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ProjectSAMEFF - Allocating Railway Tracks Using Market Mechanisms and Optimization

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SAMEFF - Allocating Railway Tracks Using Market Mechanisms and Optimization

New rules call for new methods. The deregularisation of the railway market in Sweden has not only opened the market for new railway operators, but also posed challenges to the old methods. SICS Swedish ICT is developing a process to make timetabling transparent, easy and fair, while still satisfying the societal needs to a maximum.

How can track time be distributed between competing companies and needs in a deregulated railway market? The basic rule is to squeeze in as many trains as possible while at the same time maintaining the quality of the traffic for society as a whole. But what to do when the railway network already is heavily congested and many trains need the same track time? The European Union advocates a fair market on the tracks by the EU-railway directive (2001/14/EC). For a well-functioning competition on the tracks, the decision of which railway undertaker or maintenance entrepreneur will obtain a specific track time they compete about has to be fully transparent and non-discriminatory. Currently, there is no method for this, but SICS is researching a new method together with the Swedish Transport Administration.

The project “Cost-benefit efficient track allocation” investigates a new timetabling approach where track time is sold to an operator to a market based price, which mirrors the highest price the operator is willing to pay for it. Giving the track time to the operator who values it the most provides a transparent competition. Since the operator wants to maximize the amount of passengers and/or transported goods, the societal service is made sure to be maximized. The only trick is how to make the operators reveal how much they are willing to pay for track time.

The solution is a timetabling process consisting of three parts: framework agreements, auctions, and a spot market. The auctions take place one year in advance and only very sought-after track timeslots are included. The resulting prices of the auction become the foundation of the pricing mechanism in the spot market. The prices in the spot market are set by a kind of revenue management and the operators can apply for their desired track timeslots and pay the price. The auctions and the spot market will give an opportunity to let the operators themselves settle their dispute of the track time they have applied for. The goal is to develop a fully functional, transparent method to rule out competitors on the same market segments and to add flexibility in an otherwise long process.

Non-commercial traffic, which is subsidised by the state and thus financially stronger will not take part in the auction and the slot market. Instead the non-commercial traffic enters framework agreements which last for a longer time period, typically five years. These framework agreements should contract a capacity utilization rather than a fixed timetable. As an example, a regional operator can sign a framework agreement where the infrastructure planner (the Swedish Transport Administration) agrees to set up the timetable so that trains of the regional operator can depart from a station every 15 minutes each day.

How do we then make sure that neither too much nor too little capacity is booked in the framework agreements during the negotiation?

To compare the possible other trains and the non-commercial traffic we want to use a cost-benefit analysis. The basis is the generalized cost and operating cost of the non-commercial traffic. By linearizing the expression for the costs, modeling it as an MIP problem and solving it the minimum cost is found. Since the time-table is not known yet, the minimum value is an estimation of the best possible timetable. The resulting timetable will work as an input to calculate a consumer and producer surplus when conducting a cost-benefit analysis. (1).

This work is still at an early stage. In the near future we will investigate the slot market and its combined operational and economical issues further.


Photo: Skånetrafiken.