Proposed Incentive Mechanism
On 30 April 2012, QR Network Pty Ltd (QR Network) submitted a proposed incentive mechanism to the Authority for its approval. The proposal is to adjust QR Network's allowable revenues based on a number of measures of network performance. The incentive mechanism was submitted under clause 2.6 of the 2010 access undertaking.
Clause 2.6 of the undertaking envisages that the incentive mechanism will encourage QR Network to operate, and invest in, the rail infrastructure efficiently and in a way that promotes efficiency of a coal chain. In this context, QR Network's submission notes that measures that solely improve rail network performance will tend to improve broader coal chain performance.
The undertaking already seeks to encourage the growth of a more efficient coal supply chain by requiring QR Network to:
- annually provide supply chain operating assumptions (cl. 11.1.3 of the undertaking);
- review capacity either when the operating assumptions change or prior to a capacity expansion (cl. 11.1.4);
- provide rail infrastructure master plans developed in consultation with customers and other stakeholders and either be aligned with a supply chain master plan, or provide reasons why it does not agree with the supply chain master plan (cl. 11.2);
- develop system rules to specify in detail the way in which it will plan, schedule and control train operations (cl. 7.1 & sch. G, App. 1);
- develop a master train plan which demonstrates QR Network's ability to provide all contracted train services, from origin to destination, and planned maintenance possessions, in a form which is readily convertible into a daily train plan, (schedule G, Part A, cl. 2); and
- liaise with other supply chain participants regarding the most efficient timing of track closures for scheduled maintenance shutdowns (clauses 11.1.1(b) and 11.1.4(f)).
In its June 2010 decision on pricing issues, the Authority noted the comments by:
- QR Network, that it already had sufficient incentives to maximise coal system output, but accepted that it should have a more direct incentive structure to meet the needs and aspirations of the coal industry; and
- coal industry companies, that QR Network needed to deliver on contractual commitments before rewards above the revenue cap could be considered.
The Authority received eight submissions from stakeholders on QR Network’s proposed incentive mechanism. A copy of QR Network’s proposed incentive mechanism and stakeholders’ submissions can be downloaded below.