Regulated v Unregulated fares

[whole diary]

[grahame]

Can I ask for some Xpert input here ... giving some thought to elements of what would and would not be fixed within franchise terms for a new franchise, perhaps with a different TOC^▸ (Train Operating Company) and / or with a new marketing approach.

As I understand it (but I'm liable for correction)

Some fares are regulated.  They're ticket types that must be offered, and their prices must only increase at or below a government specified level, though there can be some evening out of a basket.

The following are regulated fares:
Open Singles
Open Returns
Day Returns
Season Tickets

Other fares are unregulated. They're ticket types that are offered by the individual train operating company/ies, who can set the prices as they wish, and terms and conditions too.   Such tickets can be introduced, withdrawn and amended by the train operating company without reference back to the Department for Transport.   So it follows that any fares of this type could be withdrawn under a new franchise, to be replaced by something completely different, or not replaced at all.

The following are unregulated fares:
Advanced tickets specific to a single train
Tickets issued for use only on the trains of one company, even when multiple companies serve the route
Groupsave

But this is were I start coming a bit unstuck. 

* What about off peak and super offpeak tickets?  I thought there was some regulation involved there, but there seem to be situations where a TOC can change the definition os what is and isn't peak.   Are there "core" hours which are regulated, with companies able to add dispensations?

* What about Rover tickets?  The All Line Rover used to be a glorious "hop on anywhere, anytime and just travel" ticket, but it now seems restricted.

Help appreciated on this - I don't *think* we have a thread elsewhere that tells us, but please point me to one if we do.  Thanks

[ChrisB]

I'm not sure you're right.

I thought these were regulated

Peak Fares 'Any Permitted'
Off-Peak Returns (what used to be 'Savers')
Season Tickets

Rovers, Super off-peak & ADvance aren't regulated, nor operator-specific fares.

Peaks have to finish at 10am and 7pm into/out of London. There is no restriction on evening start times of peak, nor any for super off-peak times.

[grahame]

I'm not sure you're right.

Neither am I, Chris ... in fact I know I am or was very confused.  I need(ed) help.

That 7 p.m. peak limit would explain a couple of things ...

[ChrisB]

My advice is FGW^▸ (First Great Western)-centric.

I understand operators are able to specify which of their not-peak are their regulated fares - as Chilteern swapped their off-peak (ex-Saver) fare for their Super off-peak fares to be regulated (where they exist). It enabled them to sneakily increase their off-peak fares once in January to the RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context))+1% limit and then, once they bacame de-regulated, increased them again in September 2011

[JayMac]

Details of how fares are regulated can be found in appendix C (from page 35 & onwards) of this document:

http://webarchive.nationalarchives.gov.uk/+/http:/www.dft.gov.uk/consultations/archive/2002/farespolicyreview/faresreviewconclusions2003.pdf

That information is, to the best of my knowledge, still fairly accurate. The names of ticket types have changes since then* and an additional tier was added by some operators. Where an operator now offers a Super Off Peak Return in addition to an Off Peak Return it is the Super Off Peak Return which is now the regulated fare.

*
For Saver Return, read Off Peak/Super Off Peak Return
For Standard Return read Anytime Return

Since the SRA^» (Strategic Rail Authority - about) conducted that fares review in 2003 there has been some tinkering with the names and 'basket' rules, but in the main the 'protected' fares on any particular flow remain unchanged. Except to say that most operators now only offer the protected '(Super) Off Peak' fares at the bare minimum times allowed for in their franchise.

Things may change in the coming months. Fares are being looked at again by policy makers. There maybe another comprehensive fares review on the horizon..... Don't expect to see a return to a more generous interpretation of (Super) Off Peak though....

[ChrisB]

That information is, to the best of my knowledge, still fairly accurate. The names of ticket types have changes since then* and an additional tier was added by some operators. Where an operator now offers a Super Off Peak Return in addition to an Off Peak Return it is the Super Off Peak Return which is now the regulated fare.

*For Saver Return, read Off Peak/Super Off Peak Return
For Standard Return read Anytime Return

Hmmm - sorry, can't agree.
Unless the operator has specifically requested & obtained DfT^» (Department for Transport - about)/ORR^» (Office of Rail and Road formerly Office of Rail Regulation - about) approval, it is the off-peak return that is regulated.

To my knowledge, only Chiltern have gone down that route.

[JayMac]

Hmm, sorry. Don't agree that you can't agree. 

Where First Great Western have Super Off Peak Return's these are the regulated fare. Same goes for East Midlands Trains and East Coast. Including Chiltern, I think that's it for operators who offer Super Off Peak Returns.

I've confirmed that it is Super Off Peak Returns on FGW^▸ (First Great Western), EC & EMT^» (East Midlands Trains - about) that are regulated by comparing the fares from Dec '09 and Jan '10. It was at this time that regulated fares went down by 0.4%, thanks to negative RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context)) in summer 2009.

The only fares that went down on FGW, EC & EMT were the Super Off Peak Returns, ergo they were (and remain) the regulated fare on flows where the old Saver Return was offered prior to February 2003.

I'm unsure of the situation with Chiltern. In 2009/10 the regulated fare where a Saver Return existed prior to February 2003 was the Off Peak Return. Chiltern radically overhauled their fare structure on longer distance journeys last year. Looking at the timings when their Super Off Peak Returns are valid and comparing those with the times when a 'protected return fare' has to be valid, according to the franchise agreement, I would conclude that, yes, Chiltern's regulated/protected fare for journeys north of Banbury is now also the Super Off Peak Return.

[Trowres]

Could anyone with a good memory and/or a legal talent reveal whether fares regulation is a cap, or whether it mandates TOCs^▸ (Train Operating Company) increasing fares by the average amount that the government dictates? Where in regulations or statute are the regulatory powers defined?

[ChrisB]

Its an average of a basket of fares. There are three baskets for FGW^▸ (First Great Western), reflecting the three franchises that were rolled into the current franchise.

[Trowres]

Sorry Chris, I didn't make myself clear. Bearing in mind the origin of fares regulation, I would have expected it to dictate the maximum amount by which a TOC^▸ (Train Operating Company) could raise its fares (subject to all the basket complications) but it seems to be applied as a mandatory size of increase. I was after the source of the fares regulation powers and whether this allowed DfT^» (Department for Transport - about) to force TOCs to raise regulated fares, or whether such compulsion was introduced in franchise contracts...or whether there is any compulsion on the TOCs.

[Trowres]

The following link answers some of the points raised by Grahame and me:

www.parliament.uk/briefing-papers/SN01904.pdf

Subject to the other provisions of this Act, if it appears to the [appropriate franchising authority] that the interests of persons who use, or who are likely to use, franchised services so require, [it] shall ensure that the franchise agreement in question contains any such provision as [it] may consider necessary for the purpose of securing that any fares, or any fares of a class or description, which are to be charged are, in [its] opinion, reasonable in all the circumstances of the case.

My highlighting.
And from a franchise agreement:

The Franchisee shall procure that the Value of a Fares Basket at any time in any Fare Year
does not exceed its Regulated Value for that Fare Year.

[ChrisB]

They mustn't exceed the regulated value - but they can apply from 0% to that figure as they wish. However, elsewhere in the regs says that all this increase passes to the DfT^» (Department for Transport - about) through the payment structures....so the TOC^▸ (Train Operating Company) would take a loss if they didn't apply to the full amount.

Further, the TOC doesn't have to apply the increase in January either - but loses the option to increase at the following January increase date. Increases can be spread across the three annual dates for increases, but of course, the additional payment to the DfT is due on fares charged from January - hence why TOCs generally do put the whole increase on then....

[Trowres]

However, elsewhere in the regs says that all this increase passes to the DfT^» (Department for Transport - about) through the payment structures....so the TOC^▸ (Train Operating Company) would take a loss if they didn't apply to the full amount.

Could you help this weary guy identify where "in the regs" this appears?  (please)

[ChrisB]

Sorry, I can't.

Briefed by FGWs^▸ (First Great Western) & Chiltern's management though, who explained it all the same way

[Trowres]

Another trawl later, the following from the ATOC^» (Association of Train Operating Companies See - here) site:

Under the Government-set franchise agreements that train companies work within, all additional revenue generated from the shift from RPI^▸ (Revenue Protection Inspector (or Retail Price Index, depending on the context))+1 to RPI+3 on regulated fares goes back to the Government.

The DfT^» (Department for Transport - about) calculates, on an operator by operator basis, the extra money likely to be generated by the change. Once this is agreed with the operator, the DfT makes a change to the premium or subsidy payments made by or to a train company. This process ensures that it is the Government, and not the operator, which gets the full benefit of the change in formula.

http://www.atoc.org/media-centre/latest-press-releases/train-companies-respond-to-july-inflation-rate-and-fare-rises-100612

Now let's see how the SRA^» (Strategic Rail Authority - about) expected the regulation scheme to work when it was revsed to RPI+1 after the 2003 regulation review:

The annual permitted increase in regulated fares (RPI+1%) is a
cumulative increase in the ^cap^ placed on fares baskets based on the value of that basket in
2003. It is not a maximum permitted increase in actual fares from one year to another.
Operators do not have to increase their fares by the maximum permissible amount in any
given year, and some choose not to do so, leaving the actual value of their fares basket
below the maximum level permitted by the cap in that year. This gap between the actual
value of the basket and the maximum permitted by regulation is usually called ^headroom^.
The following year, such an operator can use up this headroom as well as taking advantage
of the annual RPI+1%, and so legitimately increase the value of its fares basket from one
year to the next by more than RPI+1%.

Also from the SRA review:

Each operator^s franchise agreement allows the SRA to change fares regulation from January
2003 onwards, as long as franchise payments are adjusted so that the operator makes no net
gain or loss from the change in policy.

http://tna.europarchive.org/20060213214311/http://www.sra.gov.uk/pubs2/stratpolplan/fares/conclusions

So it's explicit that a change in the regulatory regime (e.g. to RPI+3) requires adjustment of the TOC^▸ (Train Operating Company)'s
subsidy/premium so that it has no net change in its
finances. It is still not clear how it has become compulsory for the TOC to raise fares by the full extent
permitted by the cap.

Chris B - I'm not trying to contradict you; just going through the documents to try to find where
and how a fares "cap" has come to be used contrary to the way it was intended when the railways
act was devised.