Midland Mainline Upgrade Programme Economic Case Department for Transport. 28 September 2016

Midland Mainline Upgrade Programme Economic Case Department for Transport 28 September 2016

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Table of contents Chapter Pages Executive Summary 7 1. Introduction 12 1.1. Background 12 1.2. Report Structure 13 2. Scope of the Appraisal 14 2.1. Introduction 14 2.2. Scenario Development 15 3. Service Pattern Development 17 3.1. Introduction 17 3.2. Timetable Development Process 17 4. Demand & Revenue Forecasting 25 4.1. Introduction 25 4.2. Forecasting methodology 25 4.3. Appraisal of Benefits 28 4.4. Forecasting Results 29 5. Rolling Stock 39 5.1. Introduction 39 5.2. Baseline Fleet Assumptions 39 5.3. Establishment of Rolling Stock Fleet for Modelled Options 39 6. Operating Costs 42 6.1. Introduction 42 6.2. Train and Vehicle Mileages 42 6.3. Infrastructure Cost Inputs 43 6.4. Fuel Costs 45 6.5. Lease Costs 47 6.6. Maintenance Costs 48 6.7. Staff Costs 49 6.8. Operating Costs 49 7. Scheme Capital Costs 52 7.1. Introduction 52 7.2. Capital Cost Assumptions 52 8. Economic Appraisal 54 8.1. Introduction 54 8.2. Derivation of Scheme Costs 54 8.3. Derivation of Scheme Benefits 56 8.4. Economic Appraisal Results 56 8.5. Sensitivity Tests: Business Case Robustness 59 8.6. Sensitivity Tests: Incremental Benefits 62 9. Impact of HS2 Phase 2 on MML Upgrade Programme 70 9.1. Overview 70 9.2. Analytical Approach 70 9.3. Appraisal Results 74 9.4. Sensitivity Tests 76 10. Summary & Conclusions 77 Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 3

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Appendix A. Standard Hour Timetables 80 Appendix B. Crowding Charts 84 B.1. Baseline 84 B.2. Central Case 85 B.3. Option 1: Fixed Formation (7-car 125mph EMU) 86 B.4. Option 1: Fixed Formation (8-car 125mph EMU) 87 B.5. Option 3 Homogenous Fleet 88 B.6. Sensitivity Test 2b: Full N-S Connectivity 89 B.7. HS2: Baseline Timetable 90 B.8. HS2: Central Case Timetable 91 Appendix C. TEE Tables 92 C.1. Central Case 93 C.2. Option 1: Fixed Formation (7-car 125mph EMU) 94 C.3. Option 2: Fixed Formation (8-car 125mph EMU) 95 C.4. Option 3: Homogeneous Fleet 96 C.5. Option 4: Bi-Mode 97 C.6. Sensitivity Test 1: 6 th Path to Leicester 98 C.7. Sensitivity Test 2a: Maintaining Connectivity (Wellingborough) 99 C.8. Sensitivity Test 2b: Full N-S Connectivity 100 C.9. KO1 Minus Electrification 101 C.10. KO1: Electrification to Corby 102 C.11. KO1: 2019 Timetable 103 C.12. HS2 Central Case 104 Appendix D. Quality Assurance 105 Tables Table 3-1 Baseline Timetable: Southern MML Stations Calling Pattern Trains per Hour (East Midlands Trains Services Only) 18 Table 3-2 2023 Service Specification 19 Table 3-3 Freight Services 20 Table 3-4 2023 Off-Peak Public Timings 22 Table 3-5 2019 Off-Peak Public Timings 23 Table 3-6 Journey Time Projections 24 Table 4-1 Revenue Forecasting Specification and Parameters 27 Table 4-2 Rolling Stock Capacity 28 Table 4-2 Values of Time 29 Table 4-3 Forecast Net Revenue Impacts ( k per annum, 2015/16 Demand and Prices) 30 Table 4-4 Largest Increases in Revenue ( k per annum 2015/16 Demand and Prices) 31 Table 4-5 Largest Decreases in Revenue ( k per Annum, 2015/16 Demand and Prices) 31 Table 4-6 East Midlands Trains London Revenues ( k, 2015/16 demand and prices) 35 Table 5-1 Baseline Fleet Assumptions 39 Table 5-2 Standard Hour Fleet Requirements Including Spares (No. of Sets) 40 Table 5-3 Peak Strengthening Fleet Requirements (No. of Sets) 40 Table 5-4 Total Estimated Fleet Requirements (No. of Sets) 41 Table 6-1 Annual Train and Vehicle Mileages 43 Table 6-2 Capacity Charge Rates 44 Table 6-3 Variable Track Access Charge Rates 45 Table 6-4 Electrification Asset Usage Charge Rates 45 Table 6-5 Diesel Consumption Rates 46 Table 6-6 Electric Traction Consumption Rates 46 Table 6-7 Capital Lease Costs 47 Table 6-8 Mileage-Based Maintenance Rates 49 Table 6-9 Total Operating Costs (64 years, bn, nominal undiscounted) 50 Table 7-1 Scheme Capital Cost Estimates ( m, nominal prices) 52 Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 4

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Table 8-1 Core Appraisal Assumptions 54 Table 8-2 Scheme Capital Costs Included in the Appraisal ( m, nominal prices, except for appraisal values which are in 2010 present values prices and discounted) 55 Table 8-3 Incremental Operating Costs Included in the Appraisal ( m, 60 years) 56 Table 8-4 Economic Summary Statistics ( m, 2010 present values) 57 Table 8-5 Disaggregation of Present Value of Benefits ( m, 2010 present values) 58 Table 8-6 Sensitivity Test 1: Economic Summary Statistics ( m, 2010 present values) 59 Table 8-7 Sensitivity Test 2: Economic Summary Statistics ( m, 2010 present values) 60 Table 8-9 Sensitivity Test 4: Economic Summary Statistics ( m, 2010 present values) 61 Table 8-10 Sensitivity Test 5: Economic Summary Statistics ( m, 2010 present values) 61 Table 8-11 NOx Damage Cost ( per tonne) 61 Table 8-12 Total Estimated Fleet Requirements (No. of Sets) 62 Table 8-13 Scheme Capital Cost Estimates ( m, 2010 present values) 63 Table 8-14 Alternative Upgrade Schemes, Operating Costs ( m, 2010 present values) 64 Table 8-15 Alternative Upgrade Schemes, Benefits ( m, 2010 present values) 65 Table 8-16 Incremental Impacts of Alternative Upgrade Scenarios 66 Table 8-15 Summary of Incremental Benefits of the Staged Appraisal ( m, 2010 present values) 68 Table 8-16 Incremental Impacts of Alternative Upgrade Scenarios 69 Table 9-1 Proportion of Demand Retained on MML for Key London Movements 73 Table 9-2 Fleet Requirements for HS2 Phase 2 Alternative MML TSS (No. of Units) 73 Table 9-3 Impact on Forecast HS2 Benefits and Revenues ( m, 2015/16 Present Values) 74 Table 9-4 Disaggregation of Present Value of Benefits ( m, 2010 present values) 74 Table 9-5 Impact of HS2 on MML Upgrade Programme: Economic Summary Statistics ( m, 2010 present values) 75 Figures Figure 2-1 East Midlands Franchise Comparator Model Suite 16 Figure 3-1 Notional Off-Peak Service Pattern 18 Figure 4-1 Generalised Journey Times (Baseline and Central Case) 32 Figure 4-2 Baseline: Critical Loading for each Arrival/Departure (2015/16 Demand) 33 Figure 4-3 Central Case: Critical Loading for each Arrival/Departure (2015/16 Demand) 34 Figure 4-4 Central Case: Net Annual Incremental Revenue over the Baseline Scenario, EMT Revenue (2015/16 prices) 36 Figure 4-5 Central Case: Annual forecasts of morning high peak demand and capacity 36 Figure 4-6 Growth in Demand and Benefits Over the Appraisal Period 37 Figure 9-1 Alternative MML Released Capacity Specification 71 Figure 9-2 Growth in Demand Over the Appraisal Period 75 Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 5

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Executive Summary This document presents the analysis undertaken by Atkins on behalf of the Department for Transport on the business case for electrification and other route enhancements of the Midland Main Line route from Bedford north to Corby, Leicester, Nottingham and Sheffield. The Midland Mainline (MML) Upgrade Programme was originally proposed to be delivered wholly within CP5, with the capacity enhancement programme and electrification to Kettering / Corby delivered by the December 2017 timetable change, and the commencement of electric operations to Sheffield and Nottingham by December 2019. However, due to the affordability issues around delivery of the Network Rail CP5 enhancement programme, the MML Upgrade Programme has subsequently been re-planned as part of the Hendy Review to be delivered in two separate phases: Key Output 1: electrification from Bedford to Kettering / Corby delivered by the December 2019 timetable change, along with capacity enhancement schemes between Bedford-Kettering and Kettering- Corby which facilitate a 6th LDHS path, Derby Station remodelling and PJIF linespeed works at Market Harborough, Leicester South Junction and Derby North. Key Output 2: completion of electrification between Kettering and Sheffield/Nottingham and adjustments to OLE between London St Pancras and Bedford to enable operation of electric traction at 125mph delivered by the December 2023 timetable change. Scope of Economic Case The economic case is presented assuming that the route capacity enhancements delivered alongside the electrification will allow an enhanced service frequency, enabling local stations between London and Corby to be served by dedicated services. In turn, this facilitates a reduction in journey times on the longer distance services from Nottingham and Sheffield to London through a corresponding reduction in stops south of Kettering. This also enables crowding on long-distance services to be reduced by transferring London high peak commuter demand from stations at the southern end of the route onto the Corby services; this reduction in crowding on services to Sheffield and Nottingham will provide scope to grow the long-distance market. A sample core specification timetable was developed to test the economic and financial value of this improvement. The timetables developed by Atkins were checked by Network Rail and shared with the relevant train operators including East Midlands Trains and GTR. The sample timetable was reviewed and agreed by a group of DfT and other stakeholders as providing a reasonable representation of a possible service pattern that could be enabled by the improved infrastructure. The timetable was tested for demand and revenue effects using the comparator model suite being used for the East Midlands franchise competition. The assessment considered a number of alternative rolling stock options to operate the proposed timetable centred around new 125mph electric multiple units (similar in style to the IEP / Super Express rolling stock being introduced elsewhere on the network) or new 110mph suburban-style electric multiple units. We emphasise that the inclusion of generic descriptions of options used as part of this analysis do not imply any preference for particular types or manufacturers of rolling stock. The options were developed to test the relative costs and benefits of a range of potential rolling stock scenarios including the operation of short formation sets with peak strengthening against longer fixed formation sets, and operation of a fleet of mixed 125mph intercity and 110mph suburban rolling stock against a homogenous fleet of 125mph capable trains. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 7

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL others required reworking by GTR. The most serious occur in the PM peak between Up Midland Main Line services and Down Thameslink trains making crossing moves at Carlton Road and Harpenden. Resolving these would inevitably impact on GTR services through the Thameslink Core and, therefore, fell outside the scope of this work. GTR were already aware of these issues and are working on resolving them. Owing to GTR s likely timescales, the business case work was progressed with these conflicts still in the timetable. The timetabling work cannot not considered as definitive prior to the final GTR timetable. The estimated fleet sizes presented in this report are provided for business case comparison purposes only. These numbers should in no way be viewed as recommendations for the optimum fleet size on the upgraded route, which should be the subject of further detailed analysis. Currently peak strengthening on EMT LDHS services requires additional on-board staff to crew both portions of the train. For the options which consider fixed formation rolling stock the appraisal has not taken account of the potential reduction in on-board staff which these options would deliver. This would deliver staff cost savings over the central case with indicative analysis suggesting it could potentially deliver a similar NPV to the 5-car fleet. Revenue analysis has shown that the revenue and demand losses from reduced connectivity between stations south of Leicester and north of Leicester (including Leicester itself) resulting from the core specification are outweighed by the benefits to the major flows between London and Nottingham / Sheffield. Revenue transfer from crowding relief is subject to the methodological application of the PDFH approach. If longer distance journeys are subject to a lower level of constraint (for example through a high use of advance purchase with seat reservations) then this approach may overstate revenue transfer from crowding relief. This benefit is attributed to the capacity works required to provide the 6 th path which offers very high value for money and would be resilient to lower capacity relief. The upgrade and electrification of the Midland Mainline (MML) and associated enhancement plans provide opportunities to run additional freight trains, providing the potential for benefits from removing HGV traffic from roads along the corridor. These potential benefits are not captured in the appraisal presented in this report. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 11

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 1. Introduction 1.1. Background The Midland Mainline (MML) Upgrade Programme is a combined programme of electrification and capacity enhancements which will transform travel to/from London and the East Midlands and South Yorkshire. By far the most significant element of the Upgrade Programme is the electrification of the route, initially between Bedford and Kettering / Corby, and then from Kettering to Sheffield and Nottingham, plus upgrades to the OLE between London St Pancras and Bedford to enable fast line services to operate at up to 125mph. This will facilitate conversion of long distance high speed (LDHS) passenger services to electric rolling stock, thereby delivering industry cost savings and cutting carbon emissions. Alongside electrification, the Programme also contains a number of other committed improvements to enhance capacity and linespeeds along the MML. These include: Kettering to Corby capacity, which includes doubling of the line between Kettering and Corby to increase route capacity to a maximum of five train paths per hour in each direction between Kettering and Corby from December 2019, along with linespeed increases up to 90mph and freight gauge clearance works. Bedford to Kettering capacity: the completion of full four-tracking between Sharnbrook Junction and Kettering South Junction (currently a three-track section of railway), through the addition of a slow line with maximum linespeed of 90mph, to facilitate the introduction of a 6th LDHS path along the route. Derby Station remodelling, which will deliver journey time and performance improvements at Derby Station through increased linespeeds and simplification of the track layout to allow better segregation of services. Market Harborough linespeed improvement, a Passenger Journey Improvement Fund (PJIF) scheme expected to deliver a 0.5 minute journey time saving through track realignment for services not calling at Market Harborough. Leicester South Junction and Derby North linespeed improvements, which are further PJIF schemes delivering further journey time savings. The MML Upgrade Programme was originally proposed to be delivered wholly within CP5, with the capacity enhancement programme and electrification to Kettering / Corby delivered by the December 2017 timetable change, and the commencement of electric operations to Sheffield and Nottingham by December 2020. However, due to the affordability issues around delivery of the Network Rail CP5 enhancement programme, the MML Upgrade Programme has subsequently been re-planned as part of the Hendy Review to be delivered in two separate phases: Phase 1: electrification from Bedford to Kettering / Corby delivered by the December 2019 timetable change, along with the Bedford-Kettering and Kettering Corby capacity enhancement schemes which facilitate the 6th LDHS path, Derby Station remodelling and PJIF linespeed works at Market Harborough, Leicester South Junction and Derby North. Phase 2: completion of electrification between Kettering and Sheffield/Nottingham and adjustments to OLE between London St Pancras and Bedford to enable operation of electric traction at 125mph delivered by the December 2023 timetable change. The Department for Transport commissioned Atkins in March 2016 to prepare an updated business case for the programme of upgrades. The main scope of this study is to: Develop a compliant timetable with six LDHS paths per hour that is compatible with the December 2018 Thameslink timetable. Produce an updated economic case for the enhancement programme including standard WebTAG outputs, including a number of different scenarios, to guide the decision-making process. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 12

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 1.2. Report Structure Following this introduction, the remainder of this report is structured as follows: Chapter 2 provides an overview of the scope of the appraisal, including the modelled rolling stock options; Chapter 3 describes the development of a notional timetable for business case testing purposes; Chapter 4 outlines the demand and revenue forecasting methodology and presents the results of this process; Chapter 5 sets out the approach to the estimation of the size of rolling stock fleet required to operate the services in the new timetable; Chapter 6 sets out the approach to the estimation of operating costs for each modelled option; Chapter 7 details the scheme costs for the upgrade programme; Chapter 8 presents the results of the economic appraisal; The impact of HS2 on the value for money of the MML upgrade programme is considered in Chapter 9; and Chapter 10 presents conclusions to the study. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 13

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 2. Scope of the Appraisal 2.1. Introduction The High Level Output Specification (HLOS) 2012 key outcomes for MML Programme were as follows: Deliver shorter journey times into St Pancras; Increase passenger capacity into St Pancras and to regional stations through the addition of a 6th path; Improve performance and passenger experience through the procurement of electric rolling stock; Reduce operating costs through electrification of the line to Corby, Nottingham, Derby and Sheffield; and Increase freight capacity (additional 2 paths per hour for 16 hours per day) Following the Hendy Report in November 2015, the MML Enhancement Delivery Programme of works was reset with two key outputs that will be delivered in 2019 and 2023, which include electrification of the MML: From Bedford to Kettering and Corby by December 2019, including: - Provision of 25kV electrification from the existing limits at Bedford to Kettering and Corby; - Enabling of improved journey times through the delivery of key infrastructure schemes; - Additional capacity for a 6th Long Distance High Speed services between St Pancras and Kettering; - Additional freight paths; - Enhanced capability at key stations south of Leicester through extension of platforms/operational measures; and - New stabling facilities at Kettering (to be funded through Depots and Stabling Fund). Within the report these elements of the upgrade package are referred to as Key Output 1. From Kettering to Nottingham and to Sheffield via Derby by December 2023, including - Provision of 25kV electrification from Kettering to Nottingham and to Sheffield via Derby; - Enabling of improved journey times through the delivery of key infrastructure schemes; - Completion of adjustments to existing Fast Line OLE south of Bedford, increasing the permissible speed for electric trains; and - Enhanced capability at key stations north of Leicester through extension of platforms/operational measures and completion of gauge enhancement works to provide W12 clearance. Within the report these elements of the upgrade package are referred to as Key Output 2. To test the economic value of the upgrade programme, it was agreed with DfT that a single ( core specification ) timetable would be developed for the purpose of business case testing. This enables various rolling stock options to be appraised on a consistent basis, with differences between the options being attributed to the relative performance characteristics (such as maximum speed and rates of acceleration and deceleration) and formation of the different types of rolling stock. Sensitivities around the specification itself have included sufficient timetabling work to determine the likely impact on journey times and inform the business case, but have not extended to producing a compliant timetable for each test. To simplify the assessment it was agreed with the DfT that for the purpose of this business case, electric operations to Sheffield and Nottingham on the MML should be assumed to start from the December 2019 timetable change, rather than undertaking separate appraisals of the Corby and Sheffield/Nottingham sections. Further information on the development of this notional timetable is provided in Chapter 3, whilst sensitivity tests conducted around this notional timetable itself are covered in the sensitivity testing section of Chapter 8. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 14

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 2.2. Scenario Development The assessment has considered the Midland Mainline Upgrade Programme against a Do-Minimum baseline scenario. It was agreed with the Department that the Do-Minimum would be based on the East Midlands Trains current long distance service specification on the Midland Mainline integrated into the current version of GTR s proposed 2018 Thameslink timetable. Rolling stock assumptions in the baseline scenario were based on EMT s current fleet, a mixture of 4, 5 and 7 car Class 222 (Meridian) DMUs and 8-car HST sets. Hereafter this Do-Minimum scenario is referend to as the baseline or baseline timetable. 2.2.1. Modelled Rolling Stock Options A range of alternative rolling stock options are available for the upgraded route. We emphasise that the inclusion or generic descriptions of options used as part of this analysis do not imply any preference for particular types or manufacturers of rolling stock. For each of the scenarios, information on the expected operating and leasing costs, train performance characteristics and expected seating capacity were supplied by DfT on a commercially confidential basis. Based on discussions with DfT, it was agreed that the following five combinations of rolling stock options would be considered in the appraisal: Central Case: 5 car 125mph EMU (Sheffield/Nottingham) / 4 car 110mph EMU (Corby) Option 1: 7 car 125mph EMU (Sheffield/Nottingham) / 4 car 110mph EMU (Corby) Option 2: 8 car 125mph EMU (Sheffield/Nottingham) / 4 car 110mph EMU (Corby) Option 3: 5/10 car 125mph EMU to all destinations Option 4: 5/10 car 125mph Bi-Mode / 4 car 110mph EMU (Corby) The list of options described above is not exhaustive and was designed to show the impacts of high level design choices. The options were developed to test a range of potential rolling choices including: Homogenous fleet v mixed fleet; and Fixed formation v peak strengthening. Option 4 intends to assess the impact of the additional cost of providing bi-mode rolling stock instead of 125mph EMUs for four longer distance LDHS services, and assumes that bi-modes would be running under the wires with journey times as in the central case. Bi-modes would offer advantages in terms of diversionary routes and may offer some flexibility in the event of delays to electrification. However, maintaining the journey times of 125mph EMUs by bi-modes in diesel operation remains to be proven. This option will assess the impact of the additional cost of providing bi-modes. 2.2.2. Modelling Approach For consistency, greater detail, and to enable findings to be relied upon for different purposes, the appraisal has been based on the Comparator Model Suite developed for the East Midlands Franchise competition. This model suite has been updated for the East Midlands Franchise competition in parallel to this project using outturn data for the 2015/16 financial year. For this study uses exogenous forecasts from the January 2016 DDGs. This model suite is based upon the externally assured models that are being used on the ICWC Franchise competition, although has been used in advance of external assurance for the East Midlands Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 15

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Franchise competition itself. The figure below provides an overview of the East Midlands Franchise Comparator Suite. Figure 2-1 East Midlands Franchise Comparator Model Suite Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 16

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 3. Service Pattern Development 3.1. Introduction The business case timetable development builds on the previous Midland Main Line timetabling work undertaken by Atkins in 2014. This commission has concentrated on timetabling 6 long distance paths per hour, 2 freight paths per hour and integrating these with the GTR s proposed 2018 timetable south of Bedford. Two principal scenarios were considered: the 2023 central case (with full electrification) and the 2019 case (with electrification between St Pancras and Corby only). For each case, a standard AM peak, PM peak and off-peak hour was produced. A table of assumptions together with any non-compliances which could not be resolved within the timescale of this project have been included in Appendix A. Working timetables and St Pancras platform working have been recorded in a separate Technical Note 1. The timetables developed by Atkins were checked by Network Rail Capability & Capacity Analysis and shared with the relevant train operators. Network Rail responded on the 2nd August 2016 stating the timetables were suitable for the purpose of business case analysis, subject to the recorded non-compliances being resolved during future stages. In addition to the 2019 and 2023 scenarios, the business case involved a number of sensitivity tests and a baseline timetable whereby the existing Midland Main Line service specification would be integrated into the proposed GTR timetable. In each case, sufficient timetabling work was undertaken to determine the likely impact on journey times and inform the business case, but did not extend to producing a compliant timetable for each test. The timetable development process and outputs is outlined below. Further details can be found in Appendices A. 3.2. Timetable Development Process The timetable development process focused on the design of a single core specification, enabling the different rolling stock options and subsequent sensitivity tests to be conducted on a like-for-like basis. The core timetable was developed initially using timings for Class 222 (diesel) rolling stock to current train planning rules and principles, with journey times subsequently adjusted to reflect different types of rolling stock. The service specification for the timetable development was provided by the Department and builds upon the specification from the original business case in 2014. The figure below presents the notional standard off-peak service pattern for the Baseline and the Central Case timetable. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 17

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 3.2.1.3. Rolling stock The assumptions for rolling stock with regards to timetabling are listed below, to reflect the performance of each rolling stock category and how this affects the timetable development: Existing Class 222 SRTs were used as a basis for all new trains, adjusted where appropriate. RailSys analysis undertaken for the previous timetabling work showed that the performance of 125mph EMU stock is very similar to Class 222s; therefore, only very minor adjustments were made to Class 222 SRTs, amounting to no more than a 1 minute saving between London and Nottingham / Sheffield in each direction. RailSys analysis was also undertaken during the previous phase using 110mph EMUs (with maximum speed increased to 110mph) to generate SRTs for the proposed Corby EMUs. Again, their performance was similar to that of a Class 222, being only 1 minute slower in the Down direction and no different in the Up direction. It was assumed that Class 222 planning rules for dwell times and turnarounds were applicable to 125mph EMU stock owing to them both being end loaded via single leaf doors. For Corby EMUs, EMU planning rules were used south of Bedford and DMU planning rules were used north of Bedford. Generally, dwell times for the proposed 125mph EMUs were ½ a minute longer than for the proposed 110mph EMUs. Although there are no set planning rules necessitating differentials to be applied between the Working and Public timetables, it appears these do exist between arrival times in today s timetable and Atkins sought replicate these. They are not always applied consistently; however, Atkins judged the following values to be a reasonable and fair reflection of the situation today. St Pancras International: 1 minute (increasing to 2 minutes at peak times), Nottingham: 2 minutes and Sheffield: 1 minute. 3.2.1.4. Depots and empty coaching stock (ECS) moves Additionally, assumptions around depot use and Empty Coaching Stock moves for timetable development are listed below: It was assumed that 125mph EMU stock would be based at a new deport in the Derby area 3 and the suburban EMUs would be based at Kettering. In the 2019 case, it was assumed that HSTs would continue to be based at Neville Hill. Cricklewood depot would also be used for stabling. As the supplied GTR timetable does not include a specific counter-peak direction timetable, Atkins were not able to timetable ECS moves into and out of Cricklewood depot in the peak and shoulder peak periods. However, it was agreed with GTR at a workshop held on 20th July 2016 that it would be reasonable to assume up to 2 ECS paths per hour between St Pancras and Cricklewood. This restriction on the number of ECS moves prevents every train being split down at St Pancras between the peaks. In cases where 125mph EMU sets are split down at St Pancras (i.e. in all but the fixed formation sensitivity), there will be insufficient capacity to split down 110mph EMUs at St Pancras at the same time. Therefore, 110mph EMU stock will have to be split down at Kettering instead. The additional time necessary to undertake this split at Kettering was not included in the timetable (as the affected services were not identified until loadings were calculated, after the timetable was complete), but will add a journey time penalty of up to 2 minutes between Kettering and Corby. As this only applies to a small number of counter-peak services, it has been assumed to have negligible impact on the economic benefits calculated in this study. 3.2.1.5. Freight Finally, freight services have been considered in the timetable development process to account for the interaction between the passenger and freight service paths. The assumption with regards to freight services are listed below: At off-peak times, all the specified freight paths were accommodated. However, while being compliant with the rules (where determined), there were a number of locations where timings were tight. Some 3 The capital costs of a Derby Deport are not included in the appraisal work below. An estimated capital expenditure estimated at is not considered to be material to the overall business case. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 21

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL 4. Demand & Revenue Forecasting 4.1. Introduction This section presents the demand and forecasting methodology and the key assumptions used for each component of the appraisal. It then goes on to present the impact of options on demand and revenue and the consequent impact on crowding levels. 4.2. Forecasting methodology 4.2.1. Demand and Revenue Forecasts Demand and revenue forecasts have been developed using the comparator model developed for use on the ongoing East Midlands Franchise Competition. The development of the revenue model is guided by the Passenger Demand Forecasting Handbook (PDFH) in accordance with DfT TAG guidance (unit M4, 2014). The revenue model developed for the franchise competition produces forecasts of passenger fare-box earnings, operating journeys, and passenger miles by ticket type from a 2015/16 base-year populated with LENNON data. The LENNON data is processed into 27 flow groups and eight separate ticket categories. This disaggregates demand for forecasting purposes to consider: The necessity to disaggregate flows in accordance with response drivers on different flows, for instance GDP per capita elasticities are different on Intercity and SE-London flows. For non-london demand responses to changes in the External Environment (economic growth), PDFHv5.1 introduced separate drivers for flows to\from Britain s eleven Core cities and between (a defined set of 38) major cities - reflecting strong growth in these markets over recent years. Separation of To London and From London travel (where the former has an outward leg of journey towards the Capital), reflecting separate PDFH elasticity recommendations, in some cases. Rail demand forecasting requires consideration of both exogenous and endogenous impacts. Exogenous demand drivers are factors which influence rail demand but are outside of the direct control of the rail industry and therefore are unchanged between options. Typically this relates to the external environment and inter-modal competition. For this appraisal rail fares are treated as exogenous changing only with fares policy. Endogenous effects are factors that are within the rail industries control and generally drive the difference between baseline and options forecasts. For this study these drivers are primarily those associated with the Midlands Mainline electrification and timetable changes. The exogenous forecasts for the model are taken from the January 2016 release of the DfT s Demand Driver Generator outputs as produced/supplied by DfT. Exogenous forecasts are converted to rail demand impacts (i.e. percentage year-on-year changes) using a range of elasticities recommended by PDFH. For example, if GDP per capita is forecast to rise by 2% in a given future year, and a GDP per capita elasticity of 1.5 is applicable according to PDFH, then the contribution of rising productivity (per capita income) to rail demand and revenue will be 3.01%. The EMRF revenue model adopts fare elasticities from PDFH v4.0 and non-fare elasticities from PDFH v5.1 (excluding car fuel costs where PDFH v5.0 is retained) as a central case but with the option of v5.0 for sensitivity setting. The revenue model is supported by dedicated sub-modelling in a number of instances: Timetable impacts which are modelled using MOIRA 1 with both Generalised Journey Time and ORCATS influences reflected (i.e. overall timetable quality and revenue allocation between TOCs, respectively). The revenue model forecasts changes to franchise revenues with changes to other TOCs revenue carried across and growth proportionally. This appraisal has been based upon the Wednesday timetable assuming that changes to demand and revenue will be scales proportionally for the Saturday and Sunday timetables. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 25

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Management initiatives which are modelled as a proportional or absolute increase in journeys by flow group. This provides an overlay for non-timetable related initiatives which drive demand which are calculated externally using PDFH guidance; for instance the impact of rolling stock ambience. Crowding modelling within a standalone sub model. The crowding model produces suppression factors which reflect DfT guidance 4 by adopting the modelling approach recommended in Section B6 of the Passenger Demand Forecasting Handbook (PDFH) version 5.1); The EMRF model has the following attributes: - MOIRA1 (version OR55 DfT Midlands) is used to output predicted Standard Class loads i.e. boarding, alighting and total load by journey arc on all EMT services in the Wednesday timetable at demand levels in the year to March 2016. As it is not possible to factor directly to counts following a significant timetable change the appraisal of crowding is undertaken using MOIRA loadings. Whilst MOIRA loadings are uncalibrated and unconstrained at the train level, this means the MOIRA is a modelled reflection of passengers wishing to board each train whilst loadings account for existing constraint, they were found to provide a reasonably good match to counts during the development of the original business case; - A train formation specific to the option is assigned to each service, allowing a loading level on each arc to be derived; - The train loading is converted into an overall Value of time multiplier referencing loading and recommended value-of-time multipliers from PDFH 5.1 Table B6.2. - The arc times and boarding/alighting profiles are then used to derive an average journey time for boarders and alighters at each station. - The loss of demand due to crowding (i.e. suppressed demand) is calculated for boarders and alighters at each station by combining the percentage increase in (perceived) journey time with an IVT elasticity [(crowded + uncrowded mins) / uncrowded mins]ivt elasticity. - Following the first calculation the model then iterates to equilibrium, reflecting the fact that - as some passengers are crowded off - conditions for residual demand are improved. The suppression factor outputs from the crowding model are taken as the average of the final two iterations. - The crowding model is then run with uniform growth of between 0% and 50%. Suppression factors for each flow-group and peak\off-peak travel are transferred to the revenue model. Growth for each flowgroup and ticket type growth for any given year is then directly referenced within the revenue model. It should be noted that First Class revenue is assumed never to be suppressed as fares/yields can be increased to price off demand, and to thereby restore earnings (on an assumption of a unitary fare elasticity). However, the revenue model does not explicitly allow for this - As well as forecasting suppression the crowding model includes calculations to derive the perceived crowded hour on each service. This is to allow for the economic benefits of timetable changes to be assessed. This is taken as the sum of the additional minutes of perceived crowded minutes multiplied by the number of passengers on each link. Crowded minutes are split by journey purpose using mapping from PDFH5.0 Tables B0.1 B0.9. The table below shows the factors included in the demand and revenue forecasts and the assumptions with relation to the inputs and elasticities: 4 TAG Unit M4, November 2014 Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 26

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Total revenue reductions are much lower than the increases totalling: - for EMT services against a increases of ; and - on National Rail revenues against increases of. The largest decreases are generally on non-london flows from the south of Kettering to the north of Leicester (e.g. Luton Airport Nottingham, Leicester Luton Airport, Leicester - Wellingborough) where the direct connectivity is removed as a result of the proposed stopping pattern. In the proposed timetable an interchange at Kettering is required to complete these journeys. These decreases are generally high in proportional terms although lower in absolute terms due to the smaller size of the overall market. The only London flows with a decrease in national rail revenues are from Luton, Luton Airport and Wellingborough where there are small reductions in peak hour service frequency to London. In contrast to the above flows these decreases are generally low proportions of a large market size. The changes in national rail revenues shown above are driven by changes in generalised journey times (GJT) between each Midland Mainline station. The GJT represents journey time, frequency of service and interchange in a single term and is expressed entirely in equivalent minutes of journey time. This is a daily average value accounting for the distribution of demand throughout the day. The chart below shows GJT for the baseline and the central case between each MML station and London. Figure 4-1 Generalised Journey Times (Baseline and Central Case) Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 32

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL Figure 4-3 Central Case: Critical Loading for each Arrival/Departure (2015/16 Demand) The charts above show that: With the current timetable there is an existing inability of the current, or proposed rolling stock, to meet existing demand on Nottingham and Sheffield services. This is particularly pronounced on the stopping service from London St Pancras to Nottingham (calling at Bedford, Luton Airport Parkway and Wellingborough), although the impact is observed on each existing service in the peak due to these stops being supplemented in peak hours. There is reduced loading on Nottingham and Sheffield services with the option timetable. This is because the proposed stopping pattern removes stops south of Market Harborough from the Sheffield and Nottingham services; constraining the pronounced peak in demand from commuter flows onto the shorter Corby services. The more pronounced peaks on the Corby services resulting in the need for significant peak, and to a lesser extend off-peak, lengthening with either 110 mph EMUs or a 5 car EMU service. The current stopping pattern results in crowding on the existing Nottingham and Sheffield services. This is magnified in future years by exogenous growth in rail demand. The figures above show that capacity constraint on these services is significantly reduced primarily as a result of the implementation of the 6 th Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 34

Midland Mainline Upgrade Programme Economic Case Report OFFICIAL SENSITIVE: COMMERCIAL The initial revenue increase of approximately with the introduction of the timetable change increases to after immediate forecast un-suppression. This rises to by the demand cap year. This is as a result of a higher rate of suppression on future demand growth under the baseline than in the option, incorporating peak lengthening, and reducing extreme levels of loading through the timetable changes. Atkins Midland Mainline Upgrade Programme Version 1.1 16 September 2016 5149977 38