Newton Total Annual $2.9m $1.8m $1.8m $6.5m operating cost 10. The APB&B Study Team calculated a $1m per year cost for below track operating and maintenance costs. This figure was based on 1 Figure 4-5, pg 41 APB&B Business Case 2 Table 6-4, pg 11, Appendix F, APB&B Business Case 3

6 current annual operating costs per route kilometre of $0.1m per km, a 3.5km track, and uplift to reflect the asset intensive nature of the CBD rail tunnel of % ($0.7m - $1.05m). 11. The APB&B Study Team did not make a specific assessment of the capacity of the maintenance depot and stabling sidings as it was outside the scope of their work. Depot and stabling requirements have been reviewed as part of the workstream on additional network capital costs. 2.2 Summary of methodology used in Business Case 12. To complete the Business Case, the APB&B Study Team made some high level assumptions and cost estimates around operating assumptions, including rolling stock fleet size. Assumptions were informed by discussions with ARTA and KiwiRail, along with the APB&B Study Team s knowledge of the metro rail network and data from similar projects. These assumptions around costs were applied to the base service pattern (see section Assumptions). 13. ARTA provided background information to inform the figures outlined above. The 80,000km figure for annual EMU kilometres is the figure used for rail operational budgeting processes. It should be noted that the additional EMUs assumed to be required will largely be used in peak periods when the fleet requirement is at its greatest. The APB&B Study Team checked the 80,000km figure by assuming an average speed of 50 kilometres per hour, six hours of operation per working day and 250 days per year, which gives a figure of 75,000km per annum. 14. The $2.75 for annual energy and maintenance costs per 3-car EMU is made up of $1.10 for energy costs and $1.65 for annual maintenance costs. The maintenance cost does not include indirect costs such as depot overheads as the APB&B Study Team did not expect the additional EMUs required to significantly affect these costs. 15. In regards to train crew costs, ARTA advised that the annual cost of employing one driver is $80,000. This figure is based on the assumption that changes to current train crewing levels are likely to be in place by the time the CBD rail tunnel is completed. 16. The APB&B Study Team note that a detailed assessment of the metro rail network wide operational impacts of the CBD rail tunnel was not included in the scope of the CBD Rail Link Study commissioned by KiwiRail and ARTA. The original intention of the Business Case was to determine whether there was a sufficient rationale for the project to justify protecting the route by designating it. 4

7 3 Approach to review 17. ARTA supplied the APB&B Study Team with data on existing operational costs for the metro rail system in early Since then, a joint review of the operating costs for the metro rail system in Auckland has been undertaken by the Ministry of Transport and ARTA/AT. The model incorporates the latest data as at 1 December 2010, including financial year 09/10 financial year actual data and information from the EMU procurement. 18. The purpose of the review of the operating costs was to compare the costs outlined in the Business Case with the agreed Joint MOT/AT financial model. The Working Group agreed that the consultants who built the Joint MOT/AT financial model would be contracted to undertake the review. The scope of their work was to review the figures and assumptions in the Business Case, and compare to the agreed assumptions in the financial model. 19. The base service pattern assumption in Business Case has been used for this review. Sensitivities can be calculated by inputting different EMU numbers from various scenarios, for example the minimum EMU option. 5

8 4 Findings 20. This section firstly summaries the operating cost expectations from the Joint MOT/AT financial model, then compares the predicted costs to the operating costs set out in the Business Case (as outlined in section 2). 21. The comparison of annual operating costs is based on the EMU assumptions provided in the Business Case (see Section 2.1.1) which are summarised in table 3 for clarity. Note that neither the modelling that derives these forecast fleet numbers nor the modelling that derives annual fleet kilometres for the additional EMUs have been reviewed as part of this workstream. Consequently, changes in these assumptions due to updated information could result in different estimates of the additional operating costs. Table 3 EMU assumptions as per the Business Case for the CBD Rail Tunnel Fleet Size (3-car EMUs) No CBD Link New Additions No CBD Link Total CBD Link New Additions CBD Link Total Summary of joint financial model costs 22. Table 4 outlines the operating costs for the metro rail network as per the Joint MOT/AT financial model. Key assumptions are: the costs are based on 2016/17 financial year steady state network; costs are in 2010 dollars; and maintenance and fuel costs are based on an operating fleet of 57 3-car EMUs. Table 4 Summary of operating and maintenance costs in 2016/17 financial year Forecast Train and Infrastructure Expenses Annual Cost Annual cost per 3-car EMU Cost per Km per 3- car EMU Variable with additional EMUs and train usage EMU Rolling Stock Direct Maintenance Rolling Stock Indirect Maintenance Fuel Costs Track Access $18.8m $330,000 Yes, <50% Operator Costs Station $7.7m $135,000 No Other $1.7m $30,000 Yes Total $89.3m 23. Note the following in regards to the costs in Table 4. 6

9 Indirect maintenance costs are generally fixed in nature over a range of capacity; however, indirect costs will increase in increments as capacity requirements increase. Operator costs include all costs incurred by the operator and consist primarily of salaries and wages. Approximately 70 percent of the operator s 420 full time employed (2011) are on-board staff. Station costs consist of station maintenance and access costs for Britomart. Other costs consist primarily of insurance. 4.2 Comparison of joint model and business case costs 24. Tables 5 and 6 provide a comparison between the operating assumptions in the Business Case and the Joint MOT/AT financial model developed by MOT/AT for operating and maintenance costs. 25. When considering these comparisons the following needs to be taken into account: The actual variable nature of crew and operator costs is an estimate only. The variable nature of crew costs and associated operator costs is uncertain and will be largely dependent on the future operating environment for the EMUs over the evaluation period e.g. driver operated only vehicles and the number of customer service and communications staff required etc. Below rail operating and maintenance costs for tunnels are expected to be two to three times more expensive than operating and maintaining normal track (the APB&B Study Team also used %). Costs for extra track distance are based on a track access charge of $18m per annum and approximate Auckland metro route kilometres of 100 kilometres. The variable nature of track access is an estimate only. Track access charges reflect a bundle of fixed and variable cost components including track wear, track maintenance, signals, and capital cost. Station costs for Aotea, Karangahape Road and Newton Stations are based on a percentage of Britomart costs. 26. The APB&B Study Team noted, in response to these findings, that while they were aware of ongoing negotiations in regards to the track access charges for metro rail in Auckland and Wellington, they were not provided with any information on the emerging outcomes from this work. In addition, the APB&B Study Team consider that for the purpose of the economic evaluation, the level of track access charges on the network prior to the CBD rail tunnel is not relevant, as opposed to the level of increase after the project is completed. APB&B consider that some prudent allowances were made, but a more detailed assessment will only be able to be made once the project and its operating and maintenance assumptions are further defined. 7

10 Table 5 Comparison of train operating costs Business Case Auckland financial model Forecast operating expenses Annual Cost per 3 car EMU Cost per km per 3-car EMU Annual Variable Cost (NZ $m) Variable cost per 3-car EMU Assumed Variable component Difference per km EMU Rolling Stock Direct Maintenance Rolling Stock Indirect Maintenance Fuel Costs Crew (and other operator) costs Total (indicative estimate) Table 6 Comparison of infrastructure operating costs Forecast operating expenses Business Case Auckland financial model Below Rail O&M Costs (i.e. Track Access) extra 3.5km track distance Annual Cost Cost per km Annual Cost Track Access extra train usage - - $110k per train Stations operations and maintenance $6.5m $6.5m Cost per km Assumed Variable component Difference per km $1m $0.3m $1.9m $0.54m 100% $0.9m $1.38 ~35% $1.38 per km 8

11 5 Conclusion 27. In conclusion, since ARTA provided the APB&B Study Team with operating cost information and the Business Case was prepared, Auckland Transport and MoT have agreed a financial model for operating costs on the Auckland metro rail network. This model is based on data as at 1 December 2010, and consequently varies from the Business Case in a couple of areas. The consultants also believe that there are additional costs to those assumed in the Business Case. 28. The consultants have revised the operating cost assumptions in line with the financial model. In 2021, based on an additional 24 3-car EMUs and 3.5km of additional track, the costs will be $8.9 million more than indicated in the Business Case (i.e. a total $18.1 million above the post electrification network). In 2030, when an additional 26 3-car EMUs are introduced, total additional operating costs will be $36.8million, or $17.5million above those indicated in the Business Case. Table 7 Total Impact on Annual Operating Expenses Additional cars 2021 ($m) 2030 ($m) 24 x 3 Car 50 x 3 Car EMU EMU EMU Rolling Stock Direct Maintenance Rolling Stock Indirect Maintenance Fuel Costs Crew (and other Operator) Costs Track Access extra track distance Track Access extra train usage Total additional to BC assumptions Additional operating costs in BC Total additional operating costs from CBD rail tunnel 9

12 6 Appendices Memorandum DRAFT To Michael Quinn Page 10 CC Subject From Pete Clark, Neil Buchanan, Andy Olsen, Alan Burford, David Adams, Bill Lee, John Bolland, Russell Turnbull, Chris Money, Peter Twomey Responses to Ministry of Transport Memo of 3rd February 2011 re CBD Rail LInk Rail Opex Assumptions Simon Wood File/Ref No /3.08 Date 26-Feb-2011 Overview This memo has been prepared by APB&B, with the assistance of Auckland Transport, to respond to the issues raised on CBD Rail Link Opex Assumptions in the memo to Michael Quinn from Andrew Wallace and Andy Reid dated 3 rd February The Ministry of Transport (MOT) memo provided a high level comparison of the Operating cost rate assumptions used by APB&B in the CBD Rail Link Business Case, with alternative figures that appear to be based on recent work undertaken by or the Ministry of Transport as part of Auckland metro rail access charge negations between KiwiRail and Auckland Transport. APB&B was not made aware of this information during the production of the business case. APB&B, assisted by Auckland Transport Public Transport Operations Staff, have provided a detailed commentary on the observations made by the MOT below, but in summary most of the operating cost figures cited by the MOT are higher than the corresponding figures used by APB&B. We have therefore, tested the impact of using the MOT figures on the current CBD Rail Link transport benefit cost ratio. This results in the BCR (G) (BCR (Government) including revenue) dropping by 0.05 from 1.13 to Further details are provided below. Therefore, whilst there may be some debate about the appropriate opex cost rate assumptions, APB&B considers that these assumptions do not have a significant impact on the economic viability of the CBD Rail Link. It is however acknowledged that rail operational costs and associated funding requirements, is and may remain a significant issue; however in order to provide more definition on the likely post CBD Rail Link operational costs, considerably more detailed service planning and timetable development, will be required to establish the optimal service patterns and corresponding train fleet size and configuration and annual kilometres operated. This is a level of 10

13 detail beyond that needed for an initial business case designed to support protection of the route of the project and would typically be undertaken as part of more detailed project definition phases. Detailed Responses 3 (a) The Auckland Metro Model operating costs metro model allows [xx] per km for a 3 car EMU based on light (routine) maintenance and a smoothed renewal/ refurbishment cost over the entire life of the EMU s. In reality much of this is deferred to mid life or later in the life of an EMU. APB&B, based on discussions with Auckland Transport, did not take this approach, with renewals/ refurbishment costs kept separate from ongoing maintenance costs. Further renewals costs are only included in the cost benefit evaluation if they fall due within the 30 year project evaluation period, commencing from the start of construction of the project. As any additional Emus required for post CBD Rail Link services would be new when the CBD Rail Link opens (at around year 10 of the evaluation period), it has been assumed that major renewal or refurbishment would not be required within the remaining years of the evaluation period. APB&B s operating cost rate per km for a 3 Car EMU was based on ARTA assumptions of [xx] per car km giving [xx] per 3 car EMU unit plus a further $1.10 per km for traction energy costs, subsequently revised to [xx]/km. 3(b) It is acknowledged that some indirect maintenance costs will increase with a larger fleet, however these will not be directly proportionate to the increase in fleet size. The structure of the operation would determine how these costs would increase. This is yet to be quantified. 3(c) The capital costs assumed by APB&B included a $100m allowance for other network infrastructure enhancements beyond the CBD Rail Link itself, including possible additional stabling and depot facilities. As advised previously, the scope of APB&B s CBD Rail Link Study did not include for any detailed assessment of wider network impacts. However as part of the above reference sensitivity test of the higher operating cost rates set out by the MOT, we have included a further $50m allowance, for depot and stabling expansion in (d) The current average cost of employing a driver, advised by Auckland Transport, is in the vicinity of [xx] per annum (including the 2010/11 salary increase). For planning purposes an allowance of 1 driver for every 7 drivers scheduled is made to cover training, annual leave sick leave etc. This would add a further [xx] per annum giving a total in the vicinity of [xx] per annum rounded to $80000 p.a. For the purpose of the business case, a fairly rudimentary assessment was made of the number of additional trains and drivers required to run the post CBD Rail Link services patterns, but as detailed timetable development was outside the scope of the APB&B study, no effort was made to optimise either vehicle numbers or driver usage. Hence the allowances in the Business case benefit cost evaluation are possibly conservative. 3(e) APB&B cannot comment on the statement in the MOT memo that passenger rail Track Access Charges for the Post Electrification Auckland rail network are likely to be in the order of $18.8m per annum as we have no visibility of the basis for this number, although that negotiations on the level of track access charges are ongoing between Auckland Transport 11

14 and KiwiRail are still ongoing. However we would contend that track access charges are not directly related to number of trains operated and or kilometres run. For example many light fast passenger trains may cause less track damage than fewer heavy freight trains. On the other hand it is acknowledged that increased passenger service frequencies and hours of service is likely to mean that both higher asset availability and reliability is required, together with fewer daytime opportunities for maintenance. It is not known however, how much the levels of track access charges referenced by the MOT already assume such changes to maintenance levels and working times. Effect of Ministry of Transport Opex Rates on CBD Rail Link BCR As a further sensitivity test on the Benefit Cost Ratio (NZTA EEM Transport and Agglomeration benefits), we applied the MOT Opex cost rates to the Business Case rail operating assumptions refer to table below. Benefits were kept constant. There was small negative impact on the BCR: The BCR (N) decreased from 1 (0.98 to two decimal places) to 0.9 (0.94 to two decimal places) The BCR (G) decreased from 1.1 (1.13 to two decimal places) to 1.1 (1.08 to two decimal places) Item APB&B MOT Ref to MOT memo of Feb 3 Annual Train Op & Maint Annual km per unit Energy & maint cost per km $2.75 $3.20 Item (a) Energy & maint cost per annum, $k $ $ Facilities per annum, $k $85.00 $85.00 Crew costs pa, $k $80.00 $ Item (d) Total cost per unit per annum, $k $ $ Annual Infrastructure Op & Maint Below rail cost per km, $k $ $ Item (e) Uplift factor Total Total below below rail rail cost cost pa, pa, $k $k $1, $2, Stations Stations $6, $6, $6, $6, Extra Extra operation operation of of maint maint depot, depot, $k $k pa pa $0.00 $0.00 $5, $5, Item Item (b), (b), which which does does not not specify specify a figure figure Total cost per annum, $k $7, $14, Total cost per annum, $k $7, $14, Other Other Depot expansion, circa 2025, $m $50.00 Depot expansion, circa 2025, $m $50.00 Other rail network infrastructure on opening $ $ Other rail network infrastructure on opening $ $ Item (c), which does not specify figure Item (c), which does not specify a figure Notes Notes Highlighted cells are estimated at this stage Highlighted cells are estimated at this stage Extra operation of maint depot is based on pro rata increase in rolling stock Extra operation of maint depot is is based on pro rata increase in in rolling stock This suggests that the opex cost rate assumptions are not a significant factor on the economic viability of the CBD Rail Link project. 12