Surely the Alliance Rail plan was better?
It had two branches in the North & an extension to Edinburgh aswell.
So the Edinburgh only option was clearly the worst for passengers.
Clearly the government doesn't care about their 'Northern Powerhouse' plan.
Okay, I think you've been told this before but, for the avoidance of doubt, the ORR are not a part of Government they are operationally independent from Government. This decision was
not made by the Government. The Government are represented by the DfT in the consultation and discussion exercises undertaken by ORR. Are you now clear on that?
So then we turn your question. The ORR reasoning (as laid out
here) is very clear and understandable but to aid your understanding I shall pullout some key parts. Firstly with regards to GNER to Edinburgh:
This application was modelled as option 2 in the CH2M report. The results for this option excluded the costs of necessary investment in tilt capability. GNER suggested these costs might be around £30-35m (this and other values being in 2010 prices, unless stated otherwise). Network Rail declined to offer a view. Our view was that this was likely to be a very low estimate. When the NPV (+£46m) was adjusted for these costs, it was likely the option would have a near-zero or negative NPV. Further, we considered other operators would be unlikely to make use of the tilt capability for the foreseeable future, we did not identify any further material positive impacts that were excluded by the modelling, and we considered a less frequent service (as suggested by GNER to us as potentially viable) would probably have a lower NPV, due to the fixed nature of the necessary infrastructure costs.
(My bold)
So, as we can see, GNER to Edinburgh, due to the capital investment required by their bid, were most likely going to, at best, represent a break even in terms of the value added by their operation. Hardly a ringing endorsement when once considers that First Edinburgh on the other hand:
The NPV for option 16 was significant (+£77m) and the NPA ratio was above our 0.3 threshold. NPV per path was also comparable to other options, which was notable given off-peak paths are typically used for less valuable services.
So First Edinburgh are going to be bringing a boost of £77m to the network rather than, at best, breaking even.
Then if we look at Cleethorpes and West Yorkshire:
This application was modelled as option 1 in the CH2M report. The option had a strong positive NPV (+£185m), in part reflecting new direct services between London and Cleethorpes, Grimsby and Scunthorpe, and services to a new station proposed for East Leeds. The NPV was of a comparable scale to the VTEC core (option 3, +£198m) and the additional net benefits from moving from VTECs core to its full application (an increase of £182m). The benefits per path used were also similar. These differences did not provide a strong basis for preferring any of these options over the others, in light of inevitable modelling uncertainties.
(My bold)
On the face of it good so far! Big positive value so things are looking good but when we drill down into it:
However, our view was that option 1 would result in significant absolute levels of revenue abstraction, modelled at £44m p.a. On franchise expiry and re-franchising, this would probably affect the Secretary of States funds by several hundred million pounds in NPV terms. Shorter-term, the franchise agreement could lead to these costs falling to VTEC, for the last few years of the franchise (noting uncertainties around when services would start).
So it does add value bit it does this by nabbing £44m of revenue from VTEC and when you consider the ORR's statutory duties to protect the Secretary of States funds they are left with little choice but to reject. Particularly when you consider that a lot of the West Yorkshire benefits will be delivered by VTEC in any case.
Plus the ORR make, what I think, is a very telling statement about Cleethorpes:
These financial impacts would have been reduced had the application focused on serving (say) just the Cleethorpes line this line has no direct services to London at the moment and we have previously approved applications whose main impact is to provide such new direct services.
If that isn't the ORR saying 'if they had bid for paths to serve Cleethorpes separate to the bid for West Yorkshire we would have approved the Cleethorpes service' then I don't not what they were saying there!
So GNERs services were either a) not going to add value or b) abstract large amount of revenue whilst First Edinburgh are adding significant value and whilst they do abstract the level isn't too high (more than the 0.3 ratio that the ORR require).
Therefore it seems perfectly clear to me that GNERs applications would have been, by far, the worst choice to approve by the ORR.
.