Independent price regulator and customer service charter on offer in RIS
The federal government is seeking industry comment on the future of heavy vehicle road-user charging following the release of a ‘regulation impact statement’ (RIS).
Under the second phase of what the government dubs the ‘heavy vehicle road reform’ (HVRR), consultancy Marsden Jacobs Associates has produced two options to help implement the establishment of an independent price regulator (IPR) and a forward-looking cost base (FLCB).
Option A foresees a simple level of independent price regulation.
The “slightly more ambitious” option B allows the IPR to “undertake additional scrutiny of road manager expenditure proposals; a commitment from road managers to a customer service charter on key freight routes; a more formal mechanism for user input into pricing determinations (for example, an expert panel); and the ability for the IPR to alter the mix of registration charges and road user charges”.
Either way, the IPR would have its policy settings in place next year and be established in 2020.
The RIS looks at the cost-benefit analysis of making no further reform (scenario 1) and of further reform (scenario 2).
Read about the National Heavy Vehicle Charging Pilot here
Marsden Jacobs Associates highlights the difficulty of working out the eventual benefits of this part of the reform, including how much of a buy-in there might be from road mangers and the fact that the options are transitional moves rather than an end-state reality.
However, it notes Deloitte Access Economics last year estimated the end-state benefits, with some adjustments, to be around $5.8 billion.
Under scenario 1, going with both options A and B is expected to provide “more optimal lifecycle maintenance decisions”.
This would potentially lead to 8.6 per cent lower overall maintenance costs at a possible saving of $1.5 billion.
It could also lead to “increased efficiency from better governance through forward-looking pricing and economic regulation”.
Possible savings on offer here would be 7 per cent lower capacity expansion costs may be worth $3.2 billion.
Better quality roads 0.4 per cent improvement in road quality each year is put at $1.1 billion
More efficient pricing leading to lower vehicle operating costs leading to lower vehicle operating and financing costs may be worth $17 million.
Along with independent price regulation and a forward-looking cost base, having both options would likely mean:
- further scrutiny of maintenance expenditure
- further scrutiny of capacity expansion expenditure
- more formal industry consultation mechanisms
- customer service charter for key freight routes
- higher road user charges as a percentage of total heavy charging revenue
- independent scrutiny of expenditure categorisation
Savings from choosing option B only might be $4.3 billion.
“The current reform process aims to improve customer focus, linking heavy vehicle operators’ needs with the level of service they receive, the charges they pay and increasing the share of those charges invested back into road services,” federal urban infrastructure minister Paul Fletcher, who is responsible for the reform, says.
“Stakeholder feedback on the regulation impact statement will be important in helping to inform a decision by governments on the way forward for heavy vehicle road user charges.
“I encourage industry and heavy vehicle operators to carefully consider the proposed changes in the Regulation Impact Statement and have their say.”
The RIS can be found here.