Friday, 6 September 2019

National League of Cities report gets congestion pricing wrong

"The views contained in the opinion piece below are solely my own and should not in any way be attributed to my employer, D’Artagnan Consulting LLP"

As I said a few weeks ago, the United States has suddenly "discovered" congestion pricing over a decade after Europe and over two decades after Singapore, in part because it is actually going to happen in New York.  This is good news.

At last, there is policy debate about using pricing to address road congestion, rather than the debate about simply building more road capacity or building more capacity for alternatives. 

The not so good news is that some writing about the topic appears a bit rushed and this enthusiasm to produce research and analysis can sometimes mean that there are gaps and inaccuracies which come out. One of the latest efforts is a report published by the National League of Cities called "Making Space: Congestion Pricing in Cities" (PDF).  It's not as good as it could have been, and could have done with a bit more time and some research (e.g. simply going to sources on this blog) to better inform cities considering congestion pricing.

Let's be clear, I am very supportive of anyone seeking to learn more and to think more about, I fear that a rush to generate "knowledge" could actually hinder progress in pricing, because it may oversimplify concepts, or worse yet disseminate misinterpretations of experience and concepts that might encourage opposition to road pricing more generally.  For example, to talk of congestion pricing primarily in terms of generating new revenue can raise fear that it is just a new form of tax, rather than a tool that addressing a major urban transport policy problem, which can also generate revenue (which itself could be used to reduce other sources of revenue).

I've read the report end to end. Overall it has some useful points and is well structured, and I hope it generates interest in congestion pricing as a concept, but I don't think the report is necessarily as helpful as it could be for decision makers, policy advisors or advocates for better pricing of road use, because parts of it are just not correct, and some useful details are left out.  For example, the number one reason congestion pricing programmes across the world have not progressed (and quite a few have tried) is because of a lack of public and political acceptability.  Ignore this at your peril.

The main flaws of the report are that it:

• does not adequately define congestion pricing;

• does not describe all of the behavioural changes that congestion pricing can encourage;

• does not describe the technology used in ANY operating congestion pricing systems today (but depicts technology that is not used);

• misconstrues the purpose of the London scheme, doesn't note the significant limitations of the scheme today;

• incorrectly reports the use of revenue collected from the Singapore ALS and ERP schemes, and does not accurately describe how it works;

• takes a narrow view of equity in congestion pricing, essentially claiming that the sole mitigation is additional modal choice;

• concludes with a new (and tangential) point about electric and automated vehicles, giving the impression that the imperative to consider congestion pricing is about such vehicles, not congestion more generally.

Below is a thorough review of the report.

Detailed review of the report

Wednesday, 14 August 2019

Abu Dhabi congestion pricing coming in October

Following over a decade after Dubai introduced tolls on existing roads called Salek, Abu Dhabi is about to introduce a more refined scheme which is arguably a form of congestion pricing.  It is officially called the Toll Gate System, and there is a good reason why, it effectively charges for all traffic entering and exiting Abu Dhabi 24/7.  The National has images of the first toll gantries installed.  I've put together a quick map, clearly showing that the four charging points create a cordon around most of urban Abu Dhabi. Charging points will be at the four bridges entering Abu Dhabi, with the stated aim of reducing congestion by encouraging car pooling and use of public transport.

Four charging points for congestion pricing in Abu Dhabi

The scheme will start on 15th October.  The Abu Dhabi Department of Transport Twitter account has a video (in English) summarising it.

Charge rates 

There is no variation by vehicle type

AED2 (~US$0.54) Between 0900-1700 and 1900-0700 Saturday to Thursday, all day Fridays and public holidays

AED4 (~US$1.09) 0700-0900 and 1700-1900 Saturday to Thursday

There will be a daily cap of AED16 (~US$4.36) with up to ten days to pay for vehicles unregistered with the scheme.  


After ten days, fines escalate by day with a AED100 (~US$27.22) fine for the first day, AED200 (~US$54.45) for the second day and then AED400 on the third day (~$108.90) with fines able to reach AED10000(~US$2722).  There will be a similar fine for a tampered number plate or vandalism of roadside equipment.


Payment is through an online account or a payment kiosk (which are to be located scattered across the emirate).  The online account has what is called an Integrated Electronic Payment Wallet which is required to have sufficient prepaid balance to cover any charges.  Failure to keep the balance positive (travelling and incurring a charge that places it into deficit) will result in a AED50 (~US$13.61) fine.

The charging technology is Automatic Number Plate Recognition (ANPR).

On 30 August all Abu Dhabi registered vehicles will automatically have accounts registered at no charge, which will then need to be set up.   The relevant press release states:

All Abu Dhabi registered vehicles on the official system registration launch, 30 August 2019, will have automatically registered accounts at no charge. Account holders will automatically receive an SMS message stating their user-name and password for that account, and can then add any additional vehicles to the registered account as required. For vehicles registered outside Abu Dhabi, the owner must be registered in the system before crossing the toll gates. In case a vehicle which is not registered in the toll gate system crosses under the toll gates, the user will be given a grace period of ten business days, starting from the crossing time, to register in the system, otherwise a fine applies.


Emergency vehicles (ambulance, civil defence, police), military, Ministry of Interior vehicles, public buses and school buses, and Abu Dhabi licensed taxis are all exempt, along with motorcycles. 

Electric vehicles get a two year exemption, to try to encourage greater use of such vehicles (it's worth noting that Abu Dhabi has phased out subsidies for petrol in recent years).


Abu Dhabi has learned from Dubai, because it isn't introducing a leaky corridor charge with options to get around it. ANPR technology has moved on a lot, so that the toll tags used in Dubai wont be needed for Abu Dhabi, saving money on road side technology and the costs of managing toll tag inventory.  It is obviously designed geographically to put a cordon around Abu Dhabi, notably with the airport excluded, so all trips by visitors in and out of Abu Dhabi by car (although not taxi) will be charged, whether they arrived by air, from other parts of the UAE or other countries.

The exemption list is understandable, although including Abu Dhabi licensed taxis will mean greater use of taxis as substitutes for private cars. I'd suggest three points for refinement:
  1. Don't charge all of the offpeak.  Yes, Abu Dhabi's climate means there is a lot of activity very late at night, but having a charge free period would encourage more time of day shift for travel.  It is understandable to charge an hour or two either side of the peaks and during the day, but Abu Dhabi's roads are not congested 24/7.  It would be efficient to encourage traffic that has no modal substitution (e.g deliveries) to move to other times.
  2. After the scheme is bedded in, consider more refined charging periods at the charging points.  Although only Sheikh Khalifa Bridge is sufficiently distant from the other three to justify different charging periods and rates (the other three bridges are adjacent), there may be sense in having shoulder periods to the peaks (AED3 one hour either side) and other moves to spread demand.
  3. With more refined charging, consider charging trucks more than cars.  Trucks occupy two to three times the road space of cars, so contribute similarly to congestion.  Although there is less flexibility to change behaviour (as it is only about time of day or consolidating trips), it is still an efficient approach to pricing the use of scarce road space.

Tuesday, 6 August 2019

ACCC/AER Regulatory Conference presentation on road reform

Last Thursday I presented to the annual ACCC/AER Regulatory Conference in Brisbane, Australia.  The ACCC is the Australian Competition and Consumer Commission, which is Australia's anti-trust authority and consumer protection agency, the AER is the Australian Energy Regulator (which regulates the wholesale gas and electricity markets).  The presentation was about road reform, more specifically about whether roads could be transformed into regulated utilities, similar to energy and telecommunications networks.

The differences between roads and other networks are palpable, not least because roads are often funded directly by government, rather than from revenues collected from road users.  Even if road users pay taxes or fees related to road use (such as fuel tax), the relationship between what is charged and what is spent on the network is often weak.  Rarely are the road managers involved in setting the rates charged by those using the network they manage, nor is there much input from those who pay into what is spent on the network.

In some cases, road networks are managed by a very traditional government agency, which is primarily incentivised to lobby for more money, has budgets determined entirely by a political process, and is dominated by a culture of engineering and bureaucracy.  This is a vast contrast from utility networks, which are increasingly subject to competition, but more importantly bill their customers directly and decide themselves how to spend that money on maintaining, renewing and expanding network capacity.  Some use price to incentivise changes in demand, such as more off-peak utilisation.

In part this is historical, but it is also because roads are ubiquitous and such a dominant part of modern infrastructure.  Roads usually provide access to land, not just for motor vehicles, but for pedestrians and bicycles.  Roads range from having purely arterial to purely access functions, and some roads are not for motor vehicles at all.  They are also corridors for other utilities, such as pipelines and cables, and provide locations for street furniture ranging from postboxes to street lights to seating.  Yet none of that means that roads should just be treated as a public good that "everyone" pays for, not least because wear and tear is a function of the use of motor vehicles, particularly heavy vehicles.  Furthermore, there are often challenges around congestion, safety and route security and resilience due to external factors ranging from weather to earthquakes and flooding.  It isn't "everyone" generating demand for road capacity at peaks, or bridges that can withhold higher axle weights.  Roads are used by businesses to deliver goods, provide services and attract customers.

Road reform internationally

The result of a system that resembles that of other elements of government is that roads are often suffering from a lack of funding for basic maintenance let alone new capital spending, but also the political system tends to prioritise high profile, politically noticeable projects over mundane but essential maintenance.  The political system may be reluctant to increase charges on road users.  Rarely are politically rationed services seen as being exemplary in service to the public.  However, the big impacts of having an unreformed system are seen in systematic congestion (because prices mean demand exceeds supply), poor standards of maintenance in parts of the network and network gaps (such as mass restricted bridges) that hinder the efficiency of users.  Furthermore, the responses to these problems are often ad-hoc, or to focus on increasing the attractiveness or reducing the price to users of alternatives, rather than the problems of a network that isn't managed for users, paid for by users and priced to reflect cost.
So my presentation is here it runs through where others have embarked on major structural reform, with case studies of Austria, England (not the UK) and New Zealand.

In the context of road pricing, Austria's motorway network funds itself, through heavy vehicle charges based on distance and light vehicle charges based on buying access by a number of days.  England still has non-hypothecated charges on ownership and fuel, but will soon be hypothecating Vehicle Excise Duty (equivalent to registration fees elsewhere) to fund Highways England.  New Zealand has mass/distance road user charges for heavy vehicles and light diesel vehicles, fuel tax for petrol and LPG powered vehicles only and registration fees, all of which are hypothecated to fully fund state highways and on average, half fund local roads (and public transport subsidies).

Wednesday, 31 July 2019

Will Jakarta get congestion pricing?

The Jakarta Globe claimed that Electronic Road Pricing (ERP) will be operational on some roads in Jakarta by March 2019, but clearly this hasn't happened. What has gone wrong?

I've written a lot about Jakarta's attempts to introduce congestion pricing in recent years.  In order from 2010 to 2016:

Coconut Jakarta said Inrix's most recent report indicated Jakarta has the world's 12th worst traffic.

Jakarta Deputy Governor Sandiaga Uno now says it will be implemented after the Mass Rapid Transit (MRT - metro) line along Jalan Jenderal Sudirman to Jalan Medan Merdeka Barat is opened.  Coconut Jakarta also reports that Greater Jakarta Area Transportation Management Agency (BPTJ) head Bambang Prihartono has suggested charging for non-Jakarta registered vehicles to enter the city.  That may have some obvious appeal, although it would encourage commercial vehicles to register in Jakarta to avoid this (and provide a possible path for avoidance of private individuals registering vehicles through Jakarta based companies).  However, he is right to talk of ERP as the long term solution, that would enable mode shift to public transport if it is expanded sufficiently.

Where now?

Singapore's Straits Times says that 50% of vehicles in Jakarta come from outside the city, and that the first phase of the ERP scheme will be to charge for use on one road between two roundabouts - Jalan Jenderal Sudirman.  Phase Two would be an extension north along Jalan MH Thamrin.  Jalan Jenderal Sudirman already has bus rapid transit lane along much its length, and the MRT line is also under construction following that route.

Phase One (blue) Phase Two (orange) of Jakarta ERP (2018)
The choice of this route appears to be because it will parallel public transport options, as well as being a particularly congested corridor.  Care may need to be taken to ensure charging points minimise opportunities for diversion, otherwise nearby routes.    


The last report on the plan was to await installation of congestion pricing until Jakarta's metro system opens. The first phase opened on 24 March 2019 (the Red Line), but there are wider problems with implementing congestion pricing in Jakarta.

Jakarta's MRT (metro)

The main issue is that the tendering process for the system has been undermined by two of the three shortlisted bidders withdrawing (namely QFree and Kapsch, both well known for their experience in installing tolling systems) leaving only the Indonesian firm PT Bali Towerindo Sentra remaining.  One can only speculate about their reasons for withdrawing, but in doing so there is clearly insufficient confidence from the authorities to proceed.

The Governor of Jakarta has since indicated that it is "more important" to upgrade public transport than to introduce ERP, yet it is fairly obvious that the latter could help the former.  Even just introducing the single ERP corridor charge would make it much easier to introduce more rapid and frequent bus services on that corridor, and raise revenue to to improve transport infrastructure more widely.  The public transport goal is to get 90% of residents able to access either the metro (MRT) or bus rapid transit, with the current position being around 20%, but they could be introduced hand in hand.

There is another issue which is not getting much publicity, but is more fundamental to the success or failure of congestion pricing - the quality and reliability of automatic number plate detection to enforce ERP.

False number plates, and poor data linking vehicles to owners' addresses is a problem in Indonesia, which would make enforcement of ERP in Jakarta difficult.  This is a responsibility of the Police, who understandably are less enthused about addressing a problem which is more about traffic management than crime.

If the fundamental problem of fake number plates and an unreliable database are not addressed, then congestion pricing can't be implemented.  Simple as that.  As I've said before, if Jakarta can't implement free flow tolls on its existing tolled road network, it is not going to reliably introduce congestion pricing. 

No doubt reforming and upgrading both the number plate system, the enforcement of number plates and the database and processes for changing data on vehicle number plates is not easy in Jakarta, but it is going to be key to moving forward.  Whilst Jakarta embarks on upgrading its public transport network, it should move ahead on reforming this, use it to replace manual tolls on existing toll roads (which in itself will ease congestion on and approaching those roads), giving it a modern vehicle management infrastructure to introduce ERP.

Monday, 29 July 2019

Australia's National Heavy Vehicle Charging Pilot : Small-scale on-road trial of heavy vehicle charging is launched

Last Thursday (25 July 2019), Australia's Deputy Prime Minister and Minister for Transport, Infrastructure and Regional Development, The Hon. Michael McCormack along with The Hon Scott Buchholz MP, Assistant Minister for Road Safety and Freight Transport formally launched Australia's first nationwide on-road trial of heavy vehicle road user charging.

The press release is here, with more details on the Department of Infrastructure, Transport, Cities and Regional Development ("the Department") website here.

In short, it involves:
  • Up to eleven heavy vehicle operators (truck and bus) using on-board telematics systems that they were already using in their vehicles (commercial telematic systems used for fleet management purposes);
  • Up to 111 vehicles will be included (so an average of a maximum of ten vehicles per fleet);
  • A trial of six months duration;
  • Operators to use existing systems to report vehicle configuration;
  • Each operator will receive mock invoices generated by measurement of road use using the telematics systems on each participating vehicle, which will enable comparison of hypothetical charges with current charges
The trial will assess the experience of heavy vehicle users in receiving mock invoices to compare what they might pay under distance/mass/configuration based charging compared to the current mix of annual registration fees and fuel tax.  The idea being that charging by distance could replace such charges.  The diagram below from the Department indicates its plan to follow the small-scale trial with a large-scale trial next year on a much bigger scale and complexity. 

Australia's heavy vehicle charging trial programme
The small scale trial will use only one technology - existing telematics systems (which by necessity are all GNSS based On-Board Units (OBUs). The large scale trial could also include manual options to report distance, and an option to report actual mass.  However, further details of the large scale trial will be developed in the coming months, and is likely to be informed by the progress and evaluation of the small scale trial, and engagement with stakeholders (including heavy vehicle user representative organisations).

The operators participating in the small-scale trial are:
This is quite a range including local and national operators, with operators based in several states.  Telematics providers supporting the trial (providing the systems used by those operators) are:
The trials are part of a wider programme of reform of the provision of roads for heavy vehicles in Australia called Heavy Vehicle Road Reform.  The first phase of this is set out here, and involves improving transparency about spending, asset management and the levels of service provided to heavy vehicle road users. 

Other reforms as part of this include consideration of independent price regulation of the setting of heavy vehicle charges (including existing registration fees and the fuel-based charge), and measures to more closely link revenue collected from heavy vehicles to road managers for investment in their networks.

It is clear that it is early days and no decision has been made by the Australian Government to change how heavy vehicles are charged in Australia, and any decision to do so is likely to be some years away. 

It will be interesting to watch the small scale trial with interest, particularly what the responses of participants are and the lessons that the Department will learn from the trial to develop the larger scale trial and inform wider reforms. 

Disclosure:  D'Artagnan has been providing technical advice to the Department of Infrastructure, Transport, Cities and Regional Development on heavy vehicle charging trials.

Sunday, 28 July 2019

Congestion pricing - the United States awakens

Singapore pioneered a basic form of urban congestion pricing in 1975, and introduced what is still the most sophisticated, economically rational and effective congestion pricing in the world in 1998, called ERP (Electronic Road Pricing).  In 2020 it is transitioning its operating technology to GNSS On Board Units (albeit to initially apply the same mix of corridor and cordon charging as applies today, but with the focus on delivering more information about pricing, traffic, parking and alternative modes through the system).

However, if you've been following the recent very public debates and commentaries about congestion pricing in the USA you'd be excused for thinking it is new and innovative.  Innovative it is, it is just that the US has come a bit late to the concept, but what is driving it is not so much congestion, but the desire to use congestion pricing to raise revenue - typically not for roads.

For many years congestion pricing in the USA has largely been referred to in the context of express/HOT/toll lanes. Although such lanes offer options to pay to bypass congestion on some highways, they are not "comprehensive" in addressing congestion and more importantly are not technically able to be implementing except on roads with limited access. In most cases they have been implemented by converting high occupancy vehicle lanes to HOT/toll lanes. It is rarely economic to build new lanes and charge just for them (because there is insufficient willingness to pay for the capital costs of new capacity, particularly when such capacity may only be utilised for short periods during weekdays), so HOT/toll lanes are rarely seen outside the USA.

The positive example of toll lanes is that they demonstrate that the instrument of price is effective in managing demand so that a road can operate in free flow conditions, but of course such lanes are not practical on most roads and they always have an unpriced alternative.  At best they offer an option in some cases, and demonstrate the concept.

So full congestion pricing has not been seen in the US to date. By that I don't mean having peak pricing on an existing toll road to spread demand on that road (this is seen on many crossings, such as the Golden Gate Bridge, E-407 Toronto and the Sydney Harbour Crossings), but rather pricing of a network or placing a cordon (either on its own or as an area charge) on a zone, with priced access at set times/days.

This isn't common as all. Although there are many low emission zones in European cities (which prohibit or heavily charge vehicles that don't meet low or ultra-low emission standards) and restricted access zones to cities (this is seen in many Italian cities, keen to preserve historic centres of cities ill suited to large volumes of vehicle traffic), the only cities that charge a network or a zone for access on a significant scale are:

- Singapore

- London

- Stockholm

- Gothenburg

- Milan

- Dubai

- Tehran.

There are a handful of smaller examples, Oslo transitioned from a cordon set up for revenue raising to one that has a congestion management purpose now, but by and large congestion pricing is hard to implement.  It's been investigated in multiple cities in the UK (Bristol, Cambridge, Leeds, Manchester, Edinburgh) and elsewhere in Europe (Dublin, Amsterdam, Copenhagen, Helsinki), but has always come up against one major issue - public opposition.

What has woken up the US?

How about the US then? Suddenly cities, states and the media have discovered congestion pricing because of one simple reason - New York is going to do it. This follows previous attempts to introduce it, most notably by former Mayor Michael Bloomberg, who had his proposal for a cordon on lower Manhattan vetoed by the State Legislature.

The New York Senate and Assembly have approved it, along with the State Governor. The details are to be worked out by a new Traffic Mobility Review Board, but it is essentially a cordon that starts at 60th St, excluding FDR Drive and the West Side Highway. All of the net revenue is to spent on the public transport network, specifically the subway, bus network, the Long Island RailRoad and Metro-North. Private cars are only to be charged once a day, whereas ridehailing/sharing and taxi services are already subject to a surcharge of between US$0.75-US$2.75 per trip, depending on the service since 2 February 2019.  Although Charles Komanoff indicates that the effects will be much less than promised (still a 2.5% increase in average traffic speeds is worthwhile).

Some of the details to be worked out include:

· Charge rates (will they vary by vehicle type)

· Area charge (will vehicles be charged for circulating within the cordon as well as or separately from crossing the cordon)

· Direction of charge (will there be a charge for entering AND exiting the cordon)

· Time of operation

· Variation of charge by time of day

· Discounts and exemptions (it might be fair to assume that emergency vehicles and NYC transit vehicles might be exempt, but will the ride hail/share surcharge liable vehicles be exempt too)

· How those entering lower Manhattan on tolled crossings will be treated

New York is basically implementing a simple charge, primarily to raise revenue for other modes, so it will be interesting to see what impact it has and whether it is designed to spread demand by time of day, as much as it is to raise revenue. It will clearly be a trailblazer, although it is unlikely that other US city has either the density of public transport or geography to lend itself to a relatively simple cordon as the solution.

What about the rest of the US?

San Francisco has studied charging before, and looks like pursuing it again. The San Francisco County Transportation Board Authority voted earlier this year to spend US$0.5m on a study of downtown congestion pricing, suggesting that it has already decided that a downtown cordon is worth pursuing. It will be interesting to see what impacts that might have, and particularly how boundary issues are addressed. The San Francisco Mobility Trends report indicated that "vehicular traffic entering San Francisco grew 27% since 2010, although public transport use also rose 5% and cycling by 6%, on a 9% population increase (indicating that the growth in population is pushing a big increase in driving), with a decrease in private car travel speeds by 23%. It's hardly surprising that pricing access to downtown is a priority, although hopefully it will mean pricing that varies by time of day.

Los Angeles has already had a study released by Southern California Association of Governments (SCAG) which proposed a pilot cordon at Westside LA, for a number of reasons (see page 94 of the below report).

Proposed Westside LA cordon from SCAG study

 The Mobility Go Zone and Pricing Feasibility Study indicated that it could result in a 19% drop in private cars entering charged zones, and a 9% mode shift to public transit, with 7% each to walking and cycling. Whilst this might be a good place to start, LA is going to need a much more comprehensive solution to address congestion across the region. LA Metro is about to launch a study that looks more widely at options, with the intention that pricing would support a package of improvements to public transport and active modes.

Boston, Portland, Seattle and Washington DC are all considering congestion pricing, which has to be welcome. The US has gone through a couple of eras in urban transport policy, from the 1940s to the 1970s the focus was almost entirely on building roads to meet demand. That has tailed off, with a focus from the 1970s of building (mostly rail-based) public transport infrastructure to try to attract motorists from their cars, in other words supplying alternatives. More recently, cycling has had a boost in some cities, but the primary argument in all cities is one of what to supply, rather than how to manage existing demand and supply.

Thursday, 7 June 2018

Australia's National Heavy Vehicle Charging Pilot: The National Pilot Program Stage Two

The Stage One report of the National Pilot should essentially be a set of three groups of work:
  1. Strategic, technical design and implementation advice on progressing with on-road pilots of heavy vehicle road charging.
  2. Results of desktop simulation modelling, which should indicate the financial impacts on different groups of heavy vehicle users, based on a series of charging structure scenarios.  This will provide an indication of the distributional effects (excluding behaviour change) of existing heavy vehicle road users changing how they pay for roads, and so help to inform possible transitional and longer term pricing scenarios for pilots and implementation of heavy vehicle charging.
  3. Input from the heavy vehicle road user sector, but also road managers and other relevant government and private sector stakeholders of their views and understanding of heavy vehicle charging.
Stage Two will be the delivery of an on-road heavy vehicle road charging pilot, with actual road users "paying" a simulated road user charge with their own accounts, and invoicing, as a demonstration of what heavy vehicle road charging could mean for the day-to-day operations of heavy vehicle users, state/territory and local road managers, federal, state/territory treasuries and the providers of road charging services.   It should not primarily be about technology, but about how services are delivered, with the possibility of testing a range of solutions for identifying, measuring and reporting distance travelled (GNSS based ones, application of existing telematics systems both built into vehicles and commercial sservices, and the use of odometers and hubodometers), and options for different elements of charging to be included in both pricing and charging products available to users.   In practice, all participants in the pilot will continue to pay registration and fuel excise through the current PAYGO system (as well as tolls where relevant), but it will show what it would mean to have road charging operating in real life.

Part of the Stage Two pilot will be about testing policy and operational options for proceeding further, with issues such as the treatment of mass and location, the complexity of vehicle configurations (for charging purposes) and exploring the identification of fraud and evasion issues.  One of the biggest benefits of this pilot will be feedback from road users about their user experiences including what information is of use to them.  It changes road user charging from being theory (and occasional discussion of what happens overseas) to being what it might look like in practice.  Furthermore, it also presents an opportunity for the often ignored issue of what charging means from a government perspective to be explored.

It ought to mean establishment of notional hypothecated road fund accounts (although the question of how many there any, whether by geography or jurisdiction is a moot point), and the management of the data that is collected to enable sufficient assurance to be carried out about individual vehicles having valid accounts that are paid.  

The Stage Two pilot should be designed to test the critical elements that would allow for road charging to be able to replace the PAYGO system. Careshould be taken as to how much complexity will be mandated for the Stage Two pilot, bearing in mind that it wont be actually collecting revenue, and the key dimension iy must test is sufficient assurance to enable the Stage Three pilot to proceed (which actually does collect revenue, and offset this with refunds or supplementary payments to offset road charges).

Most of the pilots that have operated in the United States to date have been simulated charging pilots, so there should not be difficulty in developing a pilot for heavy vehicles, across Australia, that replicates the best elements of those, but also tests policy and governance elements that are relevant to Heavy Vehicle Road Reform.

Assuming Stage Two can be successful, then the programme can move onto Stage Three - a real money pilot, where heavy vehicle users can opt into paying by road charging instead of the PAYGO system.  That is when the real leap forward will happen.

Friday, 1 June 2018

Australia's National Heavy Vehicle Charging Pilot: Part Two - The National Pilot Program Stage One

The announcement of a National Heavy Vehicle Charging Pilot by the Australian Minister of Urban Infrastructure and Cities in December 2017 was designed to break what has been some years of inertia in progressing heavy vehicle road user charging in Australia.
As I have written before, there is no shortage of reports or studies about the merits  and possible approaches to transitioning from fuel tax and registration fees to direct road user charging for heavy vehicles in Australia, but there have been a series of key issues that have hindered progress, which in part reflect the constitutional and governance arrangements for roads and charging of road use in Australia.

The previous project, (which lasted seven years) called the Heavy Vehicle Charging and Investment project, floundered for a host of reasons.  It was too focused on charging, and not the funding or supply of roads.  Although many reports were prepared on a host of elements of charging policy, insufficient attention was paid to issues around transition.  How to get from the current charging system to feasible and user acceptable steps to direct user charges wasn't adequately addressed.  As such, the proposals focused on the costs of implementing heavy vehicle charging, in the context of a single or limited competition for supplying such systems, which raised questions as to the costs and economic viability of charging. It did not sufficiently engage with Treasuries at Commonwealth and state/territory levels, furthermore its complexity was such that it was difficult to get political traction and with that stakeholder support for the project.  It wasn't helped by a complex project governance structure that saw it lose momentum.

Given it is clearly possible to reform the supply side of roads, without reforming charging, and that reforming the supply side can help address key issues that arise in charging (especially how to set charge rates and convincing road users that revenue collected is spent wisely and in their interests), it made sense to adopt the Heavy Vehicle Road Reform approach. 

What makes road charging complicated in Australia?

1.  Registration fees are charged at the state/territory level (and motor vehicle registers are state managed, except for one for interstate heavy vehicles), but fuel tax is charged at the federal level as it is an excise duty.  This adds a complication in terms of co-ordination, but also institutional responsibility for refunds.  A state/territory level road user charge could not refund fuel duty, without a specific arrangement with the Commonwealth.  If a state/territory applied road user charging on its own roads, without fuel duty refunds, then it is only likely that its own heavy vehicles would pay road user charges, as out of state heavy vehicles would still be paying registration and fuel duty (so could not be expected to pay a state level road user charge on top). 

2. All road managers are at the state/territory or local level of government, but a significant proportion (23%) of spending on roads come from the federal (Commonwealth) level of government.  However, two thirds of revenue raised from heavy vehicles come from fuel tax (levied at the federal level).  The Commonwealth government doesn't manage any roads, but it does manage the primary means of charging for road use.
3. With a couple of exceptions, none of the revenue collected from heavy vehicles is hypothecated into funds for road capital or maintenance spending purposes.  All funding is allocated through politically led processes at Commonwealth, state/territory and ultimately local levels, on an annual basis.

4. Heavy vehicle configurations in Australia are complex, and some of the largest heavy vehicles allowed on public roads anywhere in the world. 
In essence, because the Commonwealth is not a road manager, is not the primary funder of roads and doesn't register or maintain registers of motor vehicles (with one exception), there was always some sense in encouraging states and territories to take the initiative on road user charging.  It seemed appropriate for the Commonwealth to have oversight and guidance, to ensure interoperability between road charging systems and to address interstate/cross border issues of charging, as well as being the regulator for price setting to deter the setting of "monopoly" charge levels and discriminatory behaviour with charging.  Ultimately, the ideal of land transport market reform that turns the provision of roads for heavy vehicles into an economic service, would see the providers of that service (road managers) leading the setting of road charging rates, and managing the provision of road charging services for their customers (albeit that such services may be operated at the state/territory level rather than the local).

However, it has appeared that there are two main risks with leaving it all to states and territories. Firstly, states and territories that seek "first mover advantage" could risk adopting practices in rate setting, governance and scheme design that are sub-optimal for other states and territories.  They might suit the policy objectives at the state/territory level, but not at the wider Commonwealth level. One example could be adopting a rate setting approach that lowers costs for heavy vehicles on the roads in that state, which may be appropriate for recovering the costs of those roads, but which implies that lower costs would apply on similar roads in other states.

Secondly, there is a risk that states and territories adopt approaches that do not work, and so undermine the chances of success elsewhere.  At worst, if a state or territory introducing heavy vehicle charging in a way that proves unpopular with road users, it could create opposition elsewhere in Australia, putting at risk wider deployment of heavy vehicle charging, potentially for some years.  

Finally, states and territories may simply do nothing without leadership from the Commonwealth. Without access to money from fuel duty, it may simply be seen as too difficult for states and territories to progress road user charging.   Although they can refund registration fees for vehicles in their state, they can't refund fuel duty.  This adds a complication for out of state heavy vehicles, which would all be paying under the current system, but either would have to be exempt from a state level road user charge, or effectively pay twice.  For heavy vehicles paying the road user charge in their own state or territory, when they enter another state or territory they would not pay the road user charge.

Stages of the National Heavy Vehicle Charging Pilot

Stage 1 of the Pilot is intended to start mid June 2018 and will effectively conclude in November 2018 (although some elements may run till  June 2019).  It has three major strands of work:
  • Development of design, and planning on the implementation and evaluation of on-road heavy vehicle trials for future stages of the National Pilot.
  • Modelling of the spatial and distributional impacts of direct user charging scenarios  that could replace current charges under reform  
  • Market research and surveys to obtain baseline information on the views of industry, supply chains, road managers and the wider community on direct user charging for heavy vehicles.
The first workstream will focus on the preparation for Stages 2-4 of the National Pilot, including project planning, design of concepts of operation and development of an appropriate evaluation framework for all three stages.

The second workstream is effectively the first pilot, as it will seek to model the impacts of charging scenarios on different groups of heavy vehicle users.  Datasets on different types of heavy vehicle users (by geography, type of haulage, fleet size, vehicle size, routes and trip patterns, freight and passenger services) will be used to model how much such users would pay under four different road user charging rate scenarios. All these scenarios presume revenue neutrality (although it is unclear if that means neutrality after taking into account the costs of collecting revenue).

Those scenarios are:
1. A flat national mass-distance charge, applicable to all routes. This could be seen as akin to both the Oregon and New Zealand heavy vehicle charging schemes (albeit with mass as a static measure of average loading.
2. Mass-distance charge that varies by state/territory: Similar to Scenario 1, but with charges that vary by state/territory, presumably to reflect average spending (or forward looking costs) attributable to heavy vehicles by each state/territory.  Interstate trips would change in price at the state/territory borders. This would appear to be a relatively simple variation on Scenario 1, although it would expose cross-subsidies between states and territories.

3. Mass-distance charge that varies by road type, based on marginal cost: Prices would vary by road type, nationally, based on the marginal costs heavy vehicles impose, by mass. This assumes a road type classification that reflects differential costs. However, it does raise a question as to how fixed costs are recovered (still with registration fees, or charged at a flat rate by distance).<

4. Mass-distance charge that varies by road type, based on level of service: As in 3, with national charges by road type, but varying on a defined "level of service". This could range from multi-lane grade separated roads, to unsealed tracks.  This is contrary to Scenario 3, as it implies paying more for a higher level of service, but this typically means lower marginal costs. 

The third workstream appears to be strategic engagement with road users, road managers and other interested stakeholders about their views on road charging, and will presumably be the foundation for further engagement with such stakeholders through Stages 2 to 4.

The final report of Stage 1 will be submitted to the Transport and Infrastructure Council (TIC) (Transport Ministers under the Council of Australian Governments, covering both the Commonwealth and State/Territory Ministers) in November 2018.  The expectation and hope is that the TIC will approve moving to Stage 2, an on-road pilot of heavy vehicles "paying" a simulated road user charge.

Thursday, 31 May 2018

Australia's National Heavy Vehicle Charging Pilot: Part One - Location-based trials

Australia's (Federal) Minister for Urban Infrastructure and Cities announced in his speech to the Roads Australia Annual Luncheon on 15 December 2017 that Australia will be launching a National Heavy Vehicle Charging Pilot.

The main part of the pilot is a program to investigate and design an on-road pilot for heavy vehicles across Australia, to trial replacing the existing registration/fuel tax based system of charging heavy vehicles for road use.  It has distinct stages starting with a desktop modelling simulation through to a phased transition away from the current charging system.

In parallel, the Minister also announced funding for a business case program for location based trials (the so-called "Business Case Program"). Under this program, state and territory governments will be eligible to apply for Commonwealth Government funding support to develop business cases to undertake their own trials of heavy vehicle charging, to generate additional revenue for infrastructure improvements that specifically benefit heavy vehicle users.

The Department of Infrastructure, Regional Development and the Cities released this Information Sheet about the Business Case Program (PDF)

The focus is on:

- Trials for heavy vehicle charging in specific locations, to pay (on a per kilometre basis) additionally to support road improvements that could deliver productivity benefits to heavy vehicle users;
- The additional revenue that it could raise would be specifically for such road improvements, and would not be about replacing the current registration/fuel tax based charging system;
- Funding support would be to support business case development not the trials themselves (it is presumably thought that the trials, being revenue generators, should be able to self-fund, although I am not sure that this support would necessarily be seen as sufficient incentive for interest from states and territories).

The Minister said in his speech:

The benefit might be using high productivity vehicles on routes where they cannot presently be used. Or the benefit might be a targeted program of investments to upgrade roads in a particular area which is of benefit to heavy vehicle operators—for example, livestock or grain transporters in a particular rural area.

Whatever the benefit—be it improved access, faster travel times or more flexible operating arrangements—it would clearly need to outweigh the costs of the additional charge so that heavy vehicle operators would find it worth their while to participate.

These trials could allow us to test such matters as particular technologies to record distance and location travelled; or the willingness to pay of operators; or the development of service level standards.

Again, we will be keen to work with the heavy vehicle industry—as well as state and territory governments—to see if we can work up such trials in different locations around the country. Through funding the development of business cases for trials we hope to catalyse a number of such trials over the next few years.

It should be possible for states and territories to identify gaps in their freight corridors that could be supported, over a forward-looking lifecycle cost basis, by infrastructure improvements paid for by the vehicles that benefit from them.  

Additionally, actual on-road trials could complement the proposed National pilot, by having trucks actually paying for road use, on a distance, location (and presumably some vehicle configuration and mass basis).  It also encourages road managers to take a more commercial, user-oriented approach to infrastructure development for heavy vehicles.

Which states and territories might be interested?

Thursday, 24 May 2018

Australia's Heavy Vehicle Road Reform programme: An integrated, sound approach to road charging and funding

Although much attention is often given to toll roads in Australia, almost all road distance in Australia does not involve toll roads. As an economy dominated by extraction industries primarily around mining, but with agriculture also important, heavy vehicle use of a large and in many cases, sparsely used road network, is critical to the country's economic progress.  Australia is, after all, a continent, the sixth largest country by area (Russia, Canada, China, USA and Brazil are only bigger), but for its size it is the third least densely populated country (only Namibia and Mongolia have fewer people per square km).  That sparse population explains little when you note that over two thirds of the population live in the eight state and territory capitals, and another 22% live in the remaining urban areas, most of which are located along the coast in the eastern states.  Australia also has some of the largest trucks ever seen in regular use on public roads, with vehicles up to 60 metres long allowed on some routes, and total vehicle mass configurations of well over 100 tonnes. 

So Australia has taken heavy vehicle use of the road network seriously, because the productivity of both heavy vehicle use and the provision of the roads they use, has a direct impact on the economy.

Today, Australia charges heavy vehicles (excluding toll roads) through two means:

- Registration fees collected at the state and territory level (excluding some registered for interstate only traffic);

- Fuel excise duty known as the Road User Charge (which is fuel excise duty minus a refund to reduce it the "Road User Charge" rate), collected by the Commonwealth.  Currently at A$0.258 per litre (US$0.74/US gallon) of diesel.

The National Transport Commission annually reviews the levels of these, based on its cost allocation model, which uses data on recent spending on roads, allocates a proportion of those costs to heavy vehicles, which informs the

A Cost Allocation Model is used, based on historic spending on roads, to inform the setting of both registration fees (which escalate based on the mass/configuration of the vehicles) and the amount of the refund on fuel duty to set the road user charge rate.

For some years it has been acknowledged that this system is far from optimal.  Multiple reports have proposed a shift away from registration and fuel taxes towards direct user charging.

There is a relatively poor relationship between what is paid and the costs that heavy vehicles impose on the roads that they use. Most of the revenue collected through this system is treated as general revenue at the Commonwealth, state/territory levels, so is not dedicated for spending on roads. Numerous studies have noted the scope for reform, and a major reform programme was embarked upon, called the Heavy Vehicle Charging and Investment (HVCI) project, that sought to introduce heavy vehicle road charging. It was abandoned for several reasons, not least the complexity of the proposed programme, and the sequence of reforms, which effectively sought to reform charging before reforming the funding and governance structures for roads.  It also struggled to gain sufficient heavy vehicle user support.

Heavy Vehicle Road Reform

The current Commonwealth Government, under Minister for Urban Infrastructure and Cities, Paul Fletcher, has embarked on a new reform programme that is more holistic and integrated than HVCI.  It is notable in that it seeks to reform funding and management of roads, and how existing charges are set and used first, before replacing the current charging system with direct user charges.

Heavy Vehicle Road Reform seeks to not only reform how heavy vehicles pay for road use, but also to reform the funding and management of roads.

The current system is very much a political command and control model, and is depicted in the image below. Funding for roads is traded off with public spending for other activities, and decisions on priorities for road spending although informed by benefit/cost appraisal, is fundamentally a political call. Road managers primarily operate as engineering bodies, building and maintaining roads, with limited relationship with road users. The money that is spent on the roads is used to inform the charges that heavy vehicles pay, as the National Transport Commission uses data on previous spending (and forecasts of heavy vehicle demand) to inform rate setting of registration and the fuel excise "road user charge". 

The image below from the Department of Infrastructure, Regional Development and Cities is a fair summary of the current situation.

Australia's current system of charging and supplying roads for heavy vehicles

It shows a very limited relationship between road managers and road users, and in the use of revenue collected from road charges and money spent on roads.

The reform steps

The reform agenda comprises four key stages as seen below:

Heavy Vehicle Road Reform stages