Evaluation of marginal capacity cost rates Situation This Operator spoke to us at an ALBUM conference and, having described his network and operations, informed us that the two main concessionary schemes he operated in did not pay marginal capacity costs. We resolved to examine the scheme arrangements in more detail and discovered that the scheme rules did require operators to make a marginal capacity costs claim rather than paying an initial generic rate. Challenges The primary challenges on this project were: • Demonstrating and convincing the Local Authority that marginal capacity costs were payable to this operator. • Collating the Operator’s data so that the inputs required in the marginal capacity cost calculator could be obtained efficiently. • Agreeing a significant increase in the operator’s reimbursement arrangements with the Local Authorities concerned when they had originally anticipated not paying anything for marginal capacity costs. Actions Our focus centred on marginal capacity costs, we therefore undertook the following: • An evaluation of the commercial routes that operated in the two schemes as well as the associated operational data obtained from timetables and ticket machine data. • The data was then presented to the local authorities along with the underlying evidence for them to scrutinise and question. • Given the Authority’s unwillingness to accept the figures returned by the DfT Calculator in the first instance, an application notice was submitted to the DfT appealing the Authority’s scheme. This preserved the Operator’s right to appeal the scheme while negotiations continued and demonstrated the Operator’s intentions insofar as securing a reasonable reimbursement rate. The appeal also allowed the negotiations to continue beyond the 56 day deadline set out in the Transport Act (2000). Results These actions resulted in: • Both Authorities conceding that marginal capacity costs should be paid and local values have been agreed annually since. • Reimbursement was increased by approximately 25% on the originally proposed scheme arrangements.