Rail cost discrepancy in CBH ERA submission

Late last week CBH made public its redacted version of its submission made to the ERA on April 7 this year, stating its position on the floor and ceiling price for Tier 3 rail.

Despite some parts of the 44-page document being blacked out for legal reasons, what is made crystal clear in CBH's submission is that there are some huge differences in pricing expectations between CBH and rail provider Brookfield Rail - to the tune of $340 million in some cases.

In its summary, CBH said it had made a proposal for access to certain routes on the railway network managed and controlled by Brookfield under section eight of the Rail Code.

It said, in response Brookfield proposed aggregate annual floor costs of $110,329,225 and ceiling costs of $617,685,432 including the Tier 3 lines, for which Brookfield had provided costs that were valid until June 30, 2014 and the Miling line for which Brookfield provided costs valid until December 31, 2015.

The submission report also shows that CBH estimates the floor costs and ceiling costs, if properly calculated in accordance with the Code, should be much lower than Brookfield's figures.

It calculated aggregate floor costs for its requested routes should total $15,821,503 - a difference of $94,507,722 - and ceiling costs of $274,546,536 - a difference of $343,138,896.

While the difference in calculated ceiling costs is somewhat irrelevant within the current debate because it represents a replacement cost - something that CBH and Brookfield aren't negotiating - the difference in calculated floor cost is of huge importance to CBH's case because in layman's terms it can see a $94,507,722 difference in what the CBH co-operative and Brookfield believe should be the cost of maintaining the lines for use.

As a result of what CBH deemed to be "limited cost information provided by Brookfield Rail", its submission alleges that Brookfield has over-valued the gross replacement value of the railway infrastructure, has over-valued its operating costs, and has over-valued its overheads.

It also alleges Brookfield hasn't properly calculated the floor costs.

Instead of calculating the incremental costs of providing access to CBH, the submission said Brookfield appears to have associated all non-maintenance costs and all maintenance operating costs to CBH regardless of CBH's total proportion of demand.

On June 30 the ERA made a determination of costs for certain routes on the Brookfield Rail network which are relevant to the access proposal made by CBH in December 2013 however the determination has yet to be made public.

Farm Weekly understands that the ERA will finalise the confidentiality issue once it has received feedback from Brookfield.

Neither party could comment on the issue for legal reasons.