Decision making in a rush

Treasury has questioned KiwiRail about their decision to cut electric locomotives and what this might mean for the future of rail.

A series of Treasury documents released under the Official Information Act show that Treasury regarded the decision by Kiwirail to replace electric locomotives with diesel ones by electric was no a significant decision.

But the future of the electric network was significant, and Treasury was sceptical about some of the accounting figures supplied to it to justify the decision.

Though substantial exchanges between Kiwirail and Treasury have been redacted, it is clear that Treasury thought Kiwirail was rushing the decision and that it was being made without sufficient information.

One particular concern was the possibility of extending the Auckland suburban rail network to Hamilton and offers a hint that the Government might regard Hamilton as a potential satellite city for Auckland.

“The rail network between Britomart and Hamilton could provide alternatives for the government in addressing the current level of demand on Auckland’s infrastructure,” says a Treasury report dated December 20.

“It is not clear from the analysis undertaken by KiwiRail whether any of the government’s broader priorities regarding the Auckland infrastructure were considered in making this decision.”

Two weeks ago the Auckland Council’s Planning Committee agreed to conduct a feasibility study on an Auckland – Hamilton rail link.

But it faces big practical obstacles; most notably that diesel trains can no longer access Britomart Station for safety reasons and that therefore  any link to Hamilton would need to be electrified.   

The papers released by Treasury say that electrification of a line costs $1.5 million a kilometre so the line to Hamilton would cost over $90 million which is hardly likely to make it a priority at present.

This then begs the question as to what is to happen to the remaining electrical infrastructure on the North Island main trunk between Hamilton and Palmerston North.

Kiwirail’s argument for replacing the electric locomotives is that they have to operate a “railway within a railway’ to account for the parts of the network which are electrified and those parts that are not.

This requires a dual fleet of locomotives, dual training and maintenance systems, dual depot configurations, dual inventory and a more complicated train plan.

And it says that the electric locomotives are almost 30 years old and are underperforming.

So what does this mean for the existing electric infrastructure?

In a December 19 email to Kiwirail chair, Trevor Janes, Treasury’s Commercial Operations Manager, Chris Gregory said  KiwiRail’s estimate of the cost to remove the electric infrastructure did not include removal of the power poles.

“The material provided does not address whether future capital expenditure would be required for the remaining poles for KiwiRail to meet its health and safety obligations,” his email said.

“Note that the decision to decommission the electric fleet, taken in isolation, is not a significant decision.

“However, inevitably this decision raises broader issues on the alternative for the use of electric traction on the North Island Main Trunk” which is a much more significant matter.”

However, there was no time to give that any consideration because Kiwirail planned to announce the move two days later.

The Treasury report highlights the way Kiwirail was rushing the decision.

“Shareholding Ministers were informed of the Board’s decision to decommission the electric fleet, and publicly announce the decision, on Thursday, 15 December after a ‘Communications Plan’ was provided to the Minister of State-owned Enterprises’ and the Minister of Transport’s offices,” the report says.

The decision to decommission the electric fleet is not a new matter. KiwiRail report that the decision has taken two years involving consultation with international experts, unions and consultants.

“The business case supporting the decision to decommission the electric fleet was provided to shareholding Ministers at 4:00 pm, on Monday, 19 December 2016.

The Treasury has only had a few hours to read the business case and provide comments to Ministers.”

They did so with the report quoted above on Tuesday, June 20, in time for a Cabinet meeting that morning and 24 hours in advance of the announcement.

There is no indication in the documents that Kiwirail addressed the questions about the future of the electric infrastructure.

When the Minister of State Owned Enterprises, Todd McClay, got the Treasury report the only questions he had were whether the new locomotives could be built in New Zealand and whether the Chinese manufacturer of the new locomotives could guarantee there was no asbestos in them.

There were also environmental considerations,  given that Kiwirail was changing from renewable electric power to diesel.

But Kiwirail said a shift to diesel on the North Island Main Trunk would increase the emission factor for freight carried by rail in New Zealand from 30.80 gms per Net Tonne Kilometre to approximately 34 gms.

Importantly the decision has been made without any real debate about the future of the electric infrastructure and whether it should be retained.

The papers are less than flattering about the decision-making process in an SOE and the Government’s oversight of it.

In essence, the Government was blind sided by the short timeframe and the whole process meant that broader aspects of Government policy — like the Auckland to Hamilton line — were not really considered at all.