Wednesday, 21 April 2021

Victoria to be the first Australian state to introduce RUC for light vehicles

The Australian State of Victoria looks set to be the first Australian jurisdiction to introduce road user charging (RUC), albeit for light zero-emissions vehicles (ZEV), from 1 July 2021.  Legislation has been introduced to the Victorian Parliament to put this policy into effects which sees the following introduced:

A$0.025  per kilometre (US$0.03 per mile) RUC for zero-emissions vehicles, specifically pure electric and hydrogen powered (and any other zero emission vehicle).  

A$0.02 per kilometre (US$0.024 per mile) RUC for plug-in hybrid vehicles.  Presumably the lower rate for plug-in hybrids acknowledges that they also use petrol (and pay the fuel tax on that, albeit all of that money is collected by the Commonwealth Government, not the Victorian state Government).

The RUC wont apply to conventional hybrid vehicles (those essentially petrol or diesel-electric hybrids fuelled by petrol or diesel).  

The charges will be collected at the time of registration fee collection with vehicle owners asked to supply odometer readings. This represents a very simple approach to collecting this data, and has some parallels with the first RUC pilot operated in the US State of Hawaii, which used odometer data collected at annual vehicle safety inspections to generate mock invoices comparing a RUC with what is paid now with fuel tax (Hawaii is investigating the merits of RUC to apply not only to electric and hybrid vehicles, but all light vehicles).

The revenue collected from the new RUC will be initially dedicated to funding infrastructure to support electric vehicle growth.  Specifically:

This will include new electric vehicle charging infrastructure and reforms to enable electric vehicle ready new buildings.

It is important to note it is LIGHT vehicles only (heavy vehicles are subject to a different pilot programme for RUC being led by the Commonwealth Government in Canberra).  The Victorian Government estimates that these charges are still substantially lower than what petrol or diesel powered light vehicles pay in fuel duty to use the roads.  They are estimated to pay around A$600 a year in fuel duty, on average, whereas RUC should generate around half that.  In other words, ZEVs will still be driving at a discount to use the roads in Victoria compared to conventionally powered vehicles.

What will vehicle owners need to do?

From 1 July 2021, existing ZEV owners have 14 days to lodge an initial odometer reading with VicRoads, and then the distance is reported when the owner updates the vehicle's registration (which can be done annually, half-yearly or quarterly). Odometer declarations need to be supported by "evidence" which is yet to be defined by registration. In US jurisdictions with this system, there is a specific app (VehCon's OdoPhoto for example) to record images on a smartphone and "fingerprint" a vehicle's dashboard to reduce the scope for fraud.  Maybe this will be required? An alternative could be for the telematics system built into the vehicle is used as a platform for an application to transmit such data, but that would require both an application to be developed and installed, and for VicRoads to have a contract with the telematics systems supplier for such a service, which seems unlikely between now and July.  Third-party devices could also be installed to report such data, although again it is unlikely this will be available in the timeframe. Given distance reporting is at the most, quarterly, the need to constantly report trip data doesn't exist. However, some questions remain.

What about distance travelled out of state? Well Victoria will tax you for that, as without any means to identify location along with distance yet specified (although it could be), all distance means ALL distance, including drives to and within other states. This presents an obvious issue if a neighbouring state introduces a similar RUC system which limits distance charged to that within the state.  If a Victorian ZEV drove to South Australia it might face paying a South Australia RUC along with its own.

What about distance travelled off-road? Realistically there wont be much of that, but longer term it will be an issue for vehicles in rural areas on large farm properties or privately owned roads. 

How will enforcement be carried out? Depending on the evidential requirements, there will still be a need to check that odometer reading data is correct, which is not just about fraud, but also inaccuracy (simply misreading the number and reporting it incorrectly).  It is far from clear whether Police might check on odometer readings, but it will depend on the concept of operations developed for reporting readings and verifying them.

What happens when vehicles are sold?  The issue being that if you sell the vehicle and haven't reported distance correctly, who is responsible? The easy answer is caveat emptor, which will require some education of those buying ZEVs to want evidence that RUC is up to date.

What about out of state vehicles? On the face of it, none of it applies to them, so if you have a second address that you can register your ZEV at, outside Victoria, then you might see some advantage in this, but for the sake of a few hundred dollars a year it might not be worth it.  It's not clear how many out of state ZEVs enter Victoria regularly, but it is unlikely to be very low.  Still, you would expect any policy to be able to be future-proofed against the growth of such vehicles over time, and it is not quite clear that it is yet.

Conclusion

Victoria is clearly pre-empting a longer term trend for ZEVs to progressively displace conventionally powered light vehicles, and so it is setting up a new source of revenue from those vehicles.  It wont earn much money, but in ten to fifteen years if the vehicle fleet has 15-20% ZEVs, it will be a sizeable sum that Victoria can use to contribute directly towards road infrastructure costs (and this is money that otherwise might have been collected by the Commonwealth if the vehicles were powered by petrol or diesel). There are questions around implementation, but as the first mover on this, Victoria is starting to shape policy.  It doesn't need to focus on any of the issues above, except enforcement, in the short term, but it seems difficult to sustain a system that charges for all distance travelled by Victorian registered ZEVs, but none for out of state vehicles.  Current rates of ZEV ownership in Australia are so low that this is not likely to present a short-term challenge, especially as distances and infrastructure make interstate driving of ZEVs challenging (although plug-in hybrids are fine), but it starts to look like there needs to be at least some co-ordination between states and territories on this issue in advance of obvious issues such as interoperability, enforcement and out-of-state travel.

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