Railtrack quizzed over pounds 46m `weather' provision

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The Independent Online
Railtrack, the owner of Britain's track, signalling and stations, has been asked by the rail regulator's office to explain a pounds 46m provision made in its accounts.

John Swift QC, the rail regulator, wrote last week to John Edmonds, the company's chief executive, asking him to explain why Railtrack had set aside so much for "severe weather and other matters". According to sources close to the rail regulator, the letter asks the company to "furnish Mr Swift with a detailed breakdown of the provision".

In 1996, Railtrack set aside only pounds 20m to cover poor weather conditions. A spokesman said that executives would meet Mr Swift later this month to discuss the provision. "We have never had to put money away for weather payments before and it is difficult to judge what is needed."

Railtrack says rural train services have recently been hit by "terrible flooding". If this was to happen on a busy commuter service, the spokesman said, it would "cost the company a lot of money".

The regulator has expressed concerns that the performance regime may be tilted too far in Railtrack's favour and has singled out the bonus payments as costing the train operators too much.

The track company managed to extract an extra pounds 270m in supplementary charges paid in ever diminishing amounts until 2001 from the Government after claiming it faced onerous risks under the performance regime.

However, under the performance regime in 1996 the company made a profit of pounds 21m. In 1997, Railtrack trebled that to pounds 76m despite more than doubling the amount set aside to cover bad weather.

Privately many train company executives have been appalled by the provision. "It looked very strange that Railtrack more than doubled its poor weather provision. A cynic might point out it was trying to keep profits down to avoid confrontation with the Government," one company director said.

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