Friday 22nd Jun, 2018

Miners slam Aurizon, call for transparency

Aurizon train on Queensland Rain Network. Photo: Aurizon
Photo: Aurizon

Miners have called for measures to ensure capacity is maximised on the Central Queensland Coal Network, after operator Aurizon said new restraints imposed by the competition authority would force 20 million tonnes of coal off the railway each year.

Miners like Anglo American and Glencore have used the formal submissions process to call for changes to the way Aurizon can dole out access to the CQCN.

Meanwhile rival rail operator Pacific National has called on the Queensland Competition Authority (QCA) to move away from capping the revenue Aurizon can earn, and instead base its regulation of the network around capping the prices Aurizon can charge.

Aurizon angered miners in February when it announced capacity cuts due to changes in its maintenance procedures, which were in response to a draft decision by the QCA.

The QCA determined in December Aurizon should only be allowed to earn $3.89 billion in revenue from its operation of the CQCN between FY17 and FY21 – a figure $1 billion lower than Aurizon originally proposed. Among other factors used to work out the revenue figure, the QCA disagreed with Aurizon on how much it needs to spend to efficiently maintain the rail network.

Then in February, Aurizon boss Andrew Harding said the operator had no choice but to immediately limit its maintenance spending – especially given the fact the QCA’s decision, once finalised, will be enforced retrospectively from July 1, 2017.

The changes announced by Harding would mean longer shutdowns of larger sections of the CQCN, resulting in a substantial cut to network capacity.

Now miners are angry at what they perceive as Aurizon holding the network to ransom.

In its formal submission released early in April, Anglo American said it “remains considerably disappointed in Aurizon Network’s response to the QCA’s draft decision, particularly under a negotiate/arbitrate model which enables sensible and reliable positions to be understood and put before the regulator”.

“It is critical that the QCA is not swayed by such conduct and continues to fulfil its statutory obligation to only approve a draft access undertaking it considers appropriate based on reliably provided and analysed information to reach informed conclusions,” Anglo added.

Fellow coal miner Glencore suggested Aurizon had little incentive not to sell more capacity on the network than it could deliver, and called for the formation of an independent body to continually assess the system capacity of the CQCN, similar to the role performed by the Hunter Valley Coal Chain Coordinator (HVCCC) south of the border.

“In the Hunter Valley, the HVCCC is able to plan capacity on an integrated basis,” Glencore said. “While it may not be possible to achieve the same HVCCC structure in every coal supply chain in Queensland, we certainly believe that the provisions in respect of capacity should be strengthened.”

Glencore also said an independent body would be good for transparency, saying Aurizon is currently able to keep many details of its operation of the CQCN from its customers.

“The information imbalance between Aurizon Network and the customer mean that even the limited contractual rights which access agreements provide are insufficiently effective to hold Aurizon Network to account,” Glencore wrote in its submission.

“For example, Aurizon Network issues hundreds of ‘force majeure’ notices annually which excuse it from any contractual consequences for poor performance, but it is practically impossible for any individual user to verify the occurrence of the event, the impact the event has on capacity, and whether Aurizon Network had in fact taken all the necessary steps to prevent or mitigate the effects of the event.”

Pacific National weighed in, saying the ‘maximum allowable revenue’ model used by the QCA created little incentive for Aurizon to maximise the throughput of the CQCN.

“The current ‘revenue cap model’ does not encourage Aurizon Network to efficiently expand network capacity,” Pacific National wrote.

“As an alternative, a price cap model would secure a price for Aurizon Network, and as volumes increased the recoverable revenue would increase proportionately. This would provide a strong incentive for Aurizon Network to increase the throughput of the supply chain.”

PN said the price cap model would encourage Aurizon to investigate more innovative capacity improvements, including modern train control systems.