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THE Essential Services Commission of SA is reviewing Genesee Wyoming Australia’s regulatory accounting procedures, following allegations it may be misusing its market power to “cross-subsidise” its more competitive business.
GWA, a subsidiary of North American railway giant Genesee & Wyoming Inc., owns nearly 5,000 kilometres of track in the Murray-Mallee, Mid-North and Eyre Peninsula in South Australia and the 2,200-km Tarcoola-to-Darwin railway.
Some submissions to ESCOSA in relation to its ongoing South Australian Rail Access Regime Review alleged that “GWA may be misusing its market power by cross-subsidising its competitive above-rail business from its below-rail revenues”, ESCOSA said in a new draft report.
In general, “below” rail refers to actual track management, while “above rail” refers to actual train operations and rolling stock.
“While no evidence has been presented to the commission to substantiate those claims, the commission is undertaking an independent review... to ensure that costs have been allocated appropriately between its below-rail and above-rail businesses,” ESCOSA said.
The SA rail access regime requires separation of accounts, or financial ring-fencing, and the commission felt a review could result in “increased confidence”.
This review will be completed before October this year.
The draft report also recommended that the local rail access regime be continued for another five years once the current term is completed in October, although it could be improved or integrated.
The commission suggested a clarification of the current scope of the regulated services to make it clear for new market entrants to distinguish between the various operating regimes.
“The (state) government could explore opportunities for enhanced efficiency, and other benefits, from promoting greater integration of transport access regimes (including the South Australian rail access regime, Tarcoola-Darwin rail access regime and the South Australian ports access regime).
“Alternatively, a review could be conducted to promote greater consistency between a continued set of separate regimes.”
SA grain company Viterra was among rail users calling for “anything that would reduce regulatory burden and costs and incentivise investment in rail infrastructure in South Australia”. These burdens and costs include “those arising from current multi-levels of Federal and State regulation which places South Australia (specifically the grain industry) at a competitive
It added that any reduction in costs of obtaining services from GWA or increased investment in rail infrastructure would ultimately benefit growers and the South Australian grain industry generally.
The commission concluded that the SA rail access regime has little cost burden while still
protecting against monopoly power in the current industry environment.
The review, which commenced in February, is looking at access to infrastructure on the SA Government-owned Adelaide Metro broad gauge network within metropolitan Adelaide, GWA’s lines and at the Great Southern Railway passenger terminal at Keswick.
This article first appeared on www.adelaidenow.com.au
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