Tolling Review: Australia as the next frontier?

In the latest Tolling Review magazine, published with Thinking Highways, there is an article authored by me about the prospects for road pricing in Australia.  In short, I think it has good prospects for being the country that can progress it the furthest in the coming decade (and that was before this speech and this report).

Cover of the latest Tolling Review

You can read the whole issue here, my article is on page 20, but there are plenty of interesting articles in this issue including Justin Hamilton's article on page 12 about Russia's Platon heavy vehicle road user charging system, Bob McQueen's article about how the likes of Uber and Waze would run toll roads, Pedro Pinto's piece on Portugal's successful expansion of tolling.

So just download the whole magazine and read it.

Russia's new nationwide GLONASS based truck road user charge taking shape

Russia is proceeding with what looks like being the largest network road pricing system in the world, in terms of network distance.  That system is to charge all trucks 12 tonnes and over on Federal Highways by weight and distance.  I wrote about this in 2012, and Russia is in the midst of a procurement process for the system.

Russian Federal Highway network will have the world's largest road pricing system in place

Kapsch put out a press release in November 2013 that a consortium of two of its companies and Russian company JSC (NIS) had prequalified in the tender process.   The winner was meant to have been notified on 17 March 2014, but whether that has happened or whether it remains confidential whilst concession contracts are negotiated is unclear.

However, I've managed to patch together more information through Russian language sources, given the paucity of any mention of it in English elsewhere.   A key source being the Federal Road Agency, Rosavtodor.

Russian truck tolls: World's largest distance based road user charging system?

Whilst European countries continue to roll out new distance based truck toll systems (with 3 under development and 6 in operation), and US states progressing at various paces VMT, the announcement that Russia will be introducing a distance based toll system on federal highways changes the entire scale of heavy vehicle road pricing.

According to ITS International, the Russian Ministry of Transport has prepared a draft law to require all commercial vehicles over 12 tons to pay for the use of Federal Highways on a per km basis.  The report indicates that a single operator will be set up, it will ensure all vehicles are equipped with the necessary On Board Unit (OBU) and will use the Russian GLONASS GNSS system (originally the Soviet response to GPS, but now getting substantial investment as an alternative by the Russian Government).   The report suggests that the price per km would be at least US$0.11.   This is cheap compared to the minimum rate charged in Germany of around US$0.17 per km and New Zealand of US$0.20.  Still, there is plenty of scope to have a wider range of charges.

Another report suggests that net income (after capital and operating costs) will be about US$12.77 billion per annum.  The assumption appears to be that the charge is additional, and wont replace any existing taxes.   This is substantial, but without immediate access to figures of annual vehicle kms, the picture is not entirely clear as of yet.

It appears Siemens is in partnership with NIS GLONASS to progress the project (although this report misconstrues it completely).  The long term goal is for all main roads to be charged and all vehicles to be subject to the charge.   When you consider the scale of this, it is seriously ambitious.   There are over 5 million trucks registered in Russia, but only a fraction of those are over 12 tons.  Around 200 billion ton/km of freight are moved by road in Russia every year.   About 72% of trucks sold in Russia are Russian made.

Comment

It is fairly obvious that distances in Russia are on a scale and extent that beats any other country, but also that highway maintenance can be extremely expensive, particularly when traffic densities are low and so fixed costs are a high proportion of all costs.  

The logistics of getting vehicles installed will be enormous, and I would suggest that requiring it of newly registered vehicles first would be a good start, with existing registrations required to be installed as registration dates come due.

Undoubtedly if Siemens is responsible for this, it will be one of the grandest projects of its kind in the world.   If this is extended to all main roads, as is the intention (and will be necessary in cities to avoid traffic diversion) then it will be a grand scale operation.  The payment systems and the communications systems needed (given the dearth of mobile phone coverage in parts of the country) will be interesting.  It will be evene more interesting if the talk of it being extended to ALL vehicles happens, although I suspect issues of privacy will come to the fore for fairly obvious reasons.

News briefs - Colorado, Indonesia, Missouri, Norway, Russia

I-25 HOT lanes Denver

The Denver Channel.com reports that Colorado has received US$15 million from the US Federal Government as seed funding to enable the start of the new I-25 HOT lane project.  The total cost of the project is US$44 million, with the state, regional and local authorities providing the rest.  It comprises additional lanes between route U.S. 36 and 120^th Avenue in Denver.   The project is intended to relieve this very heavily congested stretch of highway by narrowing hard shoulders in favour of creating a new HOT lane in both directions.

What’s worth noting is that this project isn’t getting funded because of the toll, but the toll is being used to manage demand on the road.  Certainly, the marginal revenue on the lanes will be helpful,  but the bottom line is better use of the existing corridor through pricing.   Vehicles with two or more occupants, including buses, will not be charged.

 Bali toll road

Jakarta Globe reports that the 11-kilometre toll road linking Nusa Dua to Bali’s Ngurah Rai international airport is expected to be open for traffic in July 2013.  The project is expected to cost US$244 million.  The concession is held by Jasa Marga Bali Toll for 45 years with tolls expected to range from RP4,000 (US$0.42) - RP10,000 (US$1.06) per vehicle. 

University of Missouri study

A study from the University of Missouri suggests tolling would more equitably allocate costs of road capital and maintenance among road users compared to fuel taxes according to a report fromForConstructionPros.com . The report indicates the key equity benefits being that those who use the road the most pay the most, and that it would far more effectively reflect the wear and tear the heaviest vehicles impose on the network.  Further evidence that relegates fuel taxes to being an inferior option if charging road users is meant to reflect equity.

St. Petersburg toll road

Construction Europe reports that finance has been obtained for the 1.5 billion Euro (US$1.87 billion) next stage of the St Petersburg Western High Speed Diameter project.  The new segment, which will be tolled, is expected to carry 140,000 vehicles a day.

Norway peak pricing of public transport

OK so it's not road pricing per se, but the Nordic Page is reporting that Ruter - the public transport authority of Oslo and Akershus, is planning to introduce congestion pricing on public transport.   The intention is to charge much higher at peak times, where capacity is scarcest relative to demand, but discount during off peak periods when much capacity lies idle.

Given Oslo has had road pricing for some years now, it makes some sense to start applying rational economic principles to public transport pricing, as the key problem with urban transport pricing is that peak demand is typically underpriced on both roads AND public transport.  If only a few more cities recognised this, and saw road pricing as a opportunity to think holistically about transport pricing across the board.

News briefs: Russia, New Zealand, Texas, New York

Russia

The Moscow Times reports that a consortium led by investment company VTB Capital, has won the right to build the 120 rouble (US$4 billion) segment of the Western High Speed Diameter in St. Petersburg.  The 11.5 km northern segment will be tolled.   The consortium includes Russian firm Gazprombank, Italian firm Astaldi and Turkish firm Ictas Insaat.  The concession last for 30 years, with revenue estimated at an average 9.67 billion roubles (US$304 million) per annum, indicating a lucrative return if revenue meets forecasts, although the City of St.Petersburg will be required to compensate if traffic forecasts are not met.  Apparently one of the key reasons for the consortium winning was because its rival wanted a guaranteed 14 billion rouble p.a (US$440 million) from the city.

Tolls remain a growing source of revenue for major new Russian motorways, and PPPs are increasingly of interest as a way to progress such projects.

New Zealand

Following on from the Auckland Mayor, Len Brown, proposing congestion pricing to help fund an underground inner city rail loop, the New Zealand Herald now reports that he is praising the proposal of the contractor lobby ground Council for Infrastructure Development.  The suggestion is that every motorway onramp in the city have a NZ$3 (US$2.33) toll at peak times, NZ$2 (US$1.55)interpeak and NZ$1 (US$0.78) off peak, with a cap of NZ$6 (US$4.66) a day.

It is an interesting idea for a city with three major radial motorways (and a north-west and south-west peripheral ones), but also with short distances between interchanges which could mean quite some diversion onto local roads.  Yet it should still be investigated to determine how much impact it could have on congestion, and revenues.

Texas

Frum Forum reports on how Republican Presidential Contender, Rick Perry, achieved considerable success with his toll road policy as Governor of Texas.  It said:

The secret lies with locally chartered toll road authorities that exist in every major Texas metropolis and were largely created under Perry’s administration. As Perry envisioned with the TTC project, the private sector has played a role. Cintra, the company that would have built the TTC, has built one decent-sized Austin-area road without a dime of public money. It is one of only a handful of enitrely-privately-financed roads in the United States...Most prominently, by opening up new land for development, the new roads have played a role in keeping Texas housing affordable for just about everyone. Today, the typical home in Texas costs less than 3 times the median income; while multiples of 8 or 12 are common in California and New York.

There is enough commentary about Presidential contenders for this blog to stand to one side, but it looks like at the very least, Rick Perry brought a free market approach to toll roads.

New York

The Gothamist writes about whether the increases on tolls on the tolled crossings from New Jersey to New York could be a trojan horse to tolling the remaining crossings.   It floats an idea from ex traffic commissioner Sam Schwartz “His plan would raise all tolls into Manhattan below 60th Street to $13, charge drivers to cross 60th Street from uptown, and impose tolls for the first time on the Brooklyn, Manhattan, Williamsburg, and Ed Koch Queensboro bridges. The price at other crossings would stay flat or be lowered, to reward drivers who aren’t contributing to Manhattan congestion - reducing tolls at the RFK Triboro, Verrazano Narrows, Throgs Neck and Whitestone Bridges from $13 to $8.” Then the issue arises as to why some bridges remain free...

Indeed. How can it be politically acceptable for the Port Authority of New York and New Jersey to increase tolls (without there being any dedication of money to new transport projects), but not toll the other crossings?  It is time for a decent study on the economic and environmental benefits of New York congestion pricing, with multiple scenarios.

USA truck tolling?

The National Review has published an article by Reihan Salam supporting distance based truck tolling, with a voluntary option for cars.  The benefits of it would mostly be in revenue protection, but also far better pricing for freight.  Yet it neglects the benefits of reducing congestion, which only will really be effective if all cars are priced too.  However, to get that far will take a long time, and the merits of starting with trucks are considerable, especially if tolling is priced to reflect economic efficiency combined with usability and practicality.

St. Petersburg's first toll road opens

The Voice of Russia reports that the first stage of the Western High Speed Diameter Toll Road is being opened for tolled traffic, and will be St. Petersburg’s first toll road. Tolls will vary by type of vehicle, and time of day suggesting a congestion element to the toll, given it is essentially an urban orbital. More details on the road are on the project website. Once complete in 2015, it will be over 46km long, mostly 4 lanes in each direction at a cost of US$7.6 billion. Although it is currently under construction, its concessionaire will be chosen in July.

According to the St Peterburg Times Basic toll rates for all toll roads in St. Petersburg have been set by the council, as being between US$2.94 for cars and US$13.35 for heavy trucks, with distance based charges of between US$0.32 per km for cars and US$1.47 per km for heavy trucks. These will be the maximum allowed for the concessionaire, which will be able to vary the prices below that on different days and at different times according to congestion.

Russia has been embarking on a massive motorway building programme in recent years, and tolls have become one way of making money from this.  It is hardly surprising that Russia has figured out the value capitalism can bring to the highways sector.

Russia embarking on major toll funded motorway construction programme

Russian newspaper Vedomosti has reported that the Russian Government intends to build 3000km of tolled highways.  This includes the already announced Moscow-St. Petersburg motorway, and also:

- Moscow Central Ring Road;

- Kaliningrad central route;

- Moscow-Kazan highway; and

- St. Petersburg- Kazakhstan highway among others.

Tolls are reportedly to be introduced on some existing routes to help funding widening and realignment, although every tolled route is meant to have a free alternative.   The Russian Government is apparently concerned at the apparent poor state of its highway infrastructure with average speeds on major highways of only 40-60 km/h, and an appalling accident rate (with almost all major routes being single carriageway/2 lane only).  Russia is notable for having a poorly developed highway infrastructure, with most emphasis on transport being on railways and air transport.

Toll roads are the responsibility of state-owned enterprise Avtodor which is seeking private investment in concessions, but also receives taxpayer funding.

One article (Russian only) has scientific director of the Institute of Transport and Roads, Mikhail Blinkin, suggesting toll roads are the wrong way forward, but rather hypothecated fuel taxes.  Given how the US and others are keen on moving towards tolls for user pays funding, he is looking at a trend in the wrong direction.   Certainly there is a longer term issue of sustainable funding of existing routes, but for the new network if tolls can facilitate the development of a modern highway network for Russia, then all well and good.  What would be particularly advantageous is for such routes to remain unsubsidised, for electronic free flow tolling to be facilitated and for the ongoing commercial management of new highways.   This would help ensure the long run maintenance of such routes, the development of new capacity as it is economically efficient to do so, and would also mean that fair competition can be maintained between road and rail transport.