§ Mrs. MayTo ask the Secretary of State for Transport if he will list the assumptions used to set the five-year price cap regime for NATS in 2001. [60657]
§ Mr. DarlingNational Air Traffic Services (NATS) is subject to price regulation by the RPI-X method, which is the standard model for monopoly regulation in the United Kingdom. The charge cap, or "X" factor, for the first five184W years of the public private partnership (PPP) was set by the Government, in the light of advice received from the Civil Aviation Authority (CAA).
The CAA's advice on the charge cap was based on a well-considered and comprehensive analysis of NATS' operational and investment plans and the potential for efficiency savings. The advice fully reflected the Government's, and the CAA's, commitment to giving the highest priority to safety.
The CAA recommended that the "X" factor for NATS' UK monopoly services be set at 5 per cent. per year for each of the first five years. The Government considered this advice carefully, alongside representations from NATS and the projections of bidders for the NATS PPP, and decided to set charge capping at 2.2 per cent. for 2001, 3.0 per cent. for 2002, 4.0 per cent. for 2003, and 5.0 per cent. for each of 2004 and 2005.
Furthermore, since delays are a major concern to airlines, the Government decided that the charge cap should include a delay term, so that the "X" factor would automatically tighten, thereby reducing NATS' revenues, if delays increased.
In reaching these decisions, the Government was concerned to achieve a smooth transition to the PPP and to enable NATS' management to focus on getting the change and investment programmes right during the early years of the PPP.