Friday 2 December 2011

National road pricing in the UK - a different approach

The argument for road pricing in the UK has long been compelling. From the Smeed report in the 1964 which said that charging vehicles according to use, varying by time and location could generate up to £150 million (in 1964 values), to the 2004 Road Pricing Feasibility Study which concluded that a national road pricing scheme could generate over £10 billion p.a. in benefits, policy makers and (in private) politicians have been convinced of the merits of road pricing.

The difficulties of road pricing at first were technical. Even though the Smeed Report made leading edge proposals to develop technologies that had barely been conceived of at the time, road pricing was, until the 1990s, about manual tolls. Given most of the benefits that have been identified come from reducing congestion, that obviously would never work.

Modern computing and telecommunications technologies changed all this. So road pricing in the UK went through four distinct phases:

1. Local body empowerment: Local authorities were given the right to introduce congestion charging schemes, with the unprecedented requirement to spend net revenues on local transport schemes. Durham was first (with a tiny historic centre scheme), closely followed by London (where Ken Livingstone was elected Mayor promising to introduce congestion charging). Edinburgh foolishly asked the public about a more complex scheme, and in a referendum saw 74% vote no. Then despite studies in several cities, interest waned. Local authorities decided politically that it would be too unpopular to charge motorists more, even if the money raised could be spent on improving transport networks.

2. Lorry Road User Charging (LRUC): Treasury through HMRC started a programme to introduce a national road pricing scheme for lorries. They were to be charged on all roads, by distance. Countervailing this would be a reduction in annual vehicle excise duty and fuel tax. The initial focus was to raise revenue from foreign vehicles, but the business case started to fall apart when the volumes of foreign vehicles turned out to be small, and there were grave fears that the scheme would face a massive cost blowout. Issues around the procurement approach and risks of complex large government led IT projects saw the scheme scrapped.

3. National Road Pricing/ Transport Innovation Fund (TIF): The official line was that LRUC was being rolled into a national road pricing programme that would include cars. However, the LRUC programme was suspended and the programme shifted to the TIF. TIF essentially linked increases in local government transport funding to an introduction of congestion charging. Councils were being incentivised to introduce local road pricing schemes. The thought was that if several major cities introducing congestion charging, it will be more commonplace and be a step forward towards national road pricing. However, few local authorities were up to it. Manchester’s authorities were convinced, but foolishly decided to hold a referendum which saw nearly 79% vote no. Again Mancunians didn’t like what looked like central government telling them they had to swallow a new tax in order to get money for an improved tram network, especially at the same time as government was starting to bail out financially troubled banks. In the end, the TIF programme wound down as the Manchester failure was followed by Cambridge suspending interest. A online petition against road pricing “signed” by 1.8 million people showed the depth of feeling against road pricing by this time.

4. LRUC Mk. II and tolls: With the change in government after the 2010 election, the Conservative/Liberal Democrat coalition agreed to a modified version of LRUC, which looks like being a version of the time based vignette systems that operate in some countries on the Continent. Investigations into that option are underway now, but appear likely to involve a cut in annual vehicle excise duty in exchange for lorry owners having to pay an annual, monthly, weekly or daily charge to access at least the trunk road network. Meanwhile the government is considering the use of tolls to help fund new roads where viable. Not exactly radical.

It is fair to say that the idea of national road pricing in the UK is political poison. The chief problem is that motorists don’t trust government to treat them fairly. The UK has one of the highest fuel taxes in the world, and up till this year would increase fuel taxes above the rate of inflation since 1993. This extra revenue was not used to improve roads, in fact the backlog of major road projects (identified by the RAC Foundation in the “Keeping the Nation Moving” report) is as much as £10 billion, whilst potholes have become commonplace as maintenance gets neglected. In such a climate, motorists are suspicious that a new road pricing system would mean they pay more, and not get any reductions in existing taxes. That is one simple reason why most politicians do not talk about it. It doesn’t help that the main reason given for considering road pricing is to reduce congestion, which, rightly is interpreted by motorist as meaning “you’re going to price me off the roads”.

A few more toll roads is a good thing, and there is certainly scope for that. The proposed LRUC vignette system will generate a small amount of revenue from foreign lorries and be a very small step forward, but no more than that. Furthermore, no city will introduce a new congestion pricing scheme in the next few years. Even London has recently closed the Western extension to its congestion charging scheme, and shown little real interest in any expansion of the current scheme. I propose a very different approach.

Pricing is a tool used almost always by commercial entities selling goods and services. It isn’t just used to manage demand or recover costs, but sends signals to service providers as to where to invest. The price signal informs both consumers and producers, whereas the main emphasis has been on the former, not the latter. It is also best established as a dynamic instrument , so that it varies as demand (and supply) changes.

However, roads are not provided in a commercial environment in the UK. Trunk roads are the responsibility of an executive agency of the Department for Transport, other roads are up to local authorities. The investment programmes of all of these are subject to political decisions, as are the funding programmes. There is virtually no link between revenue from road users and what is spent on roads. There is no customer relationship between these agencies and motorists. It is a classic central and local government delivered monopoly. Not a structure conducive to either the efficient setting of prices (or responses to prices and demand) nor to offering a service to customers.

That’s why I propose (as summarised in today’s CITY AM newspaper in London) that motorways, trunk roads and A Roads in the UK be transferred from such bodies to commercial companies, with shares held by central government and local government. These arms length companies would initially be funded through an independent purchasing authority (which would be responsible for a set amount of revenue from existing motoring taxes) which would buy road services on behalf of motorists. That authority would prioritise buying well maintained roads, then buying improvements that are valued the most by motorists. The road companies would be independent from politicians and would bid for funds from the funding authority.

However, what about road pricing? Well the road companies would be entitled to commission new roads in partnership with the private sector (which could offer finance) that could be tolled, providing an independent source of income. More importantly, road companies could start to contract directly with motorists. That would involve motorists being able to get refunds from at least part of existing motoring taxes, and paying directly to the road company, probably by paying according to distance, weight, time and location. As the roads companies would seek to receive revenue directly from users rather than a bureaucracy, they would target regular users first, like lorry and bus fleets, taxi fleets and others. There may be multiple service providers selling road pricing packages, but any motorist would only need one contract. The Irish model of multiple companies offering compatible tolling accounts to use on different roads could be one approach. Perhaps new vehicles could be sold with the default option of a road pricing contract offered by the retailer.

What are the benefits? For a start no large government IT programme. Road pricing would be introduced by commercial companies incentivised to get it right, to be operationally efficient and to be customer oriented. Secondly, it would be customer led. As customers would be opting into road pricing, they would do so only because they perceived a benefit in doing so. That could be accelerated if government continued to raise existing taxes. Thirdly, it would enable pricing to inform investment as well as demand. It would be driven by companies seeking to optimise service to road users, not only in traffic management but investment.

Yet there are obvious disadvantages. Until very large numbers of vehicles are on road pricing systems, congestion management will remain difficult. Although nothing about this option would stop congestion charging being introduced on specific roads. There may be concern about monopoly pricing, yet there could be regulatory oversight to avoid such risks. Finally, it would prove difficult to be certain that road pricing would develop as policy makers expected.

However, what is the alternative? The only way I see road pricing advancing significantly in the UK is for motorists to get something in return. It cannot be on top of existing charges, primarily because these are already more than three time what is spent on the infrastructure and above reasonable estimates as to externality costs. I cannot see central government being able to set up a customer service payment system for over 30 million vehicles, dynamically set and adjust prices on the entire road system efficiently or effectively. It doesn’t do it for airlines, telecommunications companies, supermarkets or even fuel, electricity or gas.

Ultimately road pricing is about moving roads from being seen as the tragedy of the commons to being like a service that road users buy, and decide whether or not to use (or when or where to use) based on price, service quality and their alternatives. In the UK, I believe that the size and complexity of doing this is such, that the only way of doing it effectively and efficiently, is to break up the task and to incentivise those who run roads into encouraging motorists to want to pay for road use that way.

Thursday 1 December 2011

Distance charging replacing fuel tax?

Only six years ago talk of road pricing in the US was rare beyond conventional tolls and HOT lanes. Now the big talk is about replacing fuel tax with some form of road pricing and today it is Oregon that has so far led progress on that front with its trials of a system that would charge per mile, and refund fuel tax at the petrol pump.  Such a system would be ideal in principle for a transition away from fuel taxes.

Oregon is progressing investigation of the introduction of a distance tax on electric cars, as a first step toward dealing with the long run erosion of fuel tax revenues because of the growing efficiencies of the vehicle fleet. Oregon sees the obvious first place to start being vehicles that don’t pay fuel tax now, followed by those that pay much less than others (i.e. plug-in hybrid vehicles).  The other point being that it need not worry about the complication of introducing a refund for fuel tax for vehicles that either don't or hardly pay any fuel tax now.   Office of Innovative Partnerships and Alternative Funding Manager Jim Whitty of Oregon Department of Transportation is now recognised in the US as being one of the leading officials in driving this programme at the state level, and the efforts there are being keenly watched by states as far apart as California, Minnesota, Texas, Florida and New York

What is driving this? Quite simply a combination of the political unacceptability of continually raising fuel taxes, and chronic levels of underinvestment in much of the US road infrastructure. Maintenance, let alone major capital works are becoming more difficult for many states as they face declining fuel tax revenues, not just because of the economic situation, but because the vehicle fleet is getting more fuel efficient.

You might think the obvious response is to increase fuel tax, but this does not provide a fair answer for electric vehicles or hybrids, which use the road network but may pay half as much as conventional vehicles. It also doesn’t take into account the level of antipathy towards raising fuel taxes in a country where a significant proportion of voters do not trust politicians to spend such taxation wisely.

Yet distance charging obviously provides a platform with the potential to do more than just charge a flat rate for road use. It also would allow variation of charges by time and place, ultimately meaning congestion pricing could be introduced where viable. However, no US state is talking that far ahead. The acknowledgement is that while the potential is there to do truly efficient road pricing, for now the interest is in replacing fuel tax. The question I have is not why the US is having this debate, but why the idea of replacing fuel tax remains alien to Europe (where road user charging to date has always been in addition to fuel taxes), when it faces the same challenges of declining revenues due to vehicle efficiency. Is it just that European motorists tolerate very high fuel taxes more than Americans?

Australia is starting to have the same debate as the USA, and it is not driven by revenue problems per se, but the distortions inherent in raising more revenue from fuel tax.  Australia has barely noticed the global financial crisis as its economy has been buoyed by high demand for minerals from China, it has low public debt and its infrastructure is in good condition.  However, urban congestion in major cities has been getting more serious and whilst its three largest cities all have several toll roads (mostly using electronic free flow technology) that serve as major arterials, and extensive rail, bus (and in Melbourne tram) public transport networks, it is becoming clear that future revenues may be better obtained by a transition to network based distance charging.

Why?  Well besides the slow decline in revenues from fuel tax due to growing vehicle efficiency, it is a recognition that introducing congestion charging in new world cities the London, Singapore or Stockholm way is likely to be very limited in scope.  The reason being that travel and commuting patterns are not dominated by suburb-CBD movements, but by a massive cross cutting series of trips around, within and across the metropolitan areas.  A downtown congestion charge in central Melbourne would relieve traffic congestion in central Melbourne and on its approaches, but do precious little for most of the city.   To deal with wider congestion will require a network approach whereby all vehicles in a city pay according to the roads they use, not just for crossing an engineering driven cordon.  The key risk with cordons being the distortion they present for those making a short trip across them.

Furthermore, Australia recognises the value of shifting from fuel tax to distance charging for trucks, given the heavy loads and vast distances travelled on a network that, outside the cities has relatively low densities of usage. 

The most recent tax discussion paper from the Australian Federal Government raises both congestion charging and heavy vehicle road user charging.  I expect the Australian Federal Government to leave congestion pricing to the states, and hope they make the first move on doing what they can there, but for a bigger push to come on heavy vehicles across the country.   It is only the heavy vehicle angle that offers a chance to extend into light vehicles including cars in due course.  The appetite for localised congestion pricing schemes in major cities is not high, and if done would likely require a multi-zonal approach to try to avoid the distortions inherent in a single cordon type system.

Still, the important thing is that Australia is recognising fuel tax is achieving diminishing returns from road vehicles, and so the need to have a long term sustainable revenue source from road users is starting to come together with the long recognised economic arguments in favour of road pricing to ensure all heavy vehicle users pay their fair share of road infrastructure costs, and to help manage congestion.  Hopefully they will also understand the other half of the benefit of road pricing - better signals towards where investments in roads should go.

Wednesday 30 November 2011

Network wide truck tolls - from vignettes to distance charging

Truck tolling, lorry road user charging, heavy vehicle network pricing, whatever it is called the main reason for establishing a road pricing just for heavy vehicles across an entire network has been economics.

A long time ago it was American Association of State Highway and Transportation Officials that identified that although trucks are a relatively small proportion of traffic on roads, they are responsible for a disproportionate amount of wear and tear. Subsequent studies have indicated that as much as 90% of the marginal road wear and tear costs attributable to road use are the responsibility of heavy vehicles. The introduction of distance/weight taxes in some US states was a response to this, to ensure trucks paid closer to their fair share compared with fuel taxes. The problem with diesel tax being that while fuel consumption increases as trucks get heavier, it does not increase anywhere near the proportionate increase in road damage caused by heavier weights (in part because the larger the diesel engine the more efficient it becomes).

Charging trucks according to the distance they use the road network becomes a fair proxy for how much “road” is consumed. By charging by weight, prices can reflect the wear and tear accurately. The initial systems in states in the US saw distance measurement undertaken through odometer declarations, making them fraught with risk of fraud and inefficient to collect. Today only four states still have such systems (Oregon, Kentucky, New Mexico and New York) as the trucking lobby pushed for these rather dated systems to be closed in other states. However, the economic principle still stands. New Zealand adopted a similar system in 1978 and still applies it today and applies it to all diesel powered light vehicles too, as it abolished diesel tax.

In Europe, the rise of the single European market saw a dramatic rise in cross border road freight, further enhanced by the Schengen Agreement which abolished border control between most EU Member States on the continent. Whilst some countries had toll systems on major motorways (e.g. France, Italy, Spain and Portugal), other adopted vignette systems appeared whereby truck operators would prepay for a set period of access. Vignettes would be sold for a year, a month or a week. Over time a unified product usable across multiple countries was offered called the Eurovignette. A truck could have a one year Eurovignette allowing for a year’s access across all of the Eurovignette countries, greatly reducing compliance costs. Today, the Eurovignette still operates for Denmark, Sweden, the Netherlands, Belgium and Luxembourg, but several other countries have moved towards distance charging. Hungary, Romania, Bulgaria and Lithuania all have their own national heavy vehicle vignette systems, whereas Austria, Switzerland, the Czech Republic, Slovakia, Hungary, Bulgaria, Romania and Slovenia all have vignette systems for light vehicles as well (links to most of these in the sidebar under network road pricing).

The key advantage of distance charging over a vignette is that it is usage based rather than the purchase of access based on time. A vignette may pre-purchase a year’s access, but does not reflect how often or how far a truck may drive in that year. As such, it is more based on the size of the vehicle fleet rather than intensity of usage. Distance charging enables growth in road freight traffic to be reflected in revenue. It also enables charges to vary by location or time of day.

Switzerland chose to move to distance charging in 2001, following a national referendum. Its system involves charging all vehicles over 3.5 tonnes on all roads, and measures distance using the tachograph signal derived from axle rotations, correlated against a GPS signal to minimise fraud. The on board unit in the truck ( or bus) stores data on distance travelled on a smartcard that is then used to declare travel to the tax department.

Germany took technology much further in 2005 with its LKW Maut system on the motorways and selected highways. It charges all vehicles over 12 tonnes based on distance, but does so by using GPS measuring distance correlated to a map of the charged network, with the total distance travelled communicated through the mobile phone network. Despite extensive teething problems, it became the first fully functioning GPS based distance charging system.

Other countries have also introduced truck toll systems across national networks with Austria (2004), the Czech Republic (2007) and Poland (2011), all adopting the more conventional Dedicated Short Range Communication (DSRC) system involving low cost tags in vehicles that are detected as the vehicles pass under motorway gantries. Slovakia most recently introduced a GPS based system similar to Germany, and New Zealand started offering a GPS based option in 2010. France is developing a GPS truck toll system to apply to the untolled motorways and major highways with the intention that it start operation in 2012.

All of the EU Member States that have moved to national truck toll systems once had vignette systems. Indeed, the two countries to most recently announce development of truck tolling systems are current participants in the Eurovignette. Belgium announced last year its intention to implement a nationwide all roads GPS based heavy vehicle toll system. The recently elected Danish government has also announced interest in a similar system. Sweden has also been investigating a GPS based national heavy vehicle toll system for the past four years.

In that context, the UK choosing to introduce a heavy vehicle vignette seems backwards, but I think it is simply catching up. With the exception of France, all of the other countries in Europe with or moving towards nationwide distance based truck toll systems started with vignettes. In the UK, a vignette system will generate revenue from foreign lorries, can be implemented at relatively low cost (as it is not substantially different from vehicle excise duty) and so can build up infrastructure for servicing customers for a fairly basic charging scheme. That could be a platform for a system that would generate revenue based on usage, rather than buying access, and could have prices to encourage off peak driving and usage of motorways rather than other routes.

However, I think the likelihood is that more European countries will move to distance based charging. Hungary and Slovenia are both known to be interested, but face current political difficulties in doing so. I believe it is inevitable that Romania and Bulgaria will do so too. More interesting may be whether other countries with extensive tolls, like Italy and Spain, follow France in introducing truck tolling on untolled routes. The obvious country to follow the UK on vignettes is Ireland, assuming Northern Ireland is included in the UK scheme. It may be that Spain, Italy and Greece introduce vignettes first as well, for the same cautious reasons as the British.

Beyond Europe, it is positive that Australia is looking at distance based charging of heavy vehicles. Given the sheer size and weight of some trucks in Australia, operating on lightly used highways over vast distances, there is considerable potential to adjust pricing to better recover infrastructure costs.

The benefits of truck tolls are primarily in generating greater revenues than access charges (vignettes) and better targeting cost recovery than any combination of fuel taxes and annual vehicle licensing fees. If done well, it can help even the market with rail freight, and encourage use of more appropriate vehicles for different tasks and incentivise use of more environmentally friendly vehicles. Truck tolls can help improve resource allocation and help ensure revenues for maintenance in particular, match demand.

The wider trend is to move from charging trucks for road use based on fuel and annual licensing fees, to distance/weight charging. Doing so will provide a more sustainable source of revenue, enable better targeted charging and demystify road pricing among the commercial road user sector. However, a wider goal can be to provide a platform for charging other vehicles. Commercial vehicles make a profit from the roads and are used by regular drivers who can easily be made familiar with a road user charging system, so provide one place to start for a shift from fixed and fuel related taxes to charging usage.

Fortunately, there is today sufficient experience from a growing list of countries to enable others introducing such systems to learn from their mistakes. On that note, anyone observing history of heavy vehicle road pricing needs to be aware of what went wrong in Germany, the Czech Republic and Slovakia, why the first UK LRUC programme was stopped, and how a small New Zealand firm is managing to successfully roll out a commercial electronic road user charging service at a substantially lower cost that many other systems. However, as with any major transport public policy led programme it should be objectives led and with an eye on the future. It would appear that embracing vignettes for lorries in the UK, that it is stepping down a path that many on the continent have gone down and found it leads them to go further in due course.

Monday 28 November 2011

UK government report pushes further for PPP toll roads

A report by non-executive Chairman of the Highways Agency, Alan Cook, has proposed that all new motorways should be toll roads built, financed and owned by the private sector according to a Press Association report.  He recommends that the Highways Agency, an executive agency of the Department for Transport be remodelled into a more business like agency, and that a strategy be developed for objectives on capacity, performance, safety and environmental outcomes over the next five years.  This includes new roads and improvements to existing ones.  He proposed that an independent board be established to provide oversight.

Meanwhile, Cambridgeshire Chamber of Commerce is opposing converting the A14 into a toll road along with a major upgrade according to Cambridge News.  It wants the road to be upgraded untolled as was previously the plan.

News briefs: UK, Canada, Maryland, New Jersey

Parliamentary Under Secretary of State for Transport, Mike Penning has announced that the UK government will not be proceeding with its proposed 33% increase in toll charges this year (or 25% next year) on the busy Dartford Crossing, according to the Essex Enquirer.  The increase proposal resulted in a flurry of submissions to the government opposing it, given the underlying economic conditions.  The government has delayed decisions on increases until 2012, and there is speculation that increases may follow the proposed conversion of the crossing to a fully electronic free flow system to relieve the chronic congestion at the toll booths.  The government is also considering options to build a fourth crossing (it currently consists of two tunnels northbound and one bridge southbound), which would be funded by the tolls.  I previously reported on the Dartford Crossing issue late last year.  Trucking lobby group the Freight Transport Association supports the decision and is calling for the introduction of free flow tolls as soon as possible and any future toll revenue to go into additional capacity.

The Star (Toronto) reported some interesting comments from former head of Metrolinx (the Toronto transport authority) at a conference on road pricing:
-  Most citizens believe governments already have the funds they need for transportation. (true)
-  Don't ask people to do things that are against human nature. (true)
-  Transportation agencies need to approach their industry as if it were a consumer product and sell convenience and availability. Transportation should be a lifestyle product, something the customer wants to be associated with. (true)
- You can make a regional case for road pricing but you have to remember to sell it locally. A lot of things come down to the individual and neighbourhoods. (true)
- Make sure you are getting the best capacity out of existing infrastructure. The Ontario government invested more than $300 million in high occupancy vehicle lanes but doesn’t charge for them. (true)
- The only thing people detest more than sprawl is density. (quite!)
- When it comes to pricing structures, it's all about choice. You have to provide people with alternatives. (the question is whether this is mode, route and time of day or part of these)
- Generally the public supports funding for capital — new vehicles, new transit lines or new roads. It is less enthusiastic about paying to operate and maintain those things.(obviously)

I wrote before that Toronto, which already has a free flow toll road, is debating adding a toll lane to an existing road.  However, the debate needs to be had for it to go further.

New Jersey

Bloomberg Businessweek is reporting that New Jersey Turnpike Authority toll roads are forecasting a $45 million shortfall for the year to September, 6% below target.  Part of the decrease is due to snowstorms and Hurricane Irene, but most is attributed to the economy suppressing demand.  This is not expected to cause major problems for the roads, as revenue is adequate to cover opex, capital expenditure and service debts.  Meanwhile, plans to increase tolls on two major turnpikes in New Jersey are proceeding, with the main intention being to general significant net revenues for the state.

New Jersey Turnpike tolls due to rise 53% in January 2012 on the 148 mile highway.
Garden State Parkway tolls due to rise 50% in January 2012 on the 173 mile highway.


Website of radio station WTOP reports that the new Inter County Connector (profiled here) toll road will have a 50% surcharge for users without an EZPass, as Maryland's first fully electronic free flow toll road.

Sri Lanka's first toll expressway finally opens

According to Colombo Page, Sri Lanka's first toll expressway has finally been opened for traffic by Sri Lankan President Mahinda Rajapaksa. The E-01 Southern Expressway has been controversial, as I wrote earlier this year with a full profile of the road.

The fears being that the road would create bottlenecks and induce fraud, with concerns exacerbated by the ongoing delays to its completion.

The toll for the whole length of the 126km road (from Colombo to Galle) is US$3.50, and the construction cost has been about US$650 million. The expressway is two lanes in each direction, but has been built to be a full service operation by the Sri Lanka Road Development Authority which owns the road. A dedicated Police unit (Special Task Force) will be employed for traffic management along the road, with monitoring of conditions, including breakdowns and accidents by CCTV. The Special Task Force will also have first aid medical capabilities to respond to accidents, while a dedicated fire brigade unit will also be on hand. There are plans for further extensions.

The toll is to be collected manually using a closed system, whereby a driver receives a ticket from the entry point on the expressway (at any interchange) and then pays according to distance travelled at an exit point. 

All the best for all Sri Lankans using this new expressway, and also for those towns and villages that will now see through traffic removed from their roads, which is surely one of the major benefits of building such a major new route.

Wednesday 9 November 2011

News shorts: Norway, North Carolina, New Jersey, Pennsylvania


Norway is to change laws to allow local authorities to introduce congestion charging, primarily to help contribute towards reducing emissions.  Given Norway's recent history with tolling, with urban toll rings in Trondheim, Bergen and Oslo (and the latter is now effectively a congestion charge), this is unsurprising.  

North Carolina toll road to be “expensive”

The Triangle Business Journal reports that the Triangle Expressway, due to open in December, will be one of the more expensive toll roads in the US. It will be North Carolina’s first toll road and will be fully electronic free flow using DSRC and ANPR technologies. It will be 18.8 miles long between I-40 at Durham to NC55 Morrinsville. The cost is estimated at US$1 billion to be recovered over 50 years.

Those who drive it from NC 147 to Holly Springs will be charged as much as $4.15 when the 19-mile section is completed next year. For drivers who don’t buy remote payment devices called transponders, the rate of 22.2 cents a mile compares to 16 cents a mile on a toll road in Greenville, S.C., 13 cents a mile on a route in Austin, Texas, and 8 cents a mile on both the New Jersey Turnpike and a short toll highway in Atlanta. The local tollway also is relatively expensive for transponder-outfitted cars, but the 14.5 cents a mile they will pay represents a relatively generous 35 percent discount. The 14.5-cent rate is just above average compared to a selection of U.S. toll systems that use transponders, according to an economic analysis used to set rates here.

The key for me is whether the tolls match the infrastructure costs, if they aligned then it is difficult to argue that they are excessive.

New Jersey and Pennsylvania states pulling money from toll roads

The Inquirer reports how turnpike authorities in both New Jersey and Pennsylvania are being told to hike up tolls to help states meet general expenditure.

New Jersey Turnpike Authority last week agreed to contribute an additional $324 million a year to the state. Since 2007, the Pennsylvania Turnpike Commission has sent $3.1 billion - more than it collected in tolls - to Harrisburg for statewide use.

Tolls will go up again Jan. 1 on the New Jersey Turnpike (53 percent), Garden State Parkway (50 percent), and Pennsylvania Turnpike (10 percent for cash customers; none for E-ZPass users).

Given some of the debates about privately owned toll roads taking money from motorists, I wonder if it is practices like this that provoke the likes of Initiative 1125 in Washington!

Tuesday 8 November 2011

Kauffman Foundation article proposes privatised roads with road pricing

Robert E. Litan, Vice President of Research & Policy, Kauffman Foundation has written an article published by the Huffington Post where he proposes a new approach to highway management and funding.

The article criticises the Obama Administration’s approach by saying how it neglects pricing:

the overall plan presumes that the first answer to congested roads and bridges is always new construction, when we know that roads, like electricity and telephone lines (more about them soon), are used most heavily in peak periods, but are almost always uncongested in off-peak hours. If congestion were priced to reflect this variation in demand, then economic activity would shift to different times of the day so that traffic is smoothed out. Yes, this would mean varied and staggered work hours at many locations, and yes for this and other reasons, congestion pricing is not wildly popular with the public. Yet, this is largely because voters have not been confronted with the choices involved.

Quite right, but of course any move towards better pricing is more complex than just building something, and so requires more sophisticated debate than politicians are often willing to undertake.

He think that voters need to be told either taxes go up or congestion pricing can be introduced, and that they might be more convinced of the merits if the choices are presented like that:

the initial evidence on high-occupancy-toll (HOT) lanes indicates that motorists in all income groups value the option of paying a toll to get to their destinations faster.

Yes, although extending the principle to currently untolled roads is always more difficult. However, he believes the wider solution is privatisation, because the private sector is better able to apply efficient pricing:

Relative to governments, privately owned infrastructure is likely to be more efficient and innovative because private owners have much stronger incentives to reduce costs and respond to users' preferences to maximize profits.

private owners are likely to encounter less opposition to congestion pricing than governments, since customers are used to paying for premium service from other types of private businesses (such as airline and train travel, credit cards, and so forth). Moreover, private firms are likely to apply congestion pricing to cater to users' varied preferences for speed and reliability -- for example, offering a few lanes with high tolls and little delays and lanes with lower tolls and more delay.

From a social perspective, greater use of congestion pricing provides a signal to help insure that only truly essential infrastructure projects are built.

This is perhaps one of the more neglected points, besides reducing congestion and being a new source of revenue, congestion pricing can help signal what new investment should occur. The other advantage of private ownership is innovation.

The challenge is dealing with concerns over monopoly power, and how local streets are part of public space, unlike other network utilities. Issues that will need addressing, but they are not reasons to dismiss Litan’s points outright.  He acknowledges this:

It is also possible that the experiments may reveal that governments may need to regulate the prices of some transportation links where drivers or fliers have few alternatives, but this should be the exception, not the rule, since price regulation introduces its own distortions (especially when it is based on a measure of costs, since this is likely to lead to gold-plating).

Sophisticated pricing is something many of us are used to in a multitude of areas of life, there is no reason to presume that eventually roads may well be treated the same way.

Litan is optimistic:

A new private industry, one centered around the ownership of roads, bridges, airports, and other formerly publicly owned facilities is thus waiting to be born, if policy makers at all levels of government will do everything they can to birth it with carefully designed experiments in selected cities, as a precursor to making this national policy.

Monday 7 November 2011

Vote No on Initiative 1125 if you support better road pricing

I don't have a particular personal interest in the State of Washington, since I've never actually been there.  However, I do have an interest in good public policy on road pricing.  Initiative 1125, which comes up for a vote on 8 November, is not an example of this.

It is being promoted by activist Tim Eyman, who frankly has taken stands on a number of issues that I would support, since I tend to be in favour of free market oriented solutions and prefer to err on the side of less government intervention over more.   However, as I have written before, I believe on balance, that while i understand his motives, on this occasion, he is wrong.

In September I said Initiative 1125 had good intentions.  I can understand not wanting money collected from road users to be spent on anything other than the roads themselves, but to clumsily only link tolls to the projects they are specifically on limits what can be done to replace fuel taxes over time.  Ultimately, I believe tolls of one form or another, will be applied to all major roads and perhaps all roads, as fuel tax becomes unsustainable.  This initiative would block that.  Similarly, the idea that a road is "paid off" and no longer needs to be paid for, doesn't really bear close scrutiny.

The key problem being that roads always need new capital put into them to be operational.  It is like building a house and assuming you never need to paint it, fix the roof, fix gutters, replace pilings or the like over time.   The setting of tolls should take into account recover of capital for long and short life assets, bearing in mind renewals will eventually be needed for major assets such as bridges.  It is a failure to consider roads like other assets that has seen so many bridges fall into disrepair.  

Beyond that is to consider congestion pricing, and what to do with surpluses from tolls.  The advantages of congestion pricing in terms of improving productivity, reducing delays and emissions are potentially enormous.  Initiative 1125 would stop this because the revenue wouldn't be spent on the roads subject to congestion pricing.  Even if you support using congestion pricing to engage in wider tax reform (e.g. replacing other taxes for money used to spend on road), it wouldn't be allowed.

He could have stuck to the first provision of the initiative (Prohibit state government from diverting gas taxes and toll revenues in the motor vehicle fund or other funds to the general fund or other funds and used for non-transportation purposes”), and I would not have found it problematic, but the rest makes it unacceptable.

The Olympian reports:

This is a typical Eyman initiative that overreaches and attempts to tackle multiple issues with a single initiative. By cluttering I-1125 with multiple requirements, Eyman has torpedoed his own effort. Toll rates should be set as close to the users as possible, not by lawmakers trading political favors in Olympia.

The Yes campaign website says tolls should only be used for "capital costs", presuming capital costs cease to exist at some point.  It seems to suggest congestion pricing is "politically correct social engineering designed to raise the congestion misery index high enough to force you out of your car."  Nothing is more politically correct than running roads in the traditional Soviet style manner of taxing users on an equivalent basis.   However, while I have some sympathy for those who question spending large amounts of money raised from road users on politically driven, financially unsustainable and economically inefficient public transport projects (and road projects), this initiative not only doesn't deliver for supporters of more market oriented approaches to roads, but is positively contrary to it.  Some of what the yes campaign says I agree with, but the ends do not justify the means, and the means are contrary to the philosophy driving the ends.

So while the No campaign looks like primarily a campaign from labor unions, Democrats and environmental groups, it should also be supported by those who believe in more economically rational pricing of roads and indeed may even interfere with privately owned toll roads if they were to be built.

So although I have some reservations about opposing the initiative, I believe those who DO support better pricing of roads, who think fuel tax is a poor way of pricing for road use and think tolls, HOT lanes, congestion pricing and ultimately network wide pricing are worthy tools for the future, should reject Initiative 1125.  Boeing and Microsoft already are opposing it.

Initiative 1125 is being returned by postal ballot by 8 November, it is one of several other ballots on the day.

Friday 4 November 2011

LA considers removing green car exemption from HOV and HOT lanes

For some years electric and certain alternative fueled vehicles have been allowed to use HOV lanes in LA with only one occupant. The obvious reason was to promote more environmentally friendly vehicles. However, the LA Times reports of plans that two of the busiest HOV lanes are to remove this exemption once they get converted to HOT lanes. The HOT lanes will only be untolled for buses and high occupancy vehicles. Low emission vehicles will have to pay the toll, like any other single occupancy vehicles.

I wrote some months ago (including a map) of the LA HOT lane trial, which could be the first step towards a city wide network of such lanes.

The report states that Stephanie Wiggins of the Metropolitan Transportation Authority said: that on the southbound 110 during afternoon rush hour, hybrids and natural gas vehicles accounted for almost 1 in 5 vehicles in the carpool lane.

In other words, 20% of lane use is "green" vehicles.  If the lanes are meant to be free flowing and to encourage car sharing, they can't also support incentives to own green vehicles.  Too many objectives can end up with conflicts.

Obviously, this will upset owners of such vehicles.  However, their cause is not helped by what was reportedly said by John Boesel, chief executive of Calstart, "a clean-transportation technology trade group in Pasadena".  He claimed, oddly, that:

In London, which has pioneered such "congestion pricing" efforts, drivers of clean-fuel vehicles pay nothing or deeply discounted rates to use carpool lanes, and that is driving the purchase of electric and other clean fuel vehicles in that city,

Firstly, London is not the pioneer, it was Singapore.  Secondly, London has no carpool lanes.  Thirdly, the congestion charge does have a 100% exemption for the lowest emission vehicles, but this no longer includes older-generation hybrids.  It would be incorrect to claim this drives the purchase of such vehicles, as the other incentives include zero vehicle excise duty, free parking and the very high price of fuel in the UK.   Such measures may be worthy of consideration in California.

Stockholm by contrast, is phasing out exemptions for "green vehicles" from its congestion charge.

The interest in promoting environmentally friendly vehicles is understandable, and such vehicles already have a major gain by not paying fuel taxes.  It is conceivable that such vehicles could have discounts on HOT lanes, but it makes sense to not have three classes of vehicles that gain access - HOVs, those who pay tolls and those that are "environmentally friendly".  It makes enforcement expensive and complex, and so HOT lanes should be developed with the intention of relieving congestion, and let policies be developed separately to incentivise environmentally friendly vehicles.  

Thursday 3 November 2011

Puerto Rico success in converting to electronic free flow tolling

I've written before about the privatisation of Puerto Rico's toll roads with Goldman Sachs and Abertis, and the plans to transform the territory's toll roads through improved maintenance and service standards.  The two roads involved are Highways 5 and 22. 

Businesswire writes about the success so far in introducing electronic free flow technology to two publicly owned highways.  PR-52 and PR-53.  The Puerto Rico Highway and Transportation Authority contracted Transcore as system supplier.

The PR-52 north to south arterial highway linking San Juan with Ponce, which includes five toll plazas, and PR-53 linking the south and east coasts of the island, with three toll plazas, were part of phase I of the project and were the first to transition. Previously rush hour wait times at high traffic toll plazas ranged from 15 to 20 minutes or more. Now motorists can pass through those same toll plazas at highway speeds, reducing some commute times by up to 45 minutes.

An obvious benefit of removing manual tolls.  Although the report indicated not only that cash lanes were converted to electronic free flow but new lanes were added for free flow - which honestly seems a little odd - true electronic free flow at highway speeds need no more lanes than the road has itself.

The project for conversion cost US$26 million and is branded AutoEspreso, starting with ETC lanes in 2004, and is expected to be completed by mid 2012.  Current ETC market share is 70% across all toll roads.

A key issue, much neglected, is how to deal with the "unbanked" population - people without bank accounts.  45% of the population of Puerto Rico is without a bank account, so 55% of motorists top up their toll accounts with cash over the counter.   Not the traditional direct debit/credit card model elsewhere, demonstrating the need for cash payment to be addressed.   Another innovation is ILR (In Lane Replenishment) allowing motorists to set up accounts on the spot with cash or credit/debit cards, or to top up their accounts (this might explain the "extra lanes" which are not exactly free flow, but provide essentially a retail outlet at the gantry).

The report indicates operational cost savings of US$2-US$3 million p.a. (presumably by eliminating manual toll collection) and reduced "leakage" (people getting free passage by toll booth collectors and thieving from toll takings) of US$10-US$20 million p.a..  I'm astonished that rather simple steps to address this are not being taken already.

Good on Puerto Rico for moving ahead on free flow technologies, especially at congested sites.  The scope for more such conversions is considerable, but the great lessons learned about Puerto Rico are around understanding the local market.  However, it's important to bear in mind the report was largely based on a press release from TransCore, it will be interesting to see any reports based on experiences of the public in Puerto Rico and perceptions of how they see service standards.

Wednesday 2 November 2011

Think Tank proposes HOT lanes for Vancouver, Calgary and Montreal

The Vancouver Sun reports on a report by the C.D. Howe Institute by Benjamin Dachis that calls for the 74km of existing and planned HOV lanes in Vancouver to be converted into HOT lanes, to help reduce congestion.  He also writes about doing the same for Calgary and Montreal.

The report claims congestion in Vancouver cost C$927 million per annum (US$935 million) which comes to C$466 per capita (US$470).   It looked at allowing vehicles to use the network by paying a toll akin to C$0.23 (US$0.23) per km at peak times and half that at the off peak - to match the Toronto 407 toll road rates.  

That would generate C$81 million (US$82 million) per annum in revenue.  The report notes that existing motoring taxes in Vancouver are too low, saying that taxes on fuel and ownership only cover 53% of road infrastructure costs - quite the opposite of such taxes in Europe.  

The Vancouver Sun article is quite complimentary of HOT lanes because:
- HOT lanes preserve untolled options;
- HOT lanes improve travel times for buses as well as cars;
- HOT lanes ensure better utilisation of HOV lanes;
- Lower income drivers often value the time savings greater than middle income ones, contrary to the much abused "Lexus lanes" label (in part this is due to a greater need to get to work on time or having a busier schedule with multiple jobs);
- The primary use of HOT lanes is for urgent trips, which is typically irregular (e.g. attending appointments or to meet flights).

The report does not explain the potential congestion reduction benefits, but assuming the lanes are underutilised, there would clearly be some benefits.   One issue not yet adequately addressed is quite why HOT lanes should simply not be toll lanes.  After all, if a car carries two or three people that is two or three people who can pay for the scarce road space.  I strongly advocate HOT being HOV for 3+ occupancy, with a long term intent to phase out the HO component over time.  

However, for now HOT lanes make a lot of sense for cities with extensive HOV networks.  They can improve utilisation of networks, introduce road pricing in a painless way, with a parallel unpriced option, and offer the real benefit of express lanes that are appreciated by motorists undertaking trips with a high value of time.  I would argue they should also be available to trucks, as freight has similar challenges of meeting time. 

I hope Canadian policy makers can start to think of how they might take lessons learned from US HOT lanes to replicate the successes seen there in Canada.

Tuesday 1 November 2011

Fear that tolling Columbia River Crossing will result in excessive diversion

CRC in blue adjacent to I-5, I-205 is upstream on the right
The news of the 50% reduction in traffic expected on SR 520 in Seattle from tolls has caused concerns in Oregon that the proposed tolled Columbia River Crossing project (which will replace the current over 95 year old "bridge lift" equipped bridge that forms Interstate 5 connecting Oregon with Washington) will suffer a major diversion of traffic to Interstate 205's Glenn L. Jackson Memorial Bridge some 6 miles upstream. 
The Columbian reports some concerns that estimates of toll revenue (neither route is currently tolled) are excessive and cites the expected 50% diversion in Seattle as likely for Oregon.   It claims the 2009 toll study only predicted diversion of less than 10% by 2030.

The bridge is estimated to cost between US$3.1 and $3.5 billion (including a light rail extension), with about a third coming from tolls, a third from the Federal Government and the rest from both Washington and Oregon State Governments.

Tolls are to be electronic free flow using DSRC and ANPR, with peak congestion based charges.  Curiously it has a break down of revenue and expenditure (although toll rates are not defined yet) of:
91% revenue from tolls, 9% from surcharges on ANPR based transactions.

69% of expenditure is to be available to service debt on the bridge, 23% pays for toll collection costs and systems maintenance, 5% are "uncollectable tolls" (written off), 3% paying credit card fees and 1% for operations and maintenance of the bridge.

It appears to be a very high cost of collection, something that ought to be seriously reduced over time. I'd hope that 26% toll collection costs should easily be half that within 3-5 years.

However, it will be fair to assume that there will be substantial diversion in the initial years.   What it will take to minimise this is for tolls to be at lower prices initially whilst accounts are opened up and people get used to free flow tolling when neither state has much experience of it (and people in Portland are to be expected to become familiar with it).  The effort taken on the customer service end for the first year will be well worthwhile.

Monday 31 October 2011

Climate Action gives congestion charging a qualified tick

The Climate Action website (associated with the UN Environment Programme) has published an article by Alan Bouquet reviewing congestion charging.   Given the website's primary interest is reducing CO2 emissions, it understandably take a fairly limited view of congestion pricing as a tool, but I am glad that it is promoting it as a positive.  Given congestion pricing simply reduces traffic flows on congested routes by pricing some vehicles off the road, it is understandably popular with those seeking to reduce use of cars.

The article states the obvious ways of introducing congestion charging as:

• A cordon area around a city center, with charges for passing the cordon line
• Area wide congestion pricing, which charges for being inside an area
• A city center toll ring, with toll collection surrounding the city
• Corridor or single facility congestion pricing, where access to a lane or a facility is priced.

The cordon and toll ring examples aren't exactly different, and it ignores multi-zonal or distance based pricing - the option with the best potential to target roads with optimal pricing.  

The negatives it cites are that it is "not equitable" (but doesn't explain why), that it "puts a burden on neighbouring communities" (only if it is a blunt badly designed cordon), that it "affects retail businesses and the economy and is another form of tax" (which can be true if badly designed and if the revenue collected is not wisely used).

The article claims there are "many unanswered questions". These are worth testing:

"Significant investment in public transport is required to offset the loss of commuters using cars. For the system to work, viable alternatives must be in place"

I disagree. For a start not everyone priced off the roads at peak times are commuters, but people who can travel at other times. Secondly, it can price people onto other routes and to other destinations. Estimates in London are that a third of motorists changed time of travel or route (some simply avoided driving through the centre), a third changed mode and a third didn't travel at all (combining multiple trips into one trip). Public transport needs to be able to operate more efficiently and meet increases in demand, but often it is also underpriced as well. Congestion pricing raises the bigger issue as to addressing the fundamental pricing problems in urban transport.

"The funds raised from the charge are not always put back into improving transport, which is a major criticism of the scheme."

Given there are only three major schemes (Singapore, London and Stockholm), this criticism is only valid in Singapore, but isn't a big issue there. The funds could be used to offset other motoring taxes quite legitimately. It does help for money raised to be used to improve transport or reduce other taxes, rather than simply be a windfall.

"The process of charging raises inequality questions. Middle class and high earners are more likely to be able to afford the charge, possibly raising unemployment among the lower classes."

This is why part of revenue raised should be used to offset cutting other taxes, which can address this. However, any charge which raises unemployment is poorly designed indeed.

"Referendums on whether to implement charging or not, like in Stockholm, show that those outside the city are against the charge, while those in the city are for it."(sic)

There have been three referenda on congestion charging. Stockholm's result was as described, but in Edinburgh and Manchester the vote was overwhelmingly negative, with majorities against across the board. That statement has little validity.

The article concludes that congestion charging can work "it also enables a cleaner flowing city, if implemented with masses of investment in alternative methods of transport."

However, that is a narrow way of looking at congestion pricing. It is only partially about promoting mode shift, but also significantly about time and route shift. Congestion pricing can enhance the viability of existing services, and can justify improvements, but it requires a deeper investigation of impacts than simply assuming mode shift.

India has toll plaza congestion - any chance of a technical solution?

The Times of India reports on chronic congestion at toll plazas in New Delhi. The concern being that delays at the 32 lane toll plaza on the New Delhi-Gurgaon Expressway should be resolved by the concessionaire - DSC Ltd. The website describes the toll plaza as:

At Delhi Gurgaon Border the Gate way to Haryana, Border Toll Plaza featuring 32 lanes built on international standards provides a smooth entry to State of Haryana.

One idea has been to introduce congestion pricing on the toll road, which of course might help (the existing toll structure is here) but the real issue is simple - manual tolling on high capacity highways cannot efficiently handle the full capacity of the road. It already has a DSRC system enabling bypasses of toll queues, but the issue is whether it is priced or managed well enough to encourage a major shift in behaviour.

A press release indicates
some steps have been taken, although frankly these are standard practice elsewhere. Faulty tags should be replaced as a matter of course, and tag costs should be subsidised over time, because of the cost savings they offer.

For a road reportedly handling 200,000 vehicles a day, it should have the majority of trips using a tag based system. Indeed, as India grows, it will be obviously unsustainable to continue to push tolling on a manual basis, as the costs of toll plaza bottlenecks will be a brake on growth.

India badly needs to develop a medium to long term approach to avoid this.   That means looking at number plates, DSRC technologies and interoperability, and taking a market led approach.  The scale is considerable, but the medium to long term benefits are potentially considerable.

Skanska sells half of Chilean toll road

Swedish infrastructure investment company Skanska has sold half of its shareholding in Chilean concession toll road Autopistas de Antofagasta according to Cision Wire.  The price was US$43 million (a US$9 million profit) and Skanska is retaining a 50% shareholding.   The buyer is Inversiones Infraestructura Dos S.A., a Chilean company owned by two investment funds managed by Las Américas, an investment funds manager belonging to PENTA (a Chilean group).

The project is under construction and due to open in December 2012 including 120km of new road and 200km of road upgrades.  It is in a fast growing mining district of Chile.  More details are in the Autopistas de Antofagasta annual report 2010 in English here.

Saturday 29 October 2011

Tolls on Seattle SR 520 will "halve demand" says study

I wrote recently about the proposed tolls on the SR 520 floating bridge in Seattle.  The bridge is to be replaced, with tolls imposed on the current bridge to help fund the work.

SR520 in blue will be tolled. I90 beneath it will not be tolled
Now the Seattle Times reports on the study compiled to prepare construction bonds for the project which claims that traffic will drop from around 100,000 vehicles a day to around 52,000.  The reduction is due to some suppressed trips, mode shift to public transport and diversion to Interstate route 90.   So the tolling will effectively deal to congestion, with traffic levels not returning to pre-toll levels until 2032.  The tolls will pay back a US$1 billion bond (total cost is US$4.65 billion for the bridge) and generate more than enough revenue to support it.

Curiously, the report also states that if equivalent tolls are placed on the I-90, then toll revenues on SR 520 increase by 38% - because the diversionary route is no longer more attractive.  State Treasurer Jim McIntire is confident that toll revenue will support the proposed bonds.   It's worth also remembering that the proposed tolls in include congestion pricing at peak times, a trend that is appearing more regularly on new toll facilities in the US, and a very welcome one to aid sustainable use of the infrastructure and to maximise revenues.

Friday 28 October 2011

Indonesia to start more toll roads in 2012

The Jakarta Post reports that the Indonesian government is to call tenders for construction of six new toll roads across the country, at a cost of Rp 77.69 trillion (US$9.1 billion).  The report is somewhat confusing, as it claims there will be six toll roads added to Jakarta, and then lists five outside Jakarta and one within.  All in all, what it does mean is that Indonesia is continuing to build a network of toll highways in and beyond Jakarta.   The claim is that they are built by PPPs, but I am not so sure there is that much "private" in some of them, although they are certainly commercial.

Projects listed are:
- Jakarta Outer Ring Road NorthWest part 2 (7km) is to be built by a joint venture between state owned toll operator PT Jasa Marga and provincial government property company PT Jakarta Propertindo
- Cikampek-Palimanan (West Java but east of Jakarta) (116km) is to be built by PT Lintas Marga Sedaya, Malaysian (ultimately state owned) highway concessionaire PLUS (which owns PT Lintas Marga Sedaya) and PT Baskara Utama Sedaya for Rp 11.35 trillion (US$1.28 billion);
-  Cileunyi-Sumedang-Dawuan (West Java, east of Bandung) (60km) to be built by the Ministry of Public Works and an undecided private firm for around Rp 9.63 trillion (US$1.08 billion);
- Pejagan-Pemalang (Central Java) (57.5km) is managed by a dedicated company called PT Pejagan Pemalang Toll Road which is seeking partners to build the project for around Rp 5.51 trillion (US$622 million);
- Gempol to Pandaan (East Java south of Surabaya) (13.6km) is to be built by PT Jasa Marga for around Rp 1.16 trillion (US$131 million); and
- Medan-Kualanamu-Tebing Tinggi (Sumatra) (60km) is to be built by the Ministry of Public Works and a yet to be identified private partner for around Rp 6.23 trilion (US$703 million).

Tolling in Indonesia remains dominated by manual cash tolls, but the extent of toll road development is such that it must present opportunities to modernise the nascent network.  One of the interesting development in tolling in developing countries is how largely isolated the major developing country economies have been in developing and running toll systems.  China, India and Indonesia have all developed systems and business rules independently, with little cross fertilisation between each other, or indeed from major developed country operators.   How long before this fractionated sector starts to consolidate?

India pushing untolled roads as new priority

The Times of India reports that the Ministry of Road Transport and Highways (responsible for policy) has requested that the National Highways Authority of India to focus on contracting 3,000 km of untolled road projects. The focus to date has been on PPPs that are tolled or contracted, which has made an enormous difference to India's national highway network. Now the concern is on those roads that are more technically difficult to toll manually, in more rural and remote areas.  The estimated cost of construction is US$505,000-US$606,000 per km which are expected to be two lane roads.  The total budget is expected to be US$1.5 billion to spend on such projects which will be built by private contractors. 

What this ultimately will need is for India to consider how it charges use of such roads.  Simple mechanisms like vehicle registration (essential for free flow tolling, but also safety enforcement) and fuel tax will be obvious, but it should provide the basis for India to see how it can evolve tolling towards electronic free flow, and more advanced forms of road pricing in time.

Thursday 27 October 2011

New Brisbane Airport Link toll road may include loyalty programme

I've written about two Brisbane toll roads that have not entirely been successful, from the point of view of their owners.  The Go Between Bridge downtown and the Clem 7 bypass tunnel.  The bankrupt Clem 7 connects with the soon to be completed Airport Link motorway.

Airport Link route connects with Clem 7 at bottom of this map
Airport Link is 6.7km long, connecting downtown Brisbane and the Clem 7 tunnel (which carries traffic from the south bypassing the city) to the East-West Arterial Road which leads to Brisbane International Airport.  It includes a parallel busway and 15km of tunnelling (twin tunnels for the motorway) at a cost of A$4.8 billion (US$5 billion).   That makes it Australia's most expensive road project to date and is touted as Australia's largest infrastructure project.

It is expected to halve travel times on the journeys to the airport by bypassing 18 traffic signal controlled intersections.  It is to be tolled using a DSRC based 5.8 GHz tag and beacon system, with a sophisticated ANPR system as backup, and is due to open in mid 2012.  The concessionaire is called BrisConnections, which has a 45 year concession to finance, build and operate the road.  BrisConnections has had a rocky history as its price collapsed during construction of the road, with institutional investors abandoning the company and retail investors buying stock that is now virtually worthless.  One of the key issues having being conflicting traffic forecasts (an issue for Clem 7).  The Environmental Impact Statement claims the road will attract 95,000 vehicles a day in 2012, the original Product Disclosure Statement, for investors, claimed 193,000.  I suspect both will be too optimistic and the real figure will be closer to 50,000.

The company has barely avoided bankruptcy and is listed on the Australian Stock Exchange.  Tolls for cars are expected to be between A$3.56 and A$4.75 (US$3.70-US$4.94) with higher tolls for trucks and buses.  There may also be higher charges at peak times, indicating a form of congestion pricing.

The Brisbane Courier Mail reports that Brisconnections is considering a loyalty programme to encourage regular use of the road.  Comparisons have been made to the mobile phone market, and so it is being treated as a fully commercial operation.  There isn't concern about congestion, except that the Airport Link will relieve congestion on the free route.   It makes commercial sense to encourage regular users, because they will be contribute a higher proportion of costs of the road, of course the issue will be if Brisbane seeks to introduce congestion charging at a later date as to how that all fits in.

I think it is a good move.  Tolling will be undertaken for a range of purposes, and in this fully commercial context there is no reason why a concessionaire shouldn't take steps to encourage a shift from untolled roads to its road, especially as it still means the infrastructure costs are recovered and helps to offset the distortion that always exists when tolls exist on one road, and not on the parallel route.

Zagreb studying congestion charging

Zagreb's main roads
European Union urban mobility project CIVITAS appears to have funded an investigation into congestion pricing in Croatian capital Zagreb. 

The report from the website says:

The large number of personal cars in the city centre is result of an insufficient road network in the northern part of the city, thus requiring all vehicles to travel across the city centre to go from east to west. There is also an inadequate level of public transport with an insufficient number of vehicles and an ill equipped management system. The study should propose modalities for introducing congestion charging in the city centre, and define the exact target area. It should also familiarise the public with the possible positive results of such a measure, thus ensuring their support for its implementation.

Croatia does need a completed ring road, but I'd argue that it should not just be about considering cordons, but other design options for charging.  Charging certain corridors, or multiple zones is another option.  The key is to design to target congestion, not just what looks technically easy.

According to the Croatian Times, the Zagreb Faculty of Traffic Sciences has proposed a charge of 20 kunas €2.75 or US$3.82 to cross a downtown cordon.

Good on Zagreb for looking at a congestion charge, I hope it can come up with some innovative solutions that will address congestion, but also add to the attractiveness of the city for business, as Croatia is on the cusp of joining the European Union.

Wednesday 26 October 2011

Finland: Minister wants national road pricing, Ministry thinks it is too difficult and costly

There have been discussions about congestion charging in Helsinki for some time, but the political climate for introducing road pricing in Finland seems to have changed, quite dramatically.

The six party coalition formed after the June 2011 elections is quite a mixed group. It is comprised of the National Coalition Party (centre-right liberal), Social Democrat Party (centre-left), Left Alliance (far left), Greens (left), Swedish People’s Party (centrist liberal) and Christian Democrats (conservative).
The new transport Minister is Merja Kyllönen from the Left Alliance, and she is keen on road pricing, but not keen on a Helsinki only congestion charge as I reported previously.

State broadcaster YLE reported that she supports a national road pricing scheme, on all roads, for all vehicles. The idea is that it would vary by time and location, so would charge for congestion, but also charge according to the level of public transport availability. The idea being that, say in Helsinki, it would cost much more to drive if the route had a parallel metro line, but not if someone was driving in a remote area.

She didn’t “have a position” on whether such pricing would replace other charges, but appears open to discussion on it. An obvious option is to replace vehicle ownership taxes and reduce fuel taxes as well.

The YLE report indicated that an advantage for Finland developing such a system would be that it could “sell” it to the world, indicating interest in developing the technology and systems locally to the extent possible (and permitted under EU rules).   However, there are quite a few system developers and manufacturers which would be keen to sell technology for implementation in Finland, to avoid a new competitor arising from, say, a rather significant Finnish telecommunications company?

However, the latest report from the Helsinki Times indicates that the Finnish Transport Ministry does not think it is technically feasible. The claim is that “there were fundamental technological hurdles, adding the system would be expensive and easy to cripple with a piece of aluminium foil.”

It would be a shame for that view to prevail, because it is technically possible to do. Systems in Germany, Slovakia and New Zealand all demonstrate that distance based charging, using GPS, can be implemented not only on motorways, but on all roads, and for heavy and light vehicles (see the links on the column to the right under network road pricing). It is likely that France, Belgium and Denmark will follow (and the Netherlands has several times tried to, but only stopped because of politics).

Yes, there is an issue of cost. The initial cost of installing On Board Units to do GPS based tolling is high, and there are always considerable risks with rolling out any system for large scale public use. This initial expense needs to be considered, but the long run economic benefits of better pricing should more than offset this.

Finally, the claim that you can cripple such systems with aluminium foil has been refuted, because protection against this can be built into the system. After all, Germany has been collected distance based charges from trucks over 12 tonnes, from many countries, since 2005. There are multiple ways to make such tampering ineffective, or easily detectable.

The potential benefits to Finland for national road pricing will come from reduced congestion, reduced emissions, greater certainty of revenue collection (as it wont be related to fuel use) and the ability to target pricing of roads related to road usage and vehicle type. A full costs and charges study and national road pricing feasibility study (similar to those carried out in the UK), could consider how efficient road pricing might impact on demand and would generate information on the costs and benefits, and be a worthwhile first step.  It would provide data behind the intellectual ammunition as to how better pricing can benefit the economy, the environment and affect social change.

My view is that it would make sense for Finland to introduce a national system on heavy vehicles first, to reduce the risks involved, prove the system and help develop a strategy to include light commercial vehicles and then private cars. The benefits from heavy vehicle charging are not high, and come from more efficient operations and routing, and maybe addressing pricing disparities between modes.  However, it is a sound platform upon which to roll out a system to cars, and the Netherlands recognised this with its proposed approach.

It’s about time the Finnish Transport Ministry took a good look at the costs of implementing GPS based road pricing, and the technical risks and how they can be addressed. Things have moved on a lot in recent years, the real issue should be about how best to extract the greatest benefits for Finland as a whole, whilst keeping risks and costs at manageable levels.  What the Minister is seeking does have a high upfront cost, but it is technically feasible, and the benefits will be akin to that of Helsinki congestion charging, but on a wider scale.    Indeed, if Finland can embark on a programme of national road pricing for all vehicles, it will certainly be a world leader. 

(PS: My news on Finland is derived from translated Finnish sources and English sources.  Obviously if someone in Finland knows more about the current position, I'd be keen to hear from you).