Tuesday 20 December 2016

Australia's Federal Government advances road pricing: Part One Heavy Vehicle Charging

Australia has for years been studying road user charging, but in the past year has been committed to what it calls "Heavy Vehicle Road Reform" which is about not just changing how heavy vehicles (both trucks and buses) are charged, but also how those charges are set, how revenue is used and the basis for planning how to spend that revenue.  It recognises that charging by registration fee and fuel tax is inefficient and results in significant infrastructure cost cross subsidies among heavy vehicle road users (the heaviest vehicles travelling the longest distances on secondary roads are subsidised by lighter vehicles operating shorter distances on freeways).  Mass, distance charging (that reflects the ESA impacts of vehicle configurations) provides a much closer link to actual costs that charging based on fuel consumption and static registration charges.  

Minister for Urban Infrastructure, Paul Fletcher announced on 25 November the Australian Government's response to the Infrastructure Australia 15 year infrastructure plan.  Infrastructure Australia is an independent statutory body with "a mandate to prioritise and progress nationally significant infrastructure" which undertakes its own research on the reforms needed to meet the country's infrastructure needs.  It published its report in February 2016, so the response is welcome.

On heavy vehicle charging Fletcher said the Australian Government will:

Progress next steps for heavy vehicle reform with states and territories through the development of a forward looking cost base, and a discussion paper to inform consultation on options for an independent price regulator.

Development of a forward looking cost base is about establishing the long run costs of the infrastructure that is being charged.  This looks at what the costs are to maintain the road network across the lifecycle of all the assets (e.g. pavement, bridges), both fixed costs (due to the effects of sun and rain) and marginal ( due to the effects of traffic volumes, mass and axle configuration), operating costs and then a rational capital renewal and improvement programme.

Independent Price Regulation takes power to set existing and future charges into the hands of an independent body, based on identifying the long run life cycle costs of road maintenance and capital spending programmes that are attributable to heavy vehicles, to establish charge rates.  Those charge rates would be based on forecasts of demand and a distribution of costs based on various factors (e.g. common costs, vehicle road space, equivalent standard axle mass loading).  

Earlier in November the Transport and Infrastructure Council, which brings together Federal and State Governments, released a communique indicating its ongoing commitment to reform(PDF):

The Council agreed to a number of actions to support the next phase of heavy vehicle road reform. The Australian Government will work with states and territories on the next steps to identify options for independent price regulation of heavy vehicle charges and to the trial of elements of heavy vehicle road reform. The Council noted that the current situation where charges related to revenue are disconnected from investment and maintenance decisions needs action. The National Transport Commission will provide technical advice to governments to conduct a review of the heavy vehicle cost base allocators, and develop a working prototype model for a forward looking life cycle cost base for heavy vehicle charges.

These steps are important in advancing heavy vehicle charging, as it sets up how charge setting is approached and the infrastructure cost data used to inform charge setting.

Actual implementation of heavy vehicle charging will require more of course, and a forward looking cost base and independent regulator would both add value to the current system of charging and funding (fuel tax and registration fees).  It will need states willing to pilot heavy vehicle charging, introducing it on a small scale, either geographically or by a small portion of the fleet or as a time limited trial.  

From that a state will have to make the transition (to a "RUC state"), but will need to reduce registration fees it collects and fuel tax collected federally for a new mass/distance charge it would collect.  It will need to take into account out of state heavy vehicles that do not pay a road user charge, without offering vehicles registered in the RUC state an opportunity to game the system.

There is no rush in Australia to have a federally mandated system, or interest in state systems emerging that are incompatible or are not within the overarching goals of heavy vehicle road reform. The question is what states are willing to move ahead and start progressing the steps necessary to introduce heavy vehicle charging.   It surely helps that the Australian Government is committed to the reform agenda, and as will be seen in the next post, is also interested in investigating further the merits of light vehicle charging.