Trucking faces transition to new charging scheme

Policy makers dismiss fuel-based charging, calling for staged approach to mass-distance-location that targets multi-combination rigs and truck trailers

Trucking faces transition to new charging scheme
Trucking faces staged transition to new charging scheme
By Brad Gardner | July 14, 2011

An industry push for fuel-based charging for trucks appears lost, with policy makers responsible for road pricing reform calling for a staged transition to a mass-distance-location scheme.

The COAG Road Reform Plan (CRRP), established to recommend a new charging regime to replace the existing excise and registration model, wants to slap GPS and on-board mass monitors on trucks.

In its preliminary findings released late last month, the group says it is technically and economically feasible to charge trucks based on their mass, the distance travelled and their location.

The report says the scheme will cost $12 billion over 30 years if applied to the whole heavy vehicle fleet, but it has recommended governments target multi-combination vehicles and heavy truck trailers initially at a cost of close to $4 billion.

"However, as greater experience is gained from introducing more direct road use charges for articulated vehicles, and as technologies change over time, it might be that the incremental benefits of extending more direct road use charges to other heavy vehicle types increases," it says.

The CRRP, which includes representatives from state-based road departments, says most of the cost involved in switching to mass-distance-location charging is due to installing equipment in trucks.

It says the multi-billion dollar price-tag includes ongoing communication, monitoring, enforcement and registration costs, but the report does not consider the price of developing billing systems.

"A critical part of developing the business systems will be to examine the likely costs of these systems to determine how this impacts on the overall costs," CRRP says.

Furthermore, the CRRP also raises the possibility of expanding the technology to monitor vehicles using higher mass limits and to prevent operators from overloading trucks.

"It will therefore be important to ensure that any system adopted does not foreclose on current technology in use or the use of information for other beneficial purposes beyond charging that might arise over time," it says.

In its report, the group says governments will need to scrap one or more of the existing road user charges if mass-distance-location pricing is introduced "to ensure there is no double-dipping on cost recovery".

According to the CRRP, charging trucks based on mass, distance and location will prompt operators to use vehicles and routes more efficiently.

The CRRP criticises existing road funding arrangements made up of general appropriations and special grants involving federal, state and local governments.

"This system of funding does not create the best incentive for efficient maintenance and investment decision making, simply because of the number of funding entities involved, all approaching road funding decisions with different objectives," it says.

The report claims the absence of direct charging and the use of registration fees and the fuel excise provides no incentive for operators to use roads efficiently.

It says a direct charging model will encourage road providers to invest in heavy vehicle infrastructure projects such as HML because it will deliver funding certainty.

"Introducing more direct road use charges creates a mutual obligation between heavy vehicles (obligation to pay for road use) and road providers (obligation to provide services commensurate with payments received)," the CRRP says.

The group proposes establishing a new framework to oversee the scheme, such as an independent heavy vehicle fund that collects the charges from trucking operators and allocates them to road providers.

The report says the approach will improve funding certainty for road providers and assure the trucking industry that charges are being pumped back into road projects.

It goes on to say that governments will need to decide whether to create one national fund or separate jurisdictional systems.

The CRRP says governments will also need to consider averaging some costs of road use to ensure a direct charging system is not too complex. It proposes breaking roads into categories (such as arterial and local) instead of pricing each route individually.

"Charging a different amount for each and every individual road is not practically feasible and would create an overly complex charging system," it says.

Trucking operators that rely heavily on local roads will pay higher charges, with the report saying the cost is "many times that of using a freeway".

The Australian Trucking Association (ATA) has repeatedly pushed for a fuel-based scheme, fearing the switch to a mass-distance-location model would impose too much of a financial burden on operators.

It wants a two-tier fuel charge that increases the diesel excise in return for setting annual truck and trailer registration fees at $400. Under the ATA’s model, two-axle rigids will pay a lower fee and three-axle rigids and all articulated vehicles will pay more.

While saying a key advantage to a fuel charging scheme is its cost effectiveness, the CRRP has dismissed it as a viable reform option.

"A fuel only approach (and indeed the status quo approach) does not provide any information with which funds can be directed on the basis of road use and so are expected to deliver no benefits compared to the alternatives," it says.

It says monitoring the actual distance of a truck rather than using fuel as a proxy will provide direct information on vehicle road use, which in turn can be used for infrastructure planning and investment. Furthermore, the CRRP adds that monitoring a truck’s distance will provide a direct signal to operators about the cost of using a road.

"In short, measuring actual distance more directly resembles a user charge as compared to paying via fuel costs and so is more likely to provide an effective and transparent signal about road use costs. It is more akin to a service charge used to price other utilities," the report says.

Former Treasury Secretary Ken Henry last year recommended a mass-distance-location scheme as part of his wide-ranging tax review. He rejected fuel as an acceptable charging model, arguing it did not take into account the spillover costs of a heavy vehicle such as congestion and road damage.

Henry also recommended variable congestion charges that would rise depending on the size of the vehicle and dedicated express lanes that motorists pay a premium to use.

The CRRP examined five different funding models as part of its work. As well as fuel-based and mass-distance-location pricing, the group looked at km-based, distance-location and mass-distance charging regimes.

It has begun staging a number of public consultation sessions nationwide on its preliminary findings and has called for industry feedback.

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