• Aurizon delivers QCA response as war of words with miners escalates
Aurizon delivers QCA response as war of words with miners escalates
13 Mar, 2018, No Comment

Summary: Aurizon plans to make a detailed submission to the Queensland Competition Authority on Monday challenging alleged errors in theAuthority's recent regulatory ruling as its coal mining customers put further pressure on the rail group to abandon changes to maintenance practices.....

The deadline for responses to the QCA's 2017 draft access undertaking closes on Monday afternoon. Aurizon was furious about the regulator's draft ruling to allow the rail group to earn only $3.9 billion from its networks business between July 2017 and June 2021, nearly $1 billion less than the company believes it should make.

Aurizon's submission is understood to challenge each element of the draft ruling that is believes is incorrect. Aurizon chief executive Andrew Harding said in February that he did not expect the QCA's final decision to be substantially different from its initial decision, arguing that the gap in past rulings had typically been "trivial".

The rail operator has been left in limbo on when it will receive a final decision, with the QCA having no fixed date for making one.

​"The QCA cannot be definitive on the time frame for the final decision as the number and complexity of the submissions to the draft decision that will be considered are largely unknown at this stage," a QCA spokesman said on Friday.

But Aurizon has wasted no time in responding to the draft decision after angering its haulage customers in Queensland by making changes to maintenance practices on its central Queensland rail network to compensate for the expected drop in regulator-approved revenues.

Mr Harding has insisted the company has "no choice" but to make the changes after what he described as the QCA's "fundamentally wrong" draft decision.

But miners, which include BHP Billiton Mitsubishi Alliance, Rio Tinto and Wesfarmers' Curragh, have now sent two letters to Aurizon via lawyers Herbert Smith Freehills threatening legal action if the company does not reverse the changes. 

In the second letter, which has been obtained by The Australian Financial Review, the lawyers said that Aurizon's new maintenance practices were causing train paths not to be scheduled or to be cancelled, affecting the ability of miners to "realise their allocated train service entitlements".

They also claim that network outages have increased, and that Aurizon is providing less information to users of the tracks, making it hard to forecast when tracks paths will be available and making it "impossible" to mitigate losses.

"In our view the limitations of liability provided for in the access agreements do not apply to protect against deliberate breaches of the agreement," the lawyers warned in the most recent letter.

Aurizon is understood to have responded to the letters, stressing that it has no plans to abandon the changes and that it continues to meet its contractual requirements. 

The company has said that the maintenance changes could reduce coal haulage volumes on its Queensland network by an estimated 20 million tonnes a year. 

Mr Harding has acknowledged that Aurizon's customers are unhappy with the maintenance changes but has argued he has to adjust Aurizon's business to compensate for less income from its network operations.

About a third of Aurizon's group revenues are generated by fees it charges coal miners and other users to access its rail tracks. The company says the QCA draft decision will lower its earnings before interest and taxation by $100 million annually, or about $1 a tonne.


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