How Much Will GO Electrification Cost? (Update 3)

An implementation scehdule of almost three years was determined for the project including a 14-month planning and approval period before any on-site work can commence.  On this basis, revenue service for the electrified line could be targeted for the first quarter of 2004 [three years after the date of this document].  [Page ii]

The summary goes on to conclude:

In the economic analyses … the existing diesel operation demonstrates an economic advantage over the introduction of an electrified railway.

The vital word here is “existing diesel operations” as the study appears to have been based on the level of service existing in 2001 with some modest additions in future decades.  Service levels now planned for the Lake Shore and other corridors substantially exceed those operated or contemplated in 2001.  The modelled electrical requirements were based on actual 2001 schedules.

In the current context, one of the study objectives is worth noting:

Given the significant environmental benefits of an electrified railway, such as reduced levels of air and noise pollution and the potential for improved service levels due to the better performance of electric locomotives, the opportunity to implement electrification at reduced cost must be fully examined and pursued if considered feasible.

The “reduced cost” mentioned here refers to then-available second-hand electric locomotives whose purchase could lower the capital cost of conversion.  Whether a similar situation with available equipment exists today is worth reviewing as part of the overall study.

The capital cost buildup for electrification has the following components over the period 2001-2025, the timeframe of the study:

Rolling Stock

Electric option

• Electric locomotives:  20 in 2001-4, 3 in 2007, 3 in 2021, 20 replacements in 2025.  $232-million (2001$).
• Locomotive maintenance facility:  $15-million
• Subtotal:  $247-million

Diesel option

• Diesel locomotives:  10 in 2006, 14 in 2007 and 4 in 2021.  $145.6-million.
• 24 new bilevel cars (12 in 2007, 12 in 2021) that are needed only for diesel option because of better fleet utilization with electric operation.  $62.4-million.
• Subtotal:  $208-million

Overhead Catenary System (OCS) and Related Work

These costs are unique to the electric scenario:

• Overhead catenary:  $56.9-million
• Traction power substations (3):  $24.5-million
• Hydro connections: $35-million
• Signal modifications:  $47.8-million
• Overhead clearance program:  $39-million
• OCS maintenance facility:  $3-million
• Property approvals/permits:  $1-million
• Subtotal:  $207.2-million

Note that this is for about 114 route-km or a cost of about $2-million/km.  This seems rather low compared to other projects, and this may be due to assumptions about the availability of second hand equipment.  Conversely, this total includes signal and trainshed modifications at Union which have, in practice, already been incorporated in the reconstruction projects now underway.  Therefore these are not net costs chargeable to an electrification decision, but part of the ongoing provision that has been made for this option.

Comparison of the Options

The totals for the two options are:

• Electric:  $454.2-million (NPV $326-million)
• Diesel:  $208.0-million (NPV $149-million)

One important note here is that the Net Present Value calculations are not shown in detail.  In particular, it is unclear whether the residual capital value of assets is considered.  Those new electric locomotives purchase right at the end of the study period would have a very large residual value that should not be included in the NPV for the electric rolling stock.

It is likely that this is not accounted for because the ratio of total capital costs above (2.18:1) is also the same for the NPV values.  This implies that there is no allowance for residual value.  Indeed a worst-case scenario has been presented by placing a locomotive fleet replacement right at the end of the study period and failing to recognize that most of its value will be consumed in years beyond the end of the study.  This is not just bad accounting, but a serious skewing of the financial comparison.

Operating Costs

I will not go into the details of the operating costs, but they have been broken down by year showing the changes as service improvements are factored in and allowing  infrequent costs (major overhauls) that appear only in certain years.

Power costs are consistently less than half of the cost of diesel fuel.  Maintenance and overhaul costs are also lower.

This leads to NPV values on the operating side of the accounts of:

• Electric:  $119-million
• Diesel:  $199-million

Page 2 of 4 | Previous page | Next page