Freight Rail

IPART calls for review of NSW access regime

Coal Train Photo Hunter Valley Coal Chain Coordinator

New South Wales’ Independent Pricing and Regulatory Tribunal (IPART) has asked the state to order a review of its rail access regime, which it says is not currently meeting stakeholders’ needs.

IPART made the request while handing down its final rate of return and mine life calculations for the state’s freight and bulk railways.

IPART on July 9 finalised a 5.3 per cent rate of return for the next five years of third-party access to the Country Regional Network, Sydney’s Metropolitan Freight Network, the Australian Rail Track Corporation’s non-Hunter Valley network, and RailCorp’s Hunter Valley network from Woodville to Newstan Junction.

The final rate of return figure is 0.5 per cent lower than the figure in IPART’s draft decision in April, a move IPART said was due to the recent decline in the risk-free rate, contributing to a decrease in the cost of equity.

IPART on July 9 also finalised its draft decision to increase RailCorp’s maximum allowed depreciation rate from 3.3 per cent to 4.8 per cent per annum for its coal railway between Woodville and Newstan Junction in the Hunter.

The depreciation increase reflected a shortening of IPART’s mine life estimate which now extends only to 2040, four years earlier than previously anticipated.

In handing down the figures, IPART chair Dr Paul Paterson explained that the undertaking had undergone “significant changes” since it came into effect and that it no longer met the needs of stakeholders. IPART has recommended the NSW Government undertake a review of the rail access regime, adding that a national review could suffice as a longer-term solution.

The line does not transport coal for export to the port of Newcastle, but it does transport coal to the Eraring and Vales Point power stations, BlueScope Steel, Port Kembla and other mines south-west of the line.

IPART’s decision was influenced by uncertainty regarding the future of coal-fired power stations and a projected decline in coal revenues over the next five years due to changing energy trends.

Origin Energy, the owner of the Eraring power station, is expected to exit coal-fired power generation after 2032.

“The shorter estimated life is an on-balance judgement, taking into account the best publicly available information on the rail line’s expected use, mine reserves, and closures of Eraring and Vales Point power stations,” Paterson said.

IPART conducts its review of the rail access undertaking every five years, including depreciation decisions for the Hunter Valley Coal Network, and rate of return for ARTC’s non-Hunter Valley network, Country Regional Network and Sydney Metropolitan Freight Network.

The next IPART review of the rail access undertaking will take place in July 2024.

The Hunter Valley Coal Network consists of 37 sectors, five of which are owned by RailCorp in accordance with the Rail Access Undertaking.

Railcorp’s sectors comprise roughly 21 kilometres of track running coal and freight trains from Newstan Junction (sector 405) to Woodville Junction (sector 497) in Hamilton.

The other 32 sectors are owned by the Australian Rail Track Corporation (ARTC) under a separate agreement with the Australian Competition and Consumer Commission (ACCC).

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