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2007 HEAVY VEHICLE CHARGES
DETERMINATION
REGULATORY IMPACT
STATEMENT VOLUME I
December 2007
Prepared by
National Transport Commission
National Transport Commission
2007 Heavy Vehicle Charges Determination: Regulatory Impact Statement
Report Prepared by: National Transport Commission
ISBN: 1 921168 72 2
REPORT OUTLINE
Date: December 2007
ISBN: 1 921168 72 2
Title: 2007 Heavy Vehicle Charges Determination:
Regulatory Impact Statement
Address: National Transport Commission
Level 15/628 Bourke Street
MELBOURNE VIC 3000
E-mail: ntc@ntc.gov.au
Website: www.ntc.gov.au
Type of report: Regulatory Impact Statement
Objectives: To improve transport efficiency, productivity and
equity, reduce administration costs, improve road
safety, and promote nationally consistent regulatory
reform.
NTC Programs: Pricing
Key words: charges, heavy vehicles, road cost recovery, allocated
costs, pricing.
FOREWORD
The Productivity Commission's Road and Rail Infrastructure Pricing Inquiry, and the
direction outlined by heads of government on 13 April 2007, clearly set out an agenda for
pricing reform to unlock more productivity from the road network.
As part of the first phase of this reform, the Australian Transport Council (ATC) and
Council of Australian Governments (COAG) asked the National Transport Commission
(NTC) to prepare a heavy vehicle charges determination for implementation in 2008. ATC
and COAG specified that the determination should ensure that heavy vehicles continue to
pay their share of increasing road expenditure by all levels of government.
Thus the 2007 Heavy Vehicle Charges Determination ("the Determination") will be the
`building block' for pricing reform. It will sustain the revenue base needed for
governments to invest in better and safer roads, including the infrastructure upgrades
needed for improved heavy vehicle access.
In the past, updating heavy vehicle road use charges has been an emotive and often
divisive issue. The NTC is encouraged by the cooperative approach of the freight industry
in the development of this proposal. Indeed, the constructive views provided by industry
have helped the NTC to better understand and respond proactively to the operating
challenges it faces, and enabled the NTC to develop charges that are more flexible than
they have been to date.
In preparing this Final Regulatory Impact Statement (RIS), the NTC has reported
differences between its recommended option and the industry's views transparently and
honestly. It has also made independent assessments of the impacts of its recommended
option, and endeavoured to manage these impacts - for example, by recommending the
phasing-in of charge increases to allow operators to better plan and re-negotiate freight
contracts.
Australia must maintain a world-class road and rail transport network to service the
growing freight task, to reduce road trauma, and to ensure Australian businesses can
compete cost-effectively in the global marketplace. The trucking industry has long
supported the principle of paying its way. The NTC's recommendations will ensure that
this happens, and continues to do so between determinations. It is now time for
governments to similarly respond by ensuring that productivity gains from the road asset -
which are required by the industry to support a competitive economy - are released.
The NTC acknowledges the work of Meena Naidu, Chris Egger, Matthew Clarke and
Pauline Sullivan as the major contributors to this RIS. The statement has been presented in
two volumes: Volume 1 describes the issues, options and recommendations; Volume II
contains the technical appendices that underpin the analysis.
Michael Deegan
Chairman
SUMMARY
The road leading to the Determination
In 2006, the Productivity Commission conducted an inquiry into Road and Rail Freight
Infrastructure Pricing (PC Inquiry), which included a review of the NTC's methodology
for developing recommendations on heavy vehicle charges. After the Productivity
Commission broadly endorsed this methodology, the Australian Transport Council (ATC)
directed the NTC to begin work on a new heavy vehicle charges determination, to replace
the current Second Determination.
In April 2007, the Council of Australian Governments (COAG) outlined a road pricing
reform plan, and endorsed the ATC directive for a 2007 Heavy Vehicle Charges
Determination ("the Determination") as part of the first phase of this plan. This reflected
findings from the PC Inquiry that:
· heavy vehicle charges were set to under-recover costs: this Determination shows that in
2007/08 heavy vehicles will under-recover expenditure by $168m
· vehicles are subsidised if they do not recover their attributable costs: the Determination
finds B-doubles under-recover their attributable costs by just over $11,000 per vehicle
per year.
Addressing issues of cost recovery through the Determination is the first step in a broader
COAG reform program which seeks to improve the efficiency and productivity of the road
network through heavy vehicle price reform.
In line with specific directions from the ATC and COAG, the primary objectives of the
2007 Determination are to ensure that:
· road expenditure allocated to heavy vehicles in aggregate is fully recovered
· each vehicle class at least recovers its attributable expenditure, so that there are no
cross-subsidies between vehicle classes
· charges accommodate high-productivity vehicles
· charges are consistent with the ATC approved pricing principles
· charges are updated in a way that enables them to continue to recover both allocated
and attributable expenditure between determinations.
Following extensive consultation on the Draft Regulatory Impact Statement, NTC sought
to achieve a further objective to maintain vehicle configuration flexibility, so that operators
can change their vehicle configuration to meet the specific needs of each trip without
facing adverse financial implications. This objective, which responds to trucking industry
concerns, is consistent with COAG's productivity reform agenda.
Process the NTC used to develop its recommendations
In July 2007, the NTC released a Draft Regulatory Impact Statement (RIS) that outlined a
range of options (including its preferred options) for heavy vehicle charges. In developing
these options, the NTC was informed by the Third Determination consultation process, the
PC Inquiry, discussions and a technical workshop with industry representatives and
government, and analyses of potential impacts of changes in the level of charges.
The NTC then completed comprehensive public consultation on the draft RIS. It invited
industry and government stakeholders and other interested parties to make written
submissions, receive industry briefings and/or participate in public focus group sessions
held around the country. It received 22 written submissions and held focus groups in
Melbourne, Sydney, Brisbane, Adelaide, Perth, Canberra and Darwin1. It also undertook
further discussions with industry representative groups (including the Australian Trucking
Association and its member associations and the National Farmers Federation) and
governments.
Stakeholders raised a variety of concerns in relation to the draft RIS and the NTC's
preferred options. Key concerns included that:
· Competitive constraints make it difficult for industry to absorb increased costs
· Incentives for local government to provide access to the local road network are weak
· Enforcement costs should not be included in the cost base without a better enforcement
and compliance framework
· The phasing in of charges needs to occur more evenly over the phase in period, to give
industry time to better respond to changes
· The use of the proposed high productivity formula to set charges for higher
productivity vehicles could impose significant administrative and enforcement burdens
· The proposed charges schedule constrained vehicle configuration flexibility.
After listening carefully to all stakeholders' comments and views, the NTC responded by
making significant changes to its preferred options in developing this Final RIS.
NTC's recommendations
The NTC recommends the heavy vehicle charges schedule contained in Appendix I Vol. II
of the Final RIS and shown for selected vehicles in Table ES1 below. These recommended
charges are based on the preferred charging option described in the draft RIS, but the
registration charges are more modular through the application of differentiated trailer axle
charges rather than a uniform trailer axle charge.
The recommended charges meet all the objectives listed above, with two minor exceptions:
· The charges have been set to ensure that heavy vehicles fully recover their allocated
expenditure in aggregate and each vehicle class at least recovers its attributable
expenditure. However, the charges schedule includes a phase-in period of up to three
years for some registration charges to establish a manageable implementation path for
heavy vehicle operators and registration authorities. As a result of this phase-in period,
the charges will not fully recover allocated and attributable expenditure until the final
year of implementation (2010/11).
· The recommendations in relation to the annual adjustment process will enable charges
to be updated so that they continue to fully recover allocated costs between
determinations, and minimise the extent to which cross-subsidies across vehicle classes
occur between determinations. The most precise way to ensure that no cross-subsidies
1
Focus group presentations and transcripts are available on the NTC website.
occur between determinations is to recalculate charges every year. However, the NTC
did not favour this option because it may lead to charges volatility and will impose a
significant regulatory burden.
Table ES1. The NTC's recommended heavy vehicle charges for selected
vehicles (nominal)
3 year phase in
Current Prime Year 1 total Year 2 total Year 3 total
07/08 mover
Fuel charge (cents) 19.633 21.0 21.0 21.0
Registration charges ($
per vehicle)
2 axle rigid truck, 4.5 - 7
tonnes 355 380 380 380 380
3 axle rigid truck over
18.5 tonnes, no trailer 946 859 859 859 859
4 axle rigid truck over 25t
no trailer 859 859 859 859
Heavy truck/trailer over
42.5 tonnes 2 5,737 5,161 6,491 7,158 7,158
6 axle articulated truck 5,084 3,930 5,070 5,145 5,220
B-double 9 axle 8,041 7,050 9,330 11,835 14,340
Double road train 8,751 7,050 10,090 10,240 10,390
Triple road train 10,526 7,050 11,990 12,215 12,440
2 axle bus over 10 tonnes 592 380 380 380 380
Annual under-recovery
($m) 168 83 39 0
Trailer charge per axle Year 1 Year 2 Year 3
Standard trailer axle
charge 355 380 380 380
Semi trailer tr-axle 355 380 405 430
B-double lead trailer -
tandem axle 355 380 1,140 1,900
B-double lead trailer - tri
axle 355 380 1,190 2,000
Road train dolly trailer 355 380 380 380
In calculating the recommended charges, the NTC:
· included 2007/08 budget expenditure in the seven-year average expenditure figure used
in establishing the cost base
· partially included enforcement costs in the cost base
· allocated costs in line with the methodology developed as part of the Third
Determination workings, except for a modification to address trucking industry
concerns about the costs allocated to double and triple road trains
· adopted a modular charges structure that maintains vehicle configuration flexibility and
accommodates higher productivity vehicles within the charges schedule
2
Note the prime mover registration charge for this class of vehicle has been phased in over 2 years. This
figure represents the year 1 prime mover charge. The prime mover charge in years 2 and 3 is $5,828
· adopted a phase-in period of up to three years for the recommended registration
charges
· modified the annual adjustment process by updating some of the formula components
and removing the cap and floor on the adjustment amount, and recommended
introducing an annual review to determine whether key variables have changed
sufficiently to warrant a new determination, and undertaking a charges determination at
least every five years.
Inclusion of 2007/08 budget expenditure in the cost base
In calculating the expenditure figure included in the Final RIS cost base, the NTC used an
average of seven years' expenditure data, including 2007/08 budget expenditure and actual
expenditure for 2001/02 to 2006/07. This resulted in a cost base of $1,978m, which is
$125m more than the Draft RIS cost base.
The NTC considered using 2006/07 budget expenditure and actual expenditure for 2000/01
to 2005/06. However, it preferred the inclusion of 2007/08 budget expenditure because:
· This approach ensures that the expenditure figure used to calculate the cost base is as
up-to-date as possible, reducing the lag in the recovery of the current year of
expenditure.
· Although it leads to a higher cost base than the alternative option, the resulting higher
charges can be phased in over up three years and so will create less of a price shock for
vehicle operators.
· It is administratively simpler, because it avoids the need for an annual adjustment to
occur on the same date as new charges under the 2007 Determination begin to be
implemented.
· It is consistent with the current methodology.
Partial inclusion of enforcement costs in the cost base
In calculating the cost base, the NTC took the view that it is appropriate for heavy vehicle
charges to recover the costs associated with enforcing axle mass limits, as the primary
objective of these constraints is to manage road wear (and thus avoid expenditure on road
maintenance). In addition, because of the difficulties in separating mass-related and safety-
related costs, the NTC took the view that the enforcement costs reported by road agencies,
discounted to account for the fact that the NSW road agency appears to spend significantly
more on safety-related enforcement than road agencies in other jurisdictions, is a
reasonable proxy for mass-related costs.
In reaching this view, the NTC considered two alternative options: full inclusion of
enforcement costs (i.e., both mass- and safety-related costs) and full exclusion of
enforcement costs. It also considered the PC Inquiry's finding that "the costs of enforcing
heavy vehicle mass and speed restrictions are appropriately recovered through road user
charges", and the ATC pricing principle that heavy vehicle charges should enable "full
recovery of allocated infrastructure costs". The NTC concluded that only the recovery of
mass-related enforcement is appropriate. This is because safety-related enforcement costs
cannot be considered to be infrastructure costs. Therefore their recovery through heavy
vehicle charges would be inconsistent with the ATC's current pricing principles.
The NTC noted the strong view expressed by the trucking industry that the recovery of
enforcement costs is not justified without a framework for enforcement that resulted in
better, more targeted and efficient enforcement. The NTC considers that work currently
being done, including the development of a National Heavy Vehicle Enforcement Strategy,
will improve the consistency and quality of enforcement, and improve the national
accreditation program. The recovery of enforcement costs through heavy vehicle charges
provides an opportunity for the cost of these various initiatives to be recovered, and could
also provide incentives for operators to participate in accreditation leading to safer roads.
Allocation of costs
The methodology the NTC used to allocate the cost base to the different vehicle classes is
based on the best available research, and was updated and consulted on as part of the Third
Determination process. The Productivity Commission found that this methodology is
reasonable although conservative in nature. In general, the methodology also has the
support of the trucking industry.
The methodology relies on road usage data from the Australian Bureau of Statistics'
Survey of Motor Vehicle Usage (SMVU) to allocate costs. In responses to the draft RIS,
the trucking industry expressed concerns about the quality of this data. The NTC reviewed
the data, and undertook further analysis on the reliability of the road train data. It found
the standard error associated with road train vehicle kilometres travelled (VKT) is
sufficiently large that the VKT for double and triple roads trains fell within a similar range
applying a 95 per cent confidence interval.
Given the significant impact VKT has on cost allocation, the NTC applied an average road
train VKT figure of 133,750 to both double and triple road trains. This increased the cost
allocated to double road trains from $35,611 to $38,055 and decreased the cost allocated to
triple road trains from $68,342 to $47,323 (before unsealed travel adjustments are made)
compared to the draft RIS.
Adoption of a modular charges structure that maintains vehicle
configuration flexibility and accommodates higher productivity vehicles
In the draft RIS, the NTC presented two options for charges:
· Option C1: Fuel-based charge of 21.3 cents per litre plus annual registration charges
with differentiated prime mover charges, which ensured that heavy vehicles fully
recover their allocated costs in aggregate, and all vehicle classes recover at least their
attributable costs (marginal road use costs).
· Option C2: Fuel-based charge of 19.7 cents per litre plus annual registration charges
with differentiated prime mover charges, which ensured that heavy vehicles fully
recover their allocated costs in aggregate, and all vehicle classes recover their fully
allocated costs (including common costs).
Consultations indicated that while there was broad support for the principle of attributable
cost recovery, there were also concerns about the implications of the proposed options for
vehicle configuration flexibility and the enforcement burden.
The trucking industry strongly put the view that operators should be able to change their
vehicle configuration to meet their needs for specific trips without facing adverse financial
implications. To enable a standard trailer axle charge, the draft RIS options proposed that
B-double, double road train and triple road train prime movers would all have different
registration charges. The trucking industry expressed concern that the flexibility of the
current charges arrangement would be lost by having a differentiated charge for a prime
mover that is the same, except for the trailer configuration.
Some governments expressed concern that a change to the charges structure would result
in a greater enforcement burden. This is because operators would be given an incentive to
register their prime mover in the most inexpensive class (a double road train) but run it as
part of a B-double or triple road train configuration.
In light of these concerns, and in consultation with the trucking industry, the NTC
developed a third option:
· Option C3. Fuel-based charge of 21.0 cents per litre plus annual registration charges
that, like Option C1, ensured that heavy vehicles fully recover their allocated costs in
aggregate, and all vehicle classes recover at least their attributable costs.
However, unlike Option C1, this option maintains the flexibility of a prime mover by
providing a multi-combinational prime mover charge. Cost recovery is achieved by
differentiating the trailer axle charge by the type of trailer, not by the vehicle configuration.
This modular approach is similar to the charging structure the ATA proposed in its
submission in response to the draft RIS, and enables virtually any configuration of prime
mover and trailers to be accommodated through the charges schedule.
This modular charge structure means that higher productivity vehicles can also be
accommodated within the charges schedule. The NTC considers this is preferable to the
use of higher productivity formula as proposed in the draft RIS, on the grounds that it is
simpler and NTC analysis indicates that it results in very similar charges to the formula.
The NTC is conscious that although registration charges constitute a relatively small
proportion of vehicle operating costs, its recommended registration charges for some
vehicles represent a considerable cost increase. This is particularly the case for vehicles in
classes that are currently under-recovering their attributable costs. Nevertheless, the NTC
prefers its recommended charges option for the following reasons:
· as indicated above, this option meets all the primary objectives for the 2007 Heavy
Vehicle Charges Determination
· unlike Options C1 and C2, it maintains vehicle configuration flexibility and
accommodate higher productivity vehicles
· the charges under Option C3 better share the recovery of costs between the prime
mover and the trailer. The charges under Option C2 do not adequately adhere to the
pricing principle of having "regard to other pricing applications, such as light vehicle
charges..." because they include a registration charge for two axle rigid vehicles that is
below the mid point of the range of maximum charges for light vehicles.
Figure ES1 shows how total registration charges are derived under the recommended
Option C3.
Figure ES1 Application of registration charges to vehicles
Adoption of a phase-in period of up to three years for registration charges
The recommended registration charges will result in cost increases for prime movers and
trucks in some heavy vehicle classes, and the introduction of differential trailer axle
charges will result in large cost increases for some trailer types. In recognition of this, the
recommended charges schedule includes a phase-in period of up to three years. Under this
schedule:
· The increased fuel-based charge is fully implemented in Year 1.
· For truck and prime mover registration charges, all increases and decreases are fully
implemented in Year 1, except those for heavy truck trailers. In this case, the increase
in the vehicle component of the registration charge is phased in evenly over three
years. This exception is due to the large size of the increase, which has partly resulted
from reclassification of SMVU data, and feedback from stakeholders on the impacts of
this increase.
· For trailer registration charges, the increase in the standard trailer per axle rate is fully
implemented in Year 1. Where a differential trailer axle charge is proposed, the charge
is phased in over three years with the Year 1 charge being equivalent to the standard
trailer axle rate and the balance being implemented evenly in the remaining years.
As noted above, this phasing in will result in a continued under-recovery of expenditure in
Years 1 and 2. However, both the governments and heavy vehicle operators have indicated
that it is necessary, to provide them with sufficient time to make the operational and
system changes required to accommodate the new charges schedule.
Modification to the annual adjustment process
The NTC recommends modifying the current annual adjustment process by:
· Updating the formula components to align with the new 2007 Determination cost
allocation model
· Removing the CPI cap and 0 per cent floor on registration charge increases
· Indexing the fuel-based charge by the Annual Adjustment Formula used to index
registration charges.
In addition, the NTC recommends that it undertakes an annual review to evaluate whether
key variables have moved sufficiently to warrant a new determination and that a charges
determination occurs at least every five years (if not already undertaken as a result of the
annual review).
The NTC considers that this approach to the annual adjustment (Option A2) is preferable
to the alternative approaches it considered. It will ensure that charges continue to recover
heavy vehicle allocated expenditure in aggregate in a way that is formula-driven, relatively
simple, and will not require a new determination each year. In addition, when combined
with an annual review process and more frequent determinations, it will minimise
"ongoing cross-subsidisation across different heavy vehicle classes".
In comparison:
· Options A1 (update formula components and include fuel indexation) does not achieve
full recovery of allocated expenditure in aggregate or reduce cross-subsidisation across
vehicle classes between determinations.
· Option A3 (index both registration charges and fuel-based charge by CPI or RCMP1)
does not ensure that the adjusted charges match the estimated cost of road use over
time, and therefore may result in the need for major corrections in subsequent
determinations. In addition, it does not have much stakeholder support.
· Option A4 (annual recalculation of charges) is the most accurate way to ensure
ongoing cost recovery and removal of cross-subsidisation, but it would introduce
unnecessary charges volatility and require a significant amount of maintenance and
consultation. Many stakeholders who commented on Option A4 expressed similar
views.
The impact of new charges
NTC has considered the impacts of its recommended charges schedule. In general, it
believes this schedule (which, as discussed above, includes a phase-in period) provides
heavy vehicle operators with sufficient time to re-negotiate contracts and pass costs on to
their customers, and to consider how they can achieve operational efficiencies, particularly
in the use of their trailer fleet. It also provides registration agencies enough time to make
the system changes required to facilitate the modified charges structure.
Impact on heavy vehicle operators
Under the recommended charges schedule, the fuel-based charge will increase by 1.367
cents per litre, or about 1.3 per cent. The increase will be implemented through a reduction
in the fuel rebate from 18.51 cents per litre to 17.143 cents per litre.
In addition, the registration charge for all vehicles and vehicle-trailer combinations will
change. Around 25 per cent of vehicles will experience a decrease in their registration
charge. The remaining 75 per cent of vehicles and 100 per cent of trailers will experience
an increase in their registration charge.
These increases will have a direct impact on vehicle operating costs, but the impact will
vary depending on a range of factors including heavy vehicle class and VKT. To illustrate
the likely impact, the NTC modelled the average vehicle impacts within each heavy
vehicle class. The results of this modelling for some key heavy vehicle types are shown in
Table ES2.
Table ES2. Change in average vehicle operating costs for key vehicle types
Vehicle type 2007 average Percentage Percentage Percentage
vehicle operating change in change in change in
costs $ Year 1 Year 2 Year 3
2 axle rigid truck 4.5 to 7 22,100 0.4 0.4 0.4
tonnes (no trailer)
3 axle rigid truck over 18 37,400 0.2 0.2 0.2
tonnes (no trailer)
Heavy truck trailer over 116,200 1.1 1.7 1.7
42.5 tonnes
6 axle articulated truck 124,800 0.5 0.5 0.6
9 axle B-double 278,200 1.0 1.9 2.8
Double road train 252,200 1.0 1.1 1.1
Triple road train 301,300 1.0 1.0 1.1
Note: annual percentage changes are not cumulative
The table shows that a B-double with average vehicle class characteristics in terms of load
and distance travelled per annum (179,000km) faces a rise of 2.8 per cent after charges are
fully phased-in. However, a shorthaul B-double that travels around 120,000 kilometres per
annum is likely to face a rise of 3.9 per cent, while a longhaul B-double that travels
240,000 kilometres per year will face a rise 2.3 per cent.
NTC has also recognised that different operators will be affected differently by this
Determination. It has therefore undertaken a variety of case studies to understand the
impacts on real operations. The impact of the Determination on the operations considered
in the case studies did not exceed 2 per cent.
In line with the ATC's request, the NTC also considered the substitution effects for
vehicles with similar vehicle characteristics and carrying capacity that face different
charges. It found that these effects are unlikely to be significant, because the
recommended registration charges are more closely related to trailer type and capacity, and
so there is closer alignment between vehicles of similar carrying capacity that are likely to
be substitutes for each other. The NTC does not support locally based concessions aimed
at discouraging substitution, as this would create incentives for vehicles in other
jurisdictions to register their vehicles in the states/territories where the concessions exist.
Impacts on end users
The flow-through impact of the NTC's recommended charges to consumer prices is
difficult to assess, due to the lack of available information. However, the NTC estimated
this impact on a trolley containing $100 worth of grocery items. If found that:
· For retail outlets dependent on B-doubles, the maximum additional cost per $100
trolley of goods would be 17 cents. This level of impact would occur in remote areas,
and the impact in other areas would be less.
· For retail outlets dependent on road trains, the maximum impact would be an extra 7
cents per $100 trolley of goods in remote areas.3
The recommended charges may also have an impact on vehicles owned by primary
producers. However, this impact is not expected to be significant, given that each
government is able to, and generally does, provide concessions for primary producers of
40-50 per cent of heavy vehicle charges. NTC notes that primary producers using hire and
reward operators will be more adversely affected.
The recommended charges will have impacts on small businesses, but on average they are
not expected to be significant, particularly due to the low share of registration charges in
annual vehicle operating costs.
Impact on government revenue
The recommended registration charges will lead to increases in the total revenue generated
by these charges for each jurisdiction (see Table ES3), and mostly lead to increases in the
revenue generated by registration charges for specific vehicle classes.
Table ES3 Registration revenue by jurisdiction $'000s (nominal)
Percentage
change in
Current Proposed Proposed Proposed revenue from
revenue revenue revenue revenue current to
State/Territory (2007/08) 2008/09 2009/10 2009/10 2009/10
NSW 150,313 150,144 159,228 166,778 11.0
Vic 171,433 172,147 185,841 197,894 15.4
Qld 146,881 149,445 160,107 169,816 15.6
SA 57,859 58,750 64,478 69,982 21.0
WA 86,169 87,452 90,940 94,113 9.2
Tas 14,940 14,864 15,726 16,503 10.5
NT 7,972 8,421 8,651 8,858 11.1
ACT 2,860 2,806 2,961 3,084 7.8
Total 638,428 644,030 687,933 727,028 13.9
The recommended fuel-based charge will increase the revenue generated by this charge
from $1.146 billion to $1.226 billion - an increase of 6.9 per cent.
3
These estimates are based on averages, and consumer price impacts will vary depending on individual
transport operator's circumstances and the decisions made by individual retail outlets on cost mark-ups.
The NTC also considered the impact of the investment resulting from increased charges.
In particular, it notes that the Monash University Accident Research Centre estimates that
improved road investment (including shoulder sealing, audible edge lines, passing lanes
and rest areas) will contribute at least 38 per cent of the total future reduction in heavy
vehicle related road deaths and casualties under the current National Heavy Vehicle Safety
Strategy, compared to 30 per cent from the effective use of speed limiters, 18 per cent from
better fatigue management, 9 per cent from increased seatbelt use by heavy vehicle drivers
and 5 per cent from safer heavy vehicles.
The next steps
ATC has stated this Determination will be implemented on 1 July 2008.
CONTENTS
1. INTRODUCTION ...................................................................................................1
1.1 The governmental directions leading to a new determination.................................... 1
1.2 NTC's role in developing heavy vehicle charges ....................................................... 2
1.3 Previous determinations ............................................................................................ 3
1.4 Developing the 2007 Heavy Vehicle Charges Determination .................................... 4
2. WHAT IS THE PROBLEM ....................................................................................5
2.1 Heavy vehicle charges don't recover heavy vehicle allocated
expenditure ................................................................................................................ 6
2.1.1 Increase in expenditure on roads .................................................................................. 6
2.1.2 Changes in the fleet numbers and usage.................................................................... 10
2.1.3 The annual adjustment................................................................................................ 11
2.1.4 Impact on the level of cost recovery............................................................................ 11
2.2 Is it appropriate to recover enforcement costs through charges?............................ 12
2.2.1 The principle for including enforcement costs ............................................................. 12
2.2.2 Getting a better outcome out of enforcement.............................................................. 13
2.2.3 Revenues association with enforcement..................................................................... 14
2.3 Smoothing the variability in road expenditures ........................................................ 15
2.4 Developing charges for high-productivity vehicles................................................... 16
3. THE OBJECTIVE ................................................................................................18
3.1.1 ATC approved pricing principles ................................................................................. 19
3.1.2 COAG requirements.................................................................................................... 19
3.1.3 The considerations ...................................................................................................... 20
4. THE OPTIONS ....................................................................................................22
4.1 Which years of expenditure should be averaged in determining the cost
base? ....................................................................................................................... 22
4.1.1 Option CB1: Include 2007/08 budget expenditure in the cost base ............................ 24
4.1.2 Option CB2: Include 2006/07 budget expenditure in the cost base ............................ 24
4.2 To what extent should enforcement costs be included in the cost base?................ 25
4.2.1 Option a: Full inclusion of road agency enforcement costs......................................... 26
4.2.2 Option b: Partial inclusion of road agency enforcement costs .................................... 27
4.2.3 Option c: Full exclusion of enforcement costs............................................................. 28
4.2.4 Comparing the impact of the options for enforcement costs ....................................... 29
4.2.5 A framework for enforcement ...................................................................................... 30
4.3 How should costs be allocated between vehicle classes?....................................... 30
4.3.1 The importance of VKT in allocating costs .................................................................. 30
4.3.2 The reliability of road usage data ................................................................................ 31
4.4 How should prices be set to fully recover heavy vehicle costs in
aggregate and ensure all vehicle classes at least recover their
attributable costs?.................................................................................................... 31
4.4.1 Implications for B-doubles and road trains .................................................................. 32
4.4.2 Implications for vehicle flexibility and enforcement burden ......................................... 33
4.4.3 Option C1 .................................................................................................................... 33
4.4.4 Option C2 .................................................................................................................... 34
4.4.5 Option C3 .................................................................................................................... 35
4.5 What charges should apply to high-productivity vehicles? ...................................... 38
4.5.1 Higher productivity vehicle charge formula ................................................................. 38
4.5.2 Modular approach to charges...................................................................................... 41
4.6 Should charges under the 2007 Determination be phased in?................................ 44
4.7 How should charges be adjusted annually? ............................................................ 47
4.7.1 Option A1: Maintain the current adjustment process with modifications
and inclusion of fuel indexation ................................................................................... 48
4.7.2 Option A2: Option A1 with removal of the cap and floor ............................................ 48
4.7.3 Option A3: Indexation of both registration and fuel charges ...................................... 49
4.7.4 Option A4: Annual re-calculation of charges .............................................................. 50
4.7.5 Stakeholder comments on the options ........................................................................ 50
5. ASSESSMENT OF POTENTIAL IMPACTS....................................................... 54
5.1 Impact on fuel-based charge ....................................................................................54
5.2 Impact on registration charge ...................................................................................54
5.2.1 Impact on heavy vehicles ............................................................................................ 54
5.2.2 Impact on jurisdictions' registration revenue ............................................................... 55
5.3 Impact on vehicle operating costs ............................................................................55
5.3.1 Impact on road user charges per net tonne kilometre................................................. 57
5.3.2 Impact on the vehicle fleet........................................................................................... 58
5.3.3 Case studies of impact on operational costs............................................................... 58
5.4 Impacts on industry production costs .......................................................................64
5.5 End user impacts......................................................................................................65
5.5.1 Impacts on the price of consumer goods .................................................................... 65
5.5.2 Ability to pass on cost increases ................................................................................. 66
5.5.3 Impacts on primary producers..................................................................................... 66
5.5.4 Impacts on small businesses ...................................................................................... 67
5.6 Impacts on competition.............................................................................................67
5.7 Implications for government financing ......................................................................68
5.7.1 The need for road investment ..................................................................................... 68
5.7.2 Charges contribution to road investment..................................................................... 68
5.8 Impact of road investment on heavy vehicle productivity and safety........................69
5.8.1 Case studies of improved productivity......................................................................... 69
5.8.2 Case studies of improved safety ................................................................................. 69
5.9 Potential productivity improvements.........................................................................70
5.9.1 COAG-endorsed NTC work program .......................................................................... 70
5.9.2 Targeted infrastructure improvements ........................................................................ 71
5.9.3 Other regulatory reforms ............................................................................................. 72
6. CONSULTATION ............................................................................................... 73
6.1 The consultation process..........................................................................................73
6.2 Major issues raised and the NTC's response...........................................................74
6.2.1 The treatment of enforcement costs............................................................................ 74
6.2.2 The methodology for estimating heavy vehicle charges revenue ............................... 75
6.2.3 Estimation of the allocated cost base.......................................................................... 76
6.2.4 Impacts of differential multi-combination prime mover charges .................................. 76
6.2.5 The inability of industry to pass on large increases in charges ................................... 77
6.2.6 Concern over the adoption of the high-productivity vehicle formula............................ 77
6.2.7 Need for productivity offsets by opening up the network more ................................... 78
7. RECOMMENDATION ......................................................................................... 79
7.1 Recommended heavy vehicle charges.....................................................................80
7.1.1 Inclusion of 2007/08 budget expenditure in the cost base .......................................... 82
7.1.2 Partial inclusion of enforcement costs in the cost base............................................... 82
7.1.3 Allocation of costs ....................................................................................................... 82
7.1.4 Adoption of a revised charges structure...................................................................... 83
7.1.5 Adoption of a phase-in period of up to three years for registration charges................ 83
7.1.6 Modification to the annual adjustment process ........................................................... 84
7.2 Compliance issues ...................................................................................................85
7.3 Implementation issues..............................................................................................85
7.4 Legislative issues .....................................................................................................85
8. REFERENCES ................................................................................................... 87
9. GLOSSARY OF TERMS .................................................................................... 89
LIST OF TABLES
Table 1. Total road construction and maintenance expenditure estimates
($2007/08m real terms)................................................................................... 6
Table 2. Changes in fleet numbers since the Second Determination .................... 10
Table 3. Heavy vehicle enforcement expenditure by state ..................................... 27
Table 4. Adjusted heavy vehicle enforcement expenditure by state ..................... 28
Table 5. Allocation of enforcement costs for each option ($/vehicle) ................... 29
Table 6. Charges under Option C1 for select vehicles under different
enforcement scenarios ................................................................................ 34
Table 7. Charges under Option C2 for select vehicles under different
enforcement scenarios ................................................................................ 35
Table 8. Charges under Option C3 for select vehicles under different
enforcement scenarios ................................................................................ 36
Table 9. Modular charge components of higher productivity vehicles ................. 42
Table 10. Registration charges for B-Triples and B-Doubles derived using the
different approaches .................................................................................... 43
Table 11. Option C1 with a two or three year phase in of registration increases
(nominal) ....................................................................................................... 45
Table 12. Option C3 with a two year phase in of registration increases (nominal) 46
Table 13. Option C3 with a three year phase in of registration increases
(nominal) ....................................................................................................... 47
Table 14. Summary of stakeholder submission comments on options for annual
adjustment process...................................................................................... 51
Table 15. Registration revenue by jurisdiction ($ `000s) ........................................... 55
Table 16. All jurisdiction registration revenue by vehicle class ($ `000s) ............... 55
Table 17. Change in average vehicle operating costs for key vehicle types .......... 56
Table 18. Changes in registration costs as a share of average vehicle operating
costs .............................................................................................................. 57
Table 19. Changes in total heavy vehicle charges as a share of average vehicle
operating costs............................................................................................. 57
Table 20. Impact on $100 worth of groceries (cents) ................................................ 66
Table 21. Recommended schedule of charges after phasing in .............................. 79
Table 22. The NTC's recommended heavy vehicle charges for selected vehicles
with phasing (nominal) ................................................................................ 81
LIST OF FIGURES
Figure 1. COAG road pricing reform plan .....................................................................2
Figure 2. Allocated arterial expenditure ($2007/08 real terms) ...................................7
Figure 3. Arterial, reported local and allocable local road expenditure
movements over the past seven years ($2007/08) .......................................8
Figure 4. Forecast impact of the freight task on truck numbers ................................9
Figure 5. Growth in the total heavy fleet number since the Second
Determination ................................................................................................10
Figure 6. B-double under-recovery of fully allocated costs per vehicle (nominal).12
Figure 7. Process for developing, implementing and adjusting charges ................22
Figure 8. Heavy vehicle allocated cost base ($nominal) ...........................................23
Figure 9. Application of charges under Option 3Cb to vehicles...............................37
Figure 10. Comparison of changes in road expenditure to changes in RCMPI and
CPI (2000/01 = 100.0).....................................................................................50
Figure 11. Road user charges per net tonne kilometre (once fully implemented)....58
Figure 12. Case study 1: impact on vehicle operating cost shares ..........................59
Figure 13. Case study 2: impact on vehicle operating cost shares ..........................60
Figure 14. Case study 3: impact on vehicle operating cost shares ..........................61
Figure 15. Case study 4: impact on vehicle operating cost shares ..........................62
Figure 16. Case study 5: impact on vehicle operating cost shares ..........................63
Figure 17. Case study 6: impact on vehicle operating cost shares ..........................64
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 1
1. INTRODUCTION
1.1 The governmental directions leading to a new determination
In 2006 the Productivity Commission conducted an inquiry into Road and Rail Freight
Infrastructure Pricing (PC Inquiry). As part of this inquiry, the Productivity Commission
reviewed the methodology the National Transport Commission (NTC) uses to develop its
recommendations on heavy vehicle charges. While the Productivity Commission identified
some shortcomings and conservative assumptions in this methodology, it broadly endorsed
the NTC's approach.
Following this endorsement, the Australian Transport Council (ATC) directed the NTC to
begin work on a new heavy vehicle charges determination, to replace the current Second
Determination. The full direction is as follows:
(ATC) DIRECTED the NTC, having regard to the final report of the Productivity
Commission and the deliberations of COAG on future pricing issues, to develop a Heavy
Vehicle Pricing Determination that:
(i) considers the inclusion of heavy vehicle enforcement costs in the cost base; and
(ii) allows for incremental charging for higher productivity vehicles;
AGREED that its preferred timeframe for the delivery of a Heavy Vehicle Road Pricing
Determination is mid 2007; and
DIRECTED the NTC to report to the next ATC meeting on a Heavy Vehicle Pricing
Determination.4
On 13 April 2007, the Council of Australian Governments (COAG) outlined a road reform
agenda, and endorsed the ATC directive for a new heavy vehicle charges determination as
part of Phase 1 of this plan (see Figure 1).
4
Recorded in the draft minutes of the 13 October 2006 ATC meeting.
Page 2 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
Figure 1. COAG road pricing reform plan
2007
National Guidelines for Transport System Management
Phase 1
Delivery of heavy vehicles Determination PBS and other agreed reforms
Independent review of PAYGO and externalities
Feasibility study (incl. trials) on Incremental Pricing Scheme CSO Research
End 2009
Timeline for reform
Evaluation of incremental pricing
Phase 2
Alternative institutional arrangements Review of Road Freight Infra Regulation
Implementation of the result of Phase 1 and 2 work programs
End 2011
Feasibility study of mass-distance location based charges
Phase 3
Implementation of the results of Phase 3 work programs
End 2014
At its May 2007 meeting, ATC reinforced its earlier direction and requested the NTC to
begin preparing a Regulatory Impact Statement (RIS) so that a new determination could be
implemented on 1 July 2008, in line with COAG's timetable. The ATC clearly indicated
that in preparing the RIS, the NTC should follow the pricing principles approved in 2004,
and meet COAG's requirement that the Determination "ensure ongoing delivery of
aggregate cost-recovery and removal of cross-subsidisation across heavy vehicle classes"
(COAG 2007).
1.2 NTC's role in developing heavy vehicle charges
The NTC is responsible for recommending heavy vehicle charges to the ATC. This
function is set out in the Inter-Governmental Agreement for Regulatory and Operational
Reform in Road, Rail and Intermodal Transport (IGA), and is intended to ensure that
nationally uniform charges are applied to heavy vehicles.
Clause 5.1 of the IGA sets out that one of the responsibilities and functions of the NTC is
to:
(c) develop
(i) road use charging principles for Heavy Vehicles (until such time as
the Council decides that another organisation should undertake this
function);
(ii) Proposed Reforms in relation to Heavy Vehicle Road Use Charges
based on charging principles agreed by the Council from time to
time;
The IGA specifies that a:
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 3
Road Use Charge means a fee for payment for use of the road system, which in the
case of a Heavy Vehicle, does not include:
- a nominal or other administration charge associated with registration of a
vehicle;
- stamp duties;
- compulsory third party insurance premiums;
- injury protection charges; and
- administrative components of permit, licence or other fees.
In addition, the IGA makes it clear that heavy vehicle charges must apply uniformly in all
jurisdictions. This is intended to stop heavy vehicle operators `shopping around' for the
jurisdiction with the lowest registration charges (which would distort price signals within
the market) and to ensure that all heavy vehicles pay their allocated share of road
expenditure.
In developing its recommended heavy vehicle charges, the NTC assesses the level and
types of expenditure on roads, assesses the usage of roads by different vehicle classes, and
consults with stakeholders. The ATC considers the NTC's recommended heavy vehicle
charges, and determines whether or not to approve them. If a majority of its members
approves the recommendations, governments in all jurisdictions are obliged to implement
them.
1.3 Previous determinations
The First Heavy Vehicle Charges Determination was approved in 1992 and implemented
between July 1995 and October 1996. The Second Determination was approved in 2000
and implemented between July 2000 and December 2000. Both these determinations
resulted in the implementation of charges with two components: a fuel-based component
designed to recover two-thirds of costs, and an annual registration component to recover
the remaining third.
After the Second Determination, an annual adjustment process was introduced. This
process updates the registration charge component only, and does not account for changes
in road use between vehicle categories or changes in the type of road works undertaken. It
is subject to a maximum annual rise no greater than the change in the Consumer Price
Index (CPI) and a floor applies so that annual registration charges cannot be reduced.
There have been six annual adjustments to date.
The fuel-based road charge component is currently 20c/litre, and has not been reviewed
since the Second Determination was implemented. Due to indexation of the diesel rebate
coupled with the freezing of the fuel excise the effective rate has fallen to 19.633c/litre.
The First and Second Determinations sought to achieve a number of policy objectives.
Their primary objective was to ensure that, in aggregate, heavy vehicle charges fully
recover the expenditure on roads allocated to heavy vehicles. However, policy decisions in
relation to the relative size of the fuel-based and registration charge components, the
promotion of newer and safer vehicles, and simplicity in charges have meant that in most
years the charges in aggregate over-recovered costs, while the charges for some vehicle
classes did not recover their share of expenditure.
The recent PC Inquiry and COAG direction have lead to a new policy focus. The primary
objective remains to ensure that heavy vehicle charges in aggregate achieve cost recovery.
Page 4 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
In addition, all vehicle classes should recover their attributable (or marginal) costs so that
there is no cross-subsidisation between vehicles classes.
1.4 Developing the 2007 Heavy Vehicle Charges Determination
In 2006, the NTC put forward recommendations for a Third Determination. In reaching
these recommendations, it undertook extensive consultation and released several reports
that documented the technical underpinning of the Determination models and the changes
made to these models since the Second Determination.
The ATC did not approve the Third Determination, but requested the NTC to begin work
on a 2007 Determination in response to the PC Inquiry and COAG direction. In doing so,
the NTC has built on some of the workings for the Third Determination, rather than
duplicating this work. For example, it largely used the same methodology for assessing the
cost base and allocating costs as it used in developing its recommendations for the Third
Determination.5
In July 2007, the NTC released a draft RIS that outlined its preferred option for heavy
vehicle charges. This option met the minimum COAG and ATC requirements that each
vehicle class at least recover its attributable costs and that heavy vehicles in aggregate fully
recover their allocated costs. It then completed comprehensive public consultation on the
draft RIS, and considered the comments and issues raised by stakeholders.
As a result of this process, the NTC revised its preferred option. It then undertook further
consultation with industry, interested parties and government before finalising its
recommendations and preparing this final RIS.
5
Throughout this RIS, the NTC will refer to documents prepared for the Third Determination where
appropriate, and identify any continuing concerns raised by stakeholders and detail any further changes since
those reports were released.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 5
2. WHAT IS THE PROBLEM
In recent years government spending on road infrastructure has increased. Whilst road
usage of the heavy vehicle fleet has also increased, the increase in the overall fleet size has
been relatively small. As a result of these changes, heavy vehicle charges in aggregate no
longer recover heavy vehicle allocated expenditure, and the charges for some heavy
vehicle classes do not recover these vehicles' attributable expenditure. This is the primary
problem that the 2007 Heavy Vehicle Charges Determination needs to address.
There are also several secondary problems that need to be addressed:
· The NTC has been asked to consider whether it would be appropriate to recover costs
associated with enforcing laws relevant to heavy vehicles through heavy vehicle
charges.
· The NTC has identified that the current practice of calculating the cost base to be
recovered through heavy vehicle charges by averaging three years of road expenditure
may not sufficiently smooth out the year-to-year variability in this expenditure. In
addition, it has been asked to consider the feasibility of including budget expenditure
for 2007/08 in calculating the cost base.
· The NTC has been asked to develop charges for the new generation of high-
productivity vehicles.
· The NTC has been asked to consider whether the new charges should be phased in, in
recognition of the fact that moving to charges that ensure all vehicle classes at least
recover their attributable expenditure may result in significant increases in charges for
some vehicle classes.
The sections below discuss these problems in more detail. Box 1 defines some of the key
terms used in these sections.
Box 1: Definition of key terms
It is important to understand some of the terminology used to describe how the charges are
calculated. The key terms are:
Total expenditure: This includes all road expenditure by all levels of government including local
government, state/territories and Auslink.
Allocable expenditure: This is the total pool of expenditure after a certain percentage of local road
expenditure, which is already recovered through rates, has been deducted.
Allocated expenditure: This is the allocable expenditure distributed across the various classes or
groups. This report will generally refer to heavy vehicle allocated expenditure, which is the share of
allocable expenditure recovered by all vehicles over 4.5 tonnes. Total allocated expenditure equals
allocable expenditure.
Attributable expenditure: This is the expenditure related to the provision and maintenance of
roads and which varies depending on the use of the road system by different types of vehicles. It is
equivalent to the long run marginal cost and therefore includes capital as well as operational costs.
These costs are directly attributable to vehicle types.
Common costs: These are costs that are not attributed to particular use and include such things
as signage and expenditure related to the impact of weathering on the roads. These costs are also
often referred to as non-attributable expenditure.
Page 6 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
2.1 Heavy vehicle charges don't recover heavy vehicle allocated
expenditure
The charges under the Second Determination were calibrated to ensure that at minimum,
they recovered historic heavy vehicle allocated expenditure. In 2000, these charges over-
recovered this historic expenditure by $140m in nominal terms. However, this situation
has reversed, and the charges now under-recover this expenditure. The primary reasons
are that expenditure has increased at a greater rate than fleet growth, and the annual
adjustment has not been able to keep pace with the increase in expenditure because it is
subject to a CPI cap.
2.1.1 Increase in expenditure on roads
Since the Second Determination was implemented in 2000, government spending on roads
has increased significantly. Table 1 shows that the total level of road construction and
maintenance expenditure increased by $2,859m (in real terms) or nearly 33 per cent in this
period.6
Table 1. Total road construction and maintenance expenditure estimates
($2007/08m real terms)
Change final
Final 2007 2007 Det/2nd
Expenditure Category 2nd Det. Draft RIS Det RIS Det.
A Servicing and operating 714 1,669 1,678 135.0%
B Road pavement and shoulder
construction
B1 Routine maintenance 631 937 926 46.7%
B2 Periodic surface maintenance 592 721 721 21.8%
C Bridge maintenance/ rehabilitation 229 393 394 72.1%
D Road rehabilitation 1,200 1,089 1,070 -10.8%
E Low-cost safety/traffic 459 830 841 83.3%
F Asset extension/improvements
F1 Pavement improvements 1,654 1,600 1,715 3.7%
F2 Bridge improvements 524 629 668 27.5%
F3 Land acquisition, earthworks, other
extensions/improvement expenditure 2,405 3,085 3,262 35.6%
G Other miscellaneous activities
G1 Corporate services 260 251 252 -2.9%
G2 Enforcement of heavy vehicle
regulations 110 114 110 0.3%
Totals 8,778 11,317 11,637 32.6%
Note: Expenditure in the 2nd Determination was calculated by taking an average of actual expenditure for 1996/7 and
1997/8 and budgeted expenditure for 1998/9. Expenditure for the Draft RIS was calculated by taking an average of
budgeted expenditure for 2006/07 and actual expenditure for the previous six years. Expenditure for the Final RIS was
calculated by taking an average of the budgeted expenditure for 2007/8 and actual expenditure for the previous six years.
6
Expenditure in the Second Determination was calculated by averaging expenditure over three years: actual
expenditure for 1996/7 and 1997/8 and budget expenditure for 1998/9. Expenditure for the 2007
Determination was calculated by averaging expenditure over seven years (to reduce short term `lumpiness').
The Draft RIS used 2006/07 budget expenditure and actual expenditure for the six year prior. The Final RIS
used the 2007/08 budget expenditure and the actual expenditure for the six years prior. The assumptions
relating to calculation of the cost base are discussed further in Chapter 4 and Appendices A and D (Vol II).
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 7
Expenditure on arterial roads has particularly increased, and is currently at its highest
levels (in both real and nominal terms) since the NTC began collecting national
expenditure data. The increase in arterial road expenditure is shown in Figure 2. This
increase is mainly due to increased spending on pavement costs associated with providing
new roads, or with improving the design standard of existing roads. The increased
spending has resulted from increases in state/territory road budgets and from the creation
of AusLink, which has led to greater funding contributions on the strategic road network
by the Commonwealth Government. In comparison, expenditure on local roads appears to
have fallen slightly (Figure 3).
Figure 2. Allocated arterial expenditure ($2007/08 real terms)
Allocated Arterial Road Expenditure
9000
8000
7000
$2007/08m
6000
5000
4000
3000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Financial Year
Page 8 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
Figure 3. Arterial, reported local and allocable local road expenditure
movements over the past seven years ($2007/08)
10000
9000
8000
7000
$ Millions
6000
5000
4000
3000
2000
1000
1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005/06 2006/07 2007-08
Year
Arterial Road Expenditure Reported local road expenditure Allocable Local
The overall increase in expenditure on road infrastructure provides important benefits for
the trucking industry - including improving productivity and safety (see Box 2).
A more detailed breakdown of the road construction and maintenance expenditure
estimates the NTC used in reaching its recommendations for the 2007 Determination is
provided in Appendix A, Vol II.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 9
Box 2. Link between road investments and productivity and safety
There is a strong link between increased investment in the road network and improving the
productivity and safety of heavy vehicles - and pricing reform plays a key role in enabling this
investment.
The NTC's Twice The Task report (February 2006) highlighted the importance of pricing reform for
enabling continuing productivity and safety improvements to address the growing freight task
(Figure 4).
Figure 4. Forecast impact of the freight task on truck numbers
The transport reform option (2020) is based on improved access for more productive heavy vehicles through
more flexible regulations, pricing reform and infrastructure investment.
Source: Twice The Task (NTC/BTRE 2006)
COAG's National Reform Agenda (10 February 2006) for quad axle groups, B-triples and
Performance Based Standards involves significant infrastructure investment to improve access for
this `new generation' of high-productivity heavy vehicles. An Australian Industry Group survey
(Transport & Logistics Operations in Australian Manufacturing 2006) also found that better
infrastructure plays an important role in reducing general transport costs. Heavy vehicle charges
can contribute to freight link upgrades, removing bottlenecks and reducing logistics costs for
exports.
An international heavy vehicle road safety benchmarking study commissioned by the NTC in 2002
highlighted the important role of better roads on truck safety. It concluded that:
... if Australian roads were upgraded to having similar proportions of divided and limited access
roads, as in the United States or Great Britain, the Australian truck fatality rate could be expected
to be similar to that in these countries ... upgrading of the Australian road system to these
standards ... require(s) significant investment.
The National Road Safety Strategy also concludes that improving the safety of roads is the single
most significant achievable factor in reducing road trauma. The research shows improving the
safety of the roads could save 332 lives a year - almost half of the national target.
Page 10 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
2.1.2 Changes in the fleet numbers and usage
The Australian Bureau of Statistics Survey of Motor Vehicle Use (SMVU) indicates that
since the Second Determination, the total number of heavy vehicles has increased by
around 21,000 or only 6 per cent7 (see Figure 5).
However, there have been considerable changes within the fleet mix (Table 2). In
particular, the number of B-doubles has increased by 267 per cent, while the number of
vehicles in other classes has grown more modestly or declined (particularly vehicles
smaller than a 6 axle articulated vehicle).
Figure 5. Growth in the total heavy fleet number since the Second
Determination
400,000
365,861
344,740
350,000
300,000
250,000
200,000
150,000
100,000
Second Determination 2007 Determination
Table 2. Changes in fleet numbers since the Second Determination
Second 2007
Determination Determination Percentage change
Rigid trucks 258,779 256,635 -1
Articulated trucks 46,565 48,896 5
B-doubles 2,604 9,564 267
Road trains 5,122 4,406 -14
Special vehicles 8,900 12,323 38
Buses 22,770 34,037 49
Total heavy vehicles 344,740 365,861 6
The way heavy vehicles are being used has also changed. This can be seen in the average
distance travelled by vehicles and is most evident with B-doubles. While the total distance
7
The fleet size derived from trend figures based on seven years data up to 2005. This methodology has been
recommended by the ABS to improve the reliability of the numbers.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 11
travelled by vehicles in this class has increased from 562 million kilometres per annum to
1,687 million kilometres, the average distance travelled per trip has fallen by 18 per cent.
This suggests that these larger, safer and more productive vehicles are being used more
widely than for long haul trips. This may reflect the fact that these vehicles have broader
network access and that heavy vehicle operators are changing their asset utilisation, to
improve productivity and safety in urban areas with safer vehicles.
2.1.3 The annual adjustment
Since the Second Determination, an automatic annual adjustment has applied to heavy
vehicle charges. The adjustment enables these charges to increase between determinations
to reflect nominal changes in heavy vehicle allocated expenditure while taking into account
changes in the overall fleet size. However, the adjustment applies only to the annual
registration component of heavy vehicle charges, and is subject to a floor of current
charges and a CPI cap. In addition, it does not take into account changes in road use
between vehicle categories.
These shortcomings mean that the annual adjustment does not enable ongoing full cost
recovery of road expenditure between determinations. For example, the CPI cap means that
annual adjustment does not adequately accommodate increases in expenditure greater than
the cost of general inflation (due to increased construction activity or higher than CPI
increases in construction costs). In addition, because the adjustment does not apply to the
fuel-based component, it only partly indexes heavy vehicle charges to expenditures.
In recognition of these shortcomings, COAG has asked ATC to instruct the NTC to amend
the adjustment approach to enable continued full cost recovery in aggregate and for each
vehicle class between determinations.
2.1.4 Impact on the level of cost recovery
The NTC has calculated that in 2007/08 heavy vehicles in aggregate under-recover heavy
vehicle allocated expenditure by $168m. This figure was calculated using trend 2005 fleet
numbers based on seven years of trend data over the 1999 to 2005 period, compared to
road expenditure data based on the latest available seven year averages.8 This methodology
eliminates any lumpiness in the data and provides a consistent basis for comparison.9
The under-recovery has arisen because of the increase in expenditure, and the change in
fleet mix and the fact that not all vehicle classes are recovering their fully allocated and
attributable costs. In particular, B-doubles significantly under-recover both their fully
allocated and attributable costs. Therefore, a disproportionate growth in these vehicles
since the Second Determination means that as a class, they under-recover to a greater
extent than they did in 2000 (see Figure 6).
8
The period for arterial expenditure is 2001/02 - 2007/08 and the period for local government expenditure is
1998/99 - 2004/05
9
The methodology for calculating the level of charges recovery is detailed in Appendix C
Page 12 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
Figure 6. B-double under-recovery of fully allocated costs per vehicle
(nominal)
$18,000
$16,032
$16,000
$14,000
$12,000
$10,000
$8,400 Common cost
Attributable
$8,000
$6,000
$4,000
$2,000
$0
Second Determination Current
The PC Inquiry considered this issue. It found that vehicles that recovered their
attributable (long run marginal) costs, but not their fully allocated costs (including
common costs), were still paying their way. The implication of this finding is that all
heavy vehicle classes should at least recover their attributable costs.
2.2 Is it appropriate to recover enforcement costs through charges?
The ATC has directed the NTC to consider including enforcement costs in the cost base to
be recovered through heavy vehicle charges. When looking to include a new cost category
to a charging framework it is important to understand how that cost compares with other
costs, to determine the appropriateness of including the cost at all.
2.2.1 The principle for including enforcement costs
The ATC direction requires that NTC consider whether, and to what extent, it is
appropriate to recover enforcement costs. To answer this, it is important to consider the
role of enforcement and the associated outcomes.
Enforcement costs means the costs involved in ensuring that heavy vehicles comply with
laws associated with their access to the road network. The most relevant laws relate to
safety (e.g., prevention of driver fatigue and speeding) and mass (e.g. constraints on
loading):
· The objective of safety-related laws is to ensure that granting heavy vehicles access to
the network does not impose additional, unwarranted safety-related costs on the
community. They recognise that there may be short-term commercial incentives on
heavy vehicle operators to operate in an unsafe way in order to reduce costs. They also
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 13
recognise that incidents involving heavy vehicles are likely to result in higher safety-
related costs than those involving only light vehicles.
· Laws related to mass recognise the relationship between heavy vehicle road use and
infrastructure cost by providing a mass limit on vehicles. Enforcement helps to ensure
those mass limits are not breached. Therefore, it prevents additional costs associated
with infrastructure provision which may be inefficient in terms of the amount of the
cost and who bears it.
In the NTC's view, heavy vehicles are required to recover costs associated with heavy
vehicle access to the road network, to ensure efficient outcomes in the transportation of
freight. Enforcement is similarly associated with heavy vehicle access and seeks to ensure
efficient outcomes. Therefore, in principle, it is an appropriate cost to be recovered
through charges.
This view is supported by the findings of the Productivity Commission, which also looked
into this issue as part of its Inquiry. The Productivity Commission found that:
"The costs of enforcing heavy vehicle mass and speed restrictions are
appropriately recovered through road user charges. However the inclusion of
these costs is not likely to have a significant effect on heavy vehicle charges."
(PC 2007)
It noted that other countries recover heavy vehicle policing costs in road charges.
The NTC sought constitutional advice on the legality of recovering enforcement costs.
This advice confirmed that there is no legal constraint to recovering enforcement costs, and
referred to an analogous case of Airservices Australia v Canadian Airlines International
Ltd (1999) 202 CLR 133 which was heard in the High Court. In this case McHugh J
stated:
"[I]n my opinion, in characterising a charge as a fee for services ..., it is legitimate to take
account of the changing circumstances of government which are exemplified by the
devolving of functions from government departments to statutory authorities or other
corporate bodies which, under the terms of their enabling statutes, have a monopoly on the
provision of a certain service and are directed by the legislature to provide those services
on a `user pays' basis. Charges by such authorities and bodies should be seen as
essentially cost driven, imposed on users for the purpose of reimbursing the cost of
services provided. They should not be approached as if they were imposed simply to raise
revenue for the general government of the country."
The extent to which enforcement costs should be recovered through heavy vehicle charges
is discussed in Chapter 4.
2.2.2 Getting a better outcome out of enforcement
As the growing freight task places more pressure on the trucking industry, enforcement has
become an increasingly important issue, for both government and the industry. During the
consultation process, stakeholders put the view that a holistic approach to enforcement
should be taken: that a broad framework is needed to strengthen enforcement and to ensure
it is targeted and more consistent.
Focus group discussions raised potential mechanisms to link charges to broader
enforcement and compliance arrangements. The Community and Public Sector Union
cited a number of anecdotal examples of the need to strengthen enforcement, and argued
"that any heavy vehicle charge must include the costs of enforcement and this `income'
Page 14 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
must be returned to the road agencies for use in properly funding enforcement
activities."(CPSU, 2007)
However, the relationship between enforcement and compliance was also acknowledged.
For example, focus group discussions noted that increasing the level of compliance
through mechanisms such as accreditation is likely to lessen the enforcement burden. The
trucking industry highlighted that offering additional financial concessions for accredited
operators will result in a higher level of overall compliance (by increasing the number of
accredited operators) and thus reduce the enforcement burden. The NTC is in the process
of reviewing the National Heavy Vehicle Accreditation Scheme with the objective of
improving road safety through creating an audited based compliance model for
accreditation. The model encourages the participation in accreditation through a system of
incentives and provides for more targeted enforcement activities. The Determination
provides a funding mechanism to support this scheme.
The NTC has long been of the view that a stronger compliance and enforcement
framework would ensure safer heavy vehicle operations. With COAG's endorsement, it
has been working with jurisdictions on the delivery of the COAG-required national heavy
vehicle enforcement strategy. This strategy seeks to promote national consistency in
enforcement leading to more targeted and effective enforcement. It is also developing a
compliance strategy that seeks to identify inconsistencies in the application (both
operationally and legislatively) of agreed compliance and enforcement programs, which
limit the effectiveness of those programs.
However, while enforcement is an essential condition for compliance, it is not sufficient on
its own to ensure compliance.10 Therefore, the NTC is developing a strategic compliance
framework in conjunction with stakeholders that both:
· continuously and rationally matches the institutional capacity of the regulatory system
to the demands placed on it by the reform process, and
· implements a range of complementary strategic interventions designed to encourage
and assist voluntary compliance and encourage workplaces to go beyond compliance to
best practice.
The recovery of enforcement costs through heavy vehicle charges provides an opportunity
for the cost of these various initiatives to be recovered, and could also provide incentives
for operators to participate in accreditation leading to safer roads.
2.2.3 Revenues association with enforcement
The trucking industry has argued that if it is appropriate to include enforcement costs in the
cost base to be recovered through heavy vehicle charges, then it is also appropriate to
deduct fine revenues from the cost base. During the consultation process, the NTC
committed to obtaining more information on fine revenues and considering this issue
further.
10
`Compliance,' is a behavioural outcome - being the degree of conformity on the part of the regulated
population with a legislated standard. `Enforcement' is a particular compliance assurance process (through
the use of administrative or judicial sanctions) directed towards catching and penalising those who break the
law. It is a means to securing the end of acceptable levels of compliance by deterring those who would
otherwise break the law if they could get away with it.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 15
Fine revenue from heavy vehicle enforcement takes two forms: revenue from Traffic
Infringement Notices (TINS) that do not result in court action, and revenue from court-
awarded fines arising from court convictions. Information on fine revenue is difficult to
obtain as the administration of TINS is often handled by independent authorities rather
than the road authorities, and in almost all jurisdictions, the revenue goes directly into
state/territory consolidated revenue. The exception is NSW, where mass-related TINS
revenue, which is of the order of $5 million per annum, goes to the Roads and Traffic
Authority (RTA).
To date, only Queensland and WA have provided estimates for their 2006/07 revenue from
all TINS and court-awarded fines. For Queensland, total fine revenues amounted to $3.3
million ($2.5 million in TINS and $0.8 million in court-awarded fines). These estimates
include fines for all heavy vehicle offences not just mass-related offences. For WA, total
fine revenues were $467,000 ($395,000 from TINS and $72,000 from court-awarded
fines), again including fines for all heavy vehicle offences.
These estimates indicate that fine revenues are considerably less than total enforcement
expenditure. For example, for Queensland the fine revenues are equivalent to 24 per cent
of enforcement expenditure, and for WA they are equivalent to 8 per cent of enforcement
expenditure.
In considering the appropriateness of deducting fine revenues from the cost base, the NTC
considered the purpose of fines. A fine is a sum of money that is required to be paid as a
penalty for an offence. While it is a punishment for committing an offence, more
importantly it is intended to deter people from committing the offence in the first place.
As such, the efficient level of a fine is the point at which it acts as an effective deterrent.
In the NTC's view, a fine is not a cost recovery mechanism. Indeed, considering fine
revenues in establishing the cost base may not promote setting fines at an efficient
deterrent level. Instead it might encourage the setting of fines at levels to maximise
revenues to the jurisdictions.
The rail industry supports this view. For example, in its submission, Asciano noted:
"any nexus between enforcement expenditure and revenue from enforcement activities has
the unfortunate side-effect of encouraging the linking of funding to such revenue. This in
turn encourages enforcement agencies to "over-enforce" in order to secure funding rather
than enforcement to secure obedience to the law. This is contrary to the intent of
enforcement and would be a most unfortunate behaviour to encourage." (Asciano, 2007)
For the above reasons, the NTC does not consider that it is appropriate to deduct fine
revenues from the cost base to be recovered through heavy vehicle charges.
2.3 Smoothing the variability in road expenditures
Expenditure on roads tends to be variable - in some years it can be particularly high and
others it can be relatively low. Under the NTC's current methodology, the cost base to be
recovered through heavy vehicle charges is calculated by averaging three years of heavy
vehicle allocated expenditure (two historic years and the current budget year). This
approach is intended to smooth out variations in road expenditure, to reduce the impact of
unusually high or low years of expenditure on charges.
However, during the PC Inquiry, the NTC identified that the smoothing effect of a three-
year average may not be sufficient, particularly as determinations tend to occur only every
seven years. Figure 2 demonstrates this point well: it shows that expenditure on arterial
Page 16 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
roads in 2007 and 2008 is considerably higher than in previous years. Calculating the cost
base for the 2007 Determination based on three-year average that includes these two years
would result in charges that may over-recover expenditure, if the level of expenditure in
future years falls again. To overcome this problem, the NTC proposed using an average of
the expenditure over seven years in establishing the cost base.
At the beginning of the Determination process, ATC advised NTC that its preferred
implementation date for the Determination was 1 July 2007. Therefore, adopting the
seven-year averaging approach, NTC applied the normal practice which included 2006/07
budget expenditure figures and actual expenditure figures for the previous six years.
However, the ATC has since requested the NTC to consider the feasibility of including the
2007/08 budget expenditure figures and the actual expenditure for the six previous years in
calculating the cost base for the 2007 Determination. This is in recognition that the
Determination will not be implemented until 1 July 2008, and will therefore be a year out
of date if the 2006/07 budget figures are included.
2.4 Developing charges for high-productivity vehicles
The ATC has directed the NTC to develop incremental charges for high-productivity
vehicles. This direction reflects the need for a pricing solution that accommodates the
introduction of more productive vehicles onto the road network. Currently, these vehicles
sit outside the vehicle classifications used for heavy vehicle charges.
The NTC's report Twice the Task also identified the need to provide access for high-
productivity vehicles. The report described the need to find solutions to better optimise the
current road network to address the forecast doubling of the freight task from year 2000
levels by 2020. If more productive vehicles are not given access to the road network, the
total number of vehicles required to accomplish the increased freight task will need to
increase. As the South Australian Freight Council stated in its submission "We need to
carry more freight with a smaller number of trucks."(SAFC, 2007)
High-productivity vehicles are not necessarily new vehicles. Nor are they necessarily
significantly innovative. In many cases, they are modular versions of the existing fleet: a
prime mover may carry an additional third trailer or a trailer may be longer or heavier than
the current arrangements allow.
To date, access to the road network for these high-productivity vehicles has been limited.
Because they are considered to create more road wear than vehicles in the existing fleet,
road managers have been reluctant to grant them access on the grounds that this will make
the sustainability of the network more difficult. A pricing solution would overcome this
problem.
In some cases, high-productivity vehicles are designed to order. Therefore, it will be
important that any pricing solution is flexible enough to accommodate a variety of
different vehicle characteristics and operations, while being consistent with current pricing
principles and the existing charges framework. As the Australian Trucking Association
noted in its submission to the Draft RIS:
"The commercial realities of industry utilisation and the current charging administration
system are based upon interchangeable prime mover and trailer units forming
combinations. The movement toward whole of combination permit fees for cost recovery
purposes will impart price rigidities upon combination selection and thereby present the
industry with significant utilisation problems." (ATA 2007)
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 17
It will also be important that the charging arrangements for high-productivity vehicles are
sufficiently transparent and predictable to enable operators to negotiate contracts with
confidence. A consultation workshop with key stakeholders and technical experts in May
2007 indicated that any pricing solution for these vehicles:
· must be transparent
· must be based on best available data
· must consider the treatment of common costs
· should not lead to perverse outcomes (financial/operational decisions), and
· should be consistent with ATC and COAG pricing principles.
In line with good regulatory practice, the pricing solution also needs to provide
consistency, certainty and administrative simplicity.
The options and proposed approaches for dealing with all of the problems identified above
are discussed in Chapter 4.
Page 18 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
3. THE OBJECTIVE
The primary objectives of the 2007 Heavy Vehicle Charges Determination are to ensure
that:
· road expenditure allocated to heavy vehicles in aggregate is fully recovered
· each vehicle class at least recovers its attributable expenditure, so that there are no
cross-subsidies between vehicle classes
· charges accommodate high-productivity vehicles
· charges are consistent with the ATC's approved pricing principles
· charges are updated in a way that enables them to continue to recover both allocated
and attributable expenditure between determinations.
These objectives have been clearly stated by both the ATC and COAG. Specifically, at its
4 May 2007 Meeting, the ATC:
NOTED that COAG has:
· requested that ATC direct the NTC to prepare a new heavy vehicle charging
determination to apply from 2008, based on an updated PAYGO process, which
fully recovers, and continues to recover, from heavy vehicle users the allocated
share of infrastructure costs in aggregate and removes cross subsidies among
heavy vehicle classes;
DIRECTED that the NTC prepare a draft Regulation Impact Statement (RIS) for a new
heavy vehicle charging determination to be implemented from 1 July 2008 that:
· includes discussion of charging options to achieve full cost recovery, without over-
recovery, with vehicle classes at least recovering their attributable costs;
· considers phasing in options over 2 and 3 years where necessary;
· is based on the ATC approved pricing principles for the third determination and
adopts a 7 year averaging period for road expenditure;
· discusses the case for and against possible inclusion of enforcement costs in the
cost base to be recovered, to inform public consultation on this issue;
· adopts the national approach of calculating charges for new high productivity
vehicle classes on the basis of full recovery of allocated costs, with B-triple charges
based on road train costs (although B-triples operating outside road train networks
could be subject to incremental charges during proposed trials); and
· in addition, ATC requested the NTC to consider issues relating to differential
treatment of vehicle classes of equivalent load capacity and that NTC also consider
the capacity to include 2007/08 budgeted financial commitments in the heavy
vehicle charge calculations
DIRECTED the NTC prepare advice for Ministers consideration at the November 2007
ATC meeting on the outcomes of the public consultation process and on the process for
implementing a new determination on 1 July 2008.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 19
DIRECTED the NTC to develop appropriate indexation adjustment arrangements to
ensure the ongoing delivery of full expenditure recovery, as requested by COAG.11
The trucking industry raised a further objective: that heavy vehicle charges should
maintain vehicle configuration flexibility. That is, that operators should be able to change
their vehicle configuration to meet the specific needs the trip without facing adverse
financial implications.
3.1.1 ATC approved pricing principles
In recommending national heavy vehicle charges, the NTC is bound by a set of Road Use
Pricing Principles, which were approved by ATC in August 2004 and reaffirmed in May
2007. These pricing principles are:
"National heavy vehicle road use prices should promote optimal use of infrastructure,
vehicles and transport modes.
This is subject to the following:
· full recovery of allocated infrastructure costs while minimising both the over and
under recovery from any class of vehicle
· cost effectiveness of pricing instruments
· transparency
· the need to balance administrative simplicity, efficiency and equity (eg impact on
regional and remote communities/access)
· the need to have regard to other pricing applications such as light vehicle charges,
tolling and congestion.
3.1.2 COAG requirements
In addition to these principles, COAG (at its 13 April 2007 meeting) required that there is
no cross-subsidisation between vehicle classes, and that heavy vehicle charges be adjusted
each year to ensure they continue to fully recover costs between determinations.
Specifically, the COAG Communiqué supplementary information from this meeting
specifies that:
"ATC direct the NTC, in developing its Determination, to apply principles and methods
that ensure the delivery of full cost recovery in aggregate, further develop indexation
adjustment arrangements to ensure the ongoing delivery of full expenditure recovery in
aggregate and remove cross-subsidisation across different heavy vehicle classes,
recognising that transition to any new arrangement may require a phased approach"
(COAG 2007).
In effect this means that revenues from both the registration charge component and the
fuel-based charge component for a given vehicle class must recover, at a minimum, the
attributable cost associated with that class. The attributable cost is the infrastructure-
related cost which is associated with the use of a vehicle. This interpretation of cross-
subsidy is consistent with the PC Inquiry Final Report, which informed the COAG
11
Draft Minutes of the ATA meeting 4 May 2007 (Broome)
Page 20 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
requirements. The report stated "A price is generally considered to be subsidy free if it is
equal to, or exceeds, its directly attributable or incremental costs of productions."(PC,
2006)
It also means that both the registration charge component and the fuel-based charge
component need to be adjusted annually, to ensure that charges continue to fully recover
costs between determinations.
3.1.3 The considerations
The NTC's recommended heavy vehicle charges under the Third Determination were
informed by a number of `considerations' (NTC, 2006). These considerations were
effectively the NTC's interpretation of the ATC's pricing principles and provided a policy
framework that guided the development of heavy vehicle charges. They were informed by
both formal and informal consultation. However, these considerations were not formal
directions.
Some of these considerations conflict with the ATC's and COAG's directions to the NTC
in developing recommendations for the 2007 Determination. Where this is the case, the
NTC has given precedence to the directions. The discussion below lists the considerations
and identifies where changes were required.
A. The results of the charges should support both the pricing principles and the objectives
set out for the NTC in the Inter-Governmental Agreement.
B. The charges should ensure that heavy vehicles as a whole `pay their way', and each
major category of heavy vehicles also pays its way.
In effect, this consideration is the same as the direction that charges should ensure that
the heavy vehicle fleet as a whole recovers both its attributable and common costs, and
that each individual vehicle class at a minimum recovers its attributable costs.
C. The revised charges should promote freight efficiency.
D. Cross-subsidies between vehicle classes should be kept to a minimum.
COAG has required that there are no cross-subsidies between vehicle classes therefore
this consideration has been strengthened accordingly.
E. A cautious approach should be taken where assumptions are needed and independent
verification of assumptions will be sought.
F. Imposts from changes should be minimised for any category of vehicle.
G. The Determination should not anticipate significant policy issues that will be dealt with
in a subsequent determination, and no attempt should be made to move charges in any
particular direction ahead of this.
The 2007 Determination has been requested as part of a broader reform program.
Therefore, while it does not attempt to predetermine outcomes of COAG's road reform
agenda, it does seek to improve on the current charges methodology to both achieve
the ATC requirements and move towards greater productivity of the heavy vehicle fleet.
This consideration has been amended to require the Determination to be in keeping
with the broader reform program as outlined in COAG's road reform agenda.
H. The Determination should not be used to promote modal outcomes.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 21
The NTC notes that recommendation 12.1 of the PC Inquiry stated "The focus of the
policy reform agenda for road and rail freight infrastructure should be on enhancing
efficiency and productivity within each mode." (PC, 2006)
I. Decreases in charges should only occur in exceptional circumstances.
Currently a number of vehicle classes significantly over-recover their costs. This is for
a number of reasons including:
· the method used to set the original fuel-based charge component led to an over-
recovery of costs by the lighter end of the heavy vehicle fleet
· the uniform increase in the registration charge component resulting from the
annual adjustment exacerbated the original over-recovery
· the requirement to meet a certain balance of revenues between the Commonwealth
and States/Territories (see consideration J), and
· changes in usage data and fleet mix.
Therefore, in order to ensure that heavy vehicles in aggregate recover their costs, but
not over-recover, and that all vehicle classes recover their attributable costs, some
registration charges will need to fall.
J. Changes that would significantly alter the balance of Commonwealth/state and territory
revenues should be avoided.
The options discussed do result in some change in the balance of revenues between
Commonwealth and states/territories to ensure there is no over-recovery.
Page 22 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
4. THE OPTIONS
The NTC has considered and consulted on a range of options for addressing the problems
identified in Chapter 2 and meeting the objectives outlined in Chapter 3. These problems
arise in different steps in the process for developing, implementing and adjusting heavy
vehicle charges (see Figure 7). Therefore they can be addressed by making choices within
the relevant step. The sections below discuss the each of the choices to be made, and the
options for each choice.
Figure 7. Process for developing, implementing and adjusting charges
Step 1 Step 2 Step 3
Determine cost base Allocate costs Set prices
Years included in the costs How are costs allocated? How are prices set to recover attributable
base? · Third determination costs?
· Option CB1: Include methodology · Option C1: Differentiated prime mover
2007/08 budget · The importance of VKT charge, attributable cost recovery by
expenditure · Reliability of road use data class
· Option CB2: Include · Option C2: Differentiated prime mover
2006/07 budget charge, allocated cost recovery by class
expenditure · Option C3: Differentiated trailer charge,
Road Agency Enforcement attributable cost recovery by class
costs? High Productivity Vehicles
· Option a: Full inclusion · High Productivity Charge formula
· Option b: Partial inclusion · Modular approach to charges
· Option c: No inclusion
Step 5
Adjust annually Step 4
How should charges be adjusted annually?
Implement
· Option A1: maintain current adjustment
process with modifications and inclusion How should charges be phased in?
of fuel index · Over two years
· Option A2: Option A1 with removal of · Over three years
cap and floor
· Option A3: Indexation of both registration
and fuel charges
· Option A4 Annual re-calculation of
charges
4.1 Which years of expenditure should be averaged in determining the
cost base?
As section 2.3 discussed, road expenditure can vary considerable from year to year. To
date, the NTC's charges methodology has used an average of three years of heavy vehicle
allocated expenditure (two historic years and the current budget year) to calculate the cost
base to be recovered through heavy vehicle charges. This approach is intended to mitigate
the impact of an unusually high or low year of expenditure thus resulting in a more
representative expenditure figure.
However, if more than one of the three years used in calculating the expenditure figure is
higher or lower than the average expenditure over the period a determination covers,
charges will over- or under-recover. To address this problem, the NTC proposed to ATC
that the charges methodology be amended so that an average of seven years expenditure is
used to calculate the cost base (one year budget expenditure and six years actual
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 23
expenditure). This would further smooth out unusual variations in expenditure from year
to year, making charges less sensitive to these variations.
The Productivity Commission considered the NTC's proposal as part of the PC Inquiry. It
acknowledged the benefits of the approach, but also noted "that it exacerbates the reliance
on historic expenditure data and therefore the lag in under- or over-recovery." (p 87, PC
2006) The ATC considered the proposal and the Productivity Commission's comments. On
balance, the ATC supported the change to a seven-year averaging period. However, the
ATC asked the NTC to look at the feasibility of including budget expenditure for 2007/08
in calculating the expenditure figure for the cost base, to minimise the lag identified by the
Productivity Commission.
The 2007/08 budget figures for all states were not available in time to be included in the
draft RIS. Therefore, the NTC calculated the cost base using 2006/07 budget expenditure
and actual expenditure for the six years prior to 2006/07. For the final RIS, all states'
2007/08 budget expenditure and 2006/07 actual expenditure figures were available, so the
NTC used an average of the 2007/08 budget expenditure and the six previous years' actual
expenditure in calculating the cost base. This resulted in an increase in the cost base to be
recovered by heavy vehicles of $125m compared to the draft RIS, and $670m compared to
the Second Determination (see Figure 8).
Figure 8. Heavy vehicle allocated cost base ($nominal)
$2,000 $1,953
$1,828
$1,800
$1,600
$m
$1,400
$1,283
$1,200
$1,000
2nd Det. 3 year Draft RIS Final RIS
The alternative to including the 2007/08 budget expenditure in calculating the cost base is
to include the 2006/07 budget expenditure and, in line with the current methodology,
reflect 2007/08 expenditure through the annual adjustment process when the actual
expenditure for this year is known. Each of these options is explored below.
Page 24 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
4.1.1 Option CB1: Include 2007/08 budget expenditure in the cost base
The first option is to include the 2007/08 budget expenditure in the cost base for this
Determination, along with actual expenditure data for 2001/02 to 2006/07. This would
result in a cost base of $1,953m to be recovered through charges.
This option has several benefits:
· It would make the expenditure figure used to calculate the cost base as up-to-date as
possible, reducing the lag in the recovery of the current year of expenditure.
· Although it would result in a higher cost base, the resulting higher charges could be
phased in over the implementation period of two or three years (see section 4.6.).
· It would prevent the need for an annual adjustment to occur on the same date as new
charges under the 2007 Determination begin to be implemented, as would happen
under Option CB2, (see below). As a consequence, it would ensure that all vehicle
classes can recover their attributable costs, at least in the first year of the Determination
(also see below).
This option is the NTC's preferred option. Because of the benefits outlined above, it best
meets the objective of achieving full cost recovery in aggregate while ensuring no cross-
subsidies between vehicle classes. It is also administratively simpler, as jurisdictions will
only need to advise heavy vehicle operators of one increase in charges (resulting from the
Determination) rather than two increases (one from the Determination and one from the
annual adjustment, both of which would be effective on 1 July 2008). In addition, if the
new charges are phased in over the implementation period, it will result in less of a price
shock for operators than Option CB2.
4.1.2 Option CB2: Include 2006/07 budget expenditure in the cost base
The second option is to include the 2006/07 budget expenditure in calculating the cost base
along with actual expenditure for 2000/2001 to 2005/06. This would result in a cost base of
$1,828m12 to be recovered through charges that will be phased in over the implementation
period. In line with the current methodology, this option would mean that 2007/08
expenditure levels would not be reflected in charges until after the 2009 annual adjustment.
The annual adjustment process adjusts charges to reflect the most recent year's actual
expenditure published in the NTC's annual report. Therefore, the charges resulting from
the 2007 Determination would reflect the 2006/07 budget expenditure figures, and would
be adjusted to reflect the 2006/07 actual expenditure figures published in the 2007 annual
report through the 2008 adjustment process. This would occur on the same date as the new
charges under the Determination are implemented - 1 July 2008. The NTC calculates that
this annual adjustment would increase charges by an additional 2.5 per cent. This
additional increase would be recovered in full in 2008/09. Actual 2007/08 expenditure
would then be reflected in the 2009 annual adjustment, and would be recovered in full in
2009/10.
The advantage of this approach is that it provides greater accuracy in charges, in that the
unusually high road expenditure budgeted for 2007/08 will not be reflected in charges until
that expenditure becomes `actual'. However, the disadvantages are that:
12
Note this cost base is in $2006/07 as the annual adjustment effectively acts as an index to $2007/08.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 25
· It involves a further lag in the recovery of expenditure for governments of Australia:
expenditure incurred in 2007/08 is not fully recovered until the end of 2009/10. The
PC Inquiry noted that such lags mean governments are not compensated for the cost of
financing investments over that period (pg 78, PC 2006).
· It would result in B-doubles and triple road trains failing to recover their attributable
costs upon implementation of the Determination. This is because the annual
adjustment is a uniform increase in charges and does not recognise the different costs
associated with different vehicles.
· It may involve greater volatility in charges and price shocks for operators, due to the
fact that increases resulting from annual adjustments are recovered in full in one year,
not phased in.
4.2 To what extent should enforcement costs be included in the cost
base?
As section 2.2 discussed, the NTC considers that in principle, it is appropriate that
enforcement costs be recovered through charges. However, to what extent should these
costs be recovered?
The ATC pricing principles provide some guidance on this question. One of these
principles is that heavy vehicle charges should enable "full recovery of allocated
infrastructure costs". In the NTC's interpretation, this principle means that enforcement
costs related to mass constraints should be recovered. Breaches of mass constraints lead to
greater wear on the infrastructure and thus more maintenance expenditure. Ultimately, this
leads to increased charges that must be borne by all heavy vehicle operators. Thus, in
effect, operators whose heavy vehicles breach mass constraints are being subsidised by
those who comply with these constraints operators. Such a subsidy is inefficient, and
therefore costs related to enforcing mass constraints should be recovered through charges.
In general, stakeholders did not agree with the NTC's interpretation for a variety of
reasons. Some stakeholders supported the inclusion of all enforcement costs in the cost
base (i.e. mass-related and safety-related enforcement). For example:
· The NSW Roads and Traffic Authority (RTA) argued that safety-related enforcement
cannot be easily divorced from mass-related enforcement: that the two go hand-in-
hand. Further, it argued that heavy vehicle operators benefit in a commercial sense
from safety-related enforcement because it helps to create a level playing field.
· Several rail industry stakeholders expressed a similar view:
- Asciano Limited commented that "mass is not just a road damage related issue: it
presumably has some link back to safety...you can[not] just simply say mass is an
economic issue and other things are safety issues."13 It also argued that all
enforcement costs should be included on the basis of consistency. It noted the rail
industry is required to recover both safety and mass-related enforcement costs
despite having a significant safety regulatory burden (Asciano, 2007).
13
Paul Bugler (Asciano) NSW Charges Focus Group, 2 August 2007
Page 26 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
- The Australasian Railway Association expressed similar views, and noted that the
difficulty in separating out the different enforcement costs is a further reason for
the full inclusion of these costs (ARA, 2007).
- The Australian Rail Track Corporation Ltd (ARTC) argued that safety-related
enforcement costs are a reasonable cost associated with use of the road
infrastructure and therefore are infrastructure-related costs (ARTC 2007).
In contrast, stakeholders from the trucking industry and the National Farmers Federation
opposed the inclusion of any enforcement costs, particularly without a supporting
framework aimed at reducing breaches. The National Farmers Federation stated that "the
incorporation of enforcement costs...merely encourages the establishment of a permanent
bureaucracy that has little intention of reducing breaches" (NFF 2007).
Although the NTC accepts that mass-related enforcement can lead to multiple benefits, it
notes the primary objective of mass constraints is to manage road wear. This is supported
by the fact that incremental pricing trials being undertaken as part of the COAG road
reform agenda allow additional mass above prescribed limits14 on the network at a cost to
the operator equivalent to the wear caused by the additional mass. Therefore, the NTC
concludes that given the current pricing principles, it is only appropriate to include mass-
related enforcement costs in the cost base.
However, it is difficult to estimate the mass-related enforcement costs. Previously, the
NTC has been reluctant to consider the issue of enforcement costs because of the
incomplete nature of the data it captures for this cost category. The data provided by
governments on heavy vehicle enforcement costs reflects the differing enforcement
systems in place, specifically:
· the way infringements are classified - heavy vehicle infringements are not always
distinguishable from light vehicles
· the differing responsibilities of police and road agencies for enforcement - the NTC
only collects road agency enforcement costs.
In addition, the data provided does not distinguish between different types of enforcement
(i.e., between mass-related and safety-related enforcement).
Given these difficulties, the NTC considers there are three options in relation to
enforcement costs - to fully include road agency enforcement costs in the cost base, to
partially include road agency enforcement costs in the cost base, and to exclude all
enforcement costs from the cost base. Each of these options is discussed below.
4.2.1 Option a: Full inclusion of road agency enforcement costs
A large portion of heavy vehicle enforcement is undertaken by agencies other than road
agencies (such as the police). Therefore, because the data provided to the NTC only
includes road agency costs, it understates the true value of enforcement costs. In
recognition of this, option a assumes that road agencies are tasked primarily with mass-
related enforcement duties and therefore that these agencies' full enforcement costs should
be recovered through heavy vehicle charges.
14
Subject to meeting safety standards
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 27
If this is the case, then there are two approaches for allocating these enforcement cost
between the vehicle classes. The first (Option a(i)), is to allocate expenditure to individual
vehicle classes based on nationally aggregated heavy vehicle vehicle-kilometres-travelled
(VKT). This is consistent with the approach of cost allocation for other expenditure
categories.
As shown in Table 3, NSW's share of total enforcement expenditure is disproportionately
large when compared with its proportion of heavy vehicle VKT (the basis on which
expenditure is allocated between the vehicle classes). This means that under Option a(i),
trucks in other jurisdictions recover some of the cost of enforcement in NSW.
Table 3. Heavy vehicle enforcement expenditure by state
NSW Vic Qld SA WA Tas NT ACT
Enforcement
expenditure
($2007/08m) 66.4 10.7 14.7 8.5 6.5 0.7 2.3 0.4
Percentage 60.2 9.7 13.4 7.7 5.9 0.6 2.1 0.4
expenditure
Heavy vehicle 32.9 23.3 20.9 7.5 11.2 2.3 1.2 0.6
VKT (%)
The second approach (Option a(ii)) involves allocating the full enforcement costs recorded
for each state/territory and then allocating by heavy vehicle VKT within each jurisdiction.
Under this option, NSW's enforcement costs of $66.4m is allocated across each of the
heavy vehicle classes in that state, based on the relative level of VKT within that state.
The same process is used to allocate the enforcement costs for each state and territory, to
derive a total dollar figure for each heavy vehicle class in each jurisdiction. These dollar
figures are then summed across the eight jurisdictions for each heavy vehicle class, then
those national total dollar figures for each heavy vehicle class are divided by the total
number of heavy vehicles nationally to come up with a full enforcement allocated cost per
vehicle in each class.
The principal difference between Options a(i) and a(ii) is the distributional impact on
vehicle classes (see Table 5). Compared to Option a(i), Option a(ii) results in higher
allocated enforcement costs per vehicle for most rigid trucks and 2 axle buses, and lower
enforcement costs for articulated trucks, B-doubles and road trains. For B-doubles and road
trains, it provides allocated costs that fall between those provided by Option a(i) and
Option b (partial inclusion of road agency enforcement costs). Nevertheless, Option a(ii)
still involves the inclusion of a higher amount of enforcement costs to be recovered in
aggregate than Option b. In general, this means it would lead to a higher fuel charge, all
else being equal, than Option b.
4.2.2 Option b: Partial inclusion of road agency enforcement costs
Option b assumes that some road agencies are engaged in safety-related enforcement
activities as well as mass-related enforcement. This is particularly true in NSW, where the
RTA has a more comprehensive enforcement role than other road agencies. Therefore the
total enforcement cost reported by road agencies is discounted to estimate mass-related
enforcement costs.
To determine an appropriate discount, the NTC identified that in most jurisdictions,
enforcement costs are related to the share of heavy vehicle VKT in the jurisdiction. The
Page 28 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
only state where this doesn't hold true is NSW (see Table 5). Therefore, the NTC proposes
that the percentage share of heavy vehicle VKT in each jurisdiction represents a good
approximation of its share of mass-related enforcement costs (the primary enforcement
activity of most road agencies, except the NSW RTA).
Under this proposal, NSW's enforcement expenditure is discounted so that it represents the
same share of national enforcement expenditure as the NSW share of national heavy
vehicle VKT (see Table 4). This reduces the level of NSW enforcement expenditure to be
included in the cost base from $66.4m to $21.5m, and the total enforcement expenditure to
be included from $110 million to $65 million (or 59 per cent of total road agency
enforcement costs).
This approach assumes that road agencies in all jurisdictions except NSW focus their
heavy vehicle enforcement activities on mass-related enforcement. This assumption
appears to be supported by a Victorian report, which found that mass-related penalties in
Victoria constitute around 41 per cent of all road-related infringements (by both heavy and
light vehicles) (VicRoads, 2004).
Table 4. Adjusted heavy vehicle enforcement expenditure by state
NSW Vic Qld SA WA Tas NT ACT
Adjusted
Expenditure
($07/08m) 21.5 10.7 14.7 8.5 6.5 0.7 2.3 0.4
Adjusted
Percentage 32.9 16.4 22.5 13.1 9.9 1.1 3.5 0.7
expenditure
HV-VKT15 % 32.9 23.3 20.9 7.5 11.2 2.3 1.2 0.6
Both the South Australian Department of Transport, Energy & Infrastructure and
Queensland Transport supported the adoption of this approach for this Determination. The
focus group consultation process found that trucking operators also generally supported the
inclusion of partial enforcement if combined with an appropriate enforcement framework
(see section 4.2.5 below).
However, Queensland Transport suggested that enforcement should not be treated in the
same manner as other expenditure items in terms of recovery. It recommended that
enforcement-related costs be recovered solely through registration charges, on the basis
that the Commonwealth Government is not involved in enforcement activities and
therefore should not recover revenues associated with enforcement. However, the NTC
notes that the current charges methodology is only intended to recover expenditure in
aggregate. In doing so, it ensures consistency in charges across states and territories and
provides a balance between the variable fuel-based charge and the fixed registration
charge. Therefore it would be inconsistent with the current charges methodology to treat
one expenditure category separately from others.
4.2.3 Option c: Full exclusion of enforcement costs
The third option is to exclude enforcement costs completely from the cost base. In the
absence of an enforcement framework, the trucking industry argued enforcement costs
should be excluded from the cost base. In particular, the Australian Livestock Transporters
15
Heavy vehicle - vehicle kilometres travelled
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 29
Association noted that "[t]here is no guarantee that any proposed enforcement cost figure
would not move upwards in the future at the behest of State Governments and there
remains at the present time no requirement on State Governments to be efficient in how
these funds are expended." (ALTA, 2007).
The ATA argued that the recovery of enforcement costs "would impose an indiscriminate
and inefficient cost upon heavy vehicle road users" and that compliant operators
(particularly those who are accredited) would face in effect a "double take". Therefore, it
opposed the inclusion of enforcement costs on any basis. The cement and forestry
industries echoed the concerns of the ATA.
While the NTC recognises the relationship between enforcement and compliance, it notes
that there are still benefits for compliant operators in ensuring that the whole industry is
compliant.
4.2.4 Comparing the impact of the options for enforcement costs
Table 5 shows the contribution to allocated costs under each option for the treatment of
enforcement costs.
Table 5. Allocation of enforcement costs for each option ($/vehicle)
Allocation Allocation
Allocation Allocation
per per
per per
vehicle - vehicle -
vehicle - vehicle -
Option Option
Option b Option c
a(i) a(ii)
$/vehicle $/vehicle
$/vehicle $/vehicle
Rigid trucks: 2 axle: no trailer: GVM 4.5 to 7.0 tonne 109 125 65 0
Rigid trucks: 2 axle: no trailer: GVM 7.0 to 12.0 tonne 161 186 96 0
Rigid trucks: 2 axle: no trailer: GVM over 12.0 tonne 153 148 92 0
Rigid trucks: 2 axle: with trailer 168 192 101 0
Rigid trucks: 3 axle: no trailer: GVM 4.5 to 18.0 tonne 133 104 80 0
Rigid trucks: 3 axle: no trailer: GVM over 18.0 tonne 196 222 117 0
Rigid trucks: 3 axle: with trailer: less than 42.5 tonne 341 333 204 0
Rigid trucks: 4 axle: no trailer: GVM 4.5 to 25.0 tonne 81 61 48 0
Rigid trucks: 4 axle: no trailer: GVM over 25.0 tonne 234 250 140 0
Rigid trucks: 4 axle: with trailer: less than 42.5 tonne 545 686 326 0
Rigid trucks: Heavy Truck/Trailer Combination 526 570 315 0
Articulated trucks: single trailer: 3 axle rig 156 122 93 0
Articulated trucks: single trailer: 4 axle rig 396 320 237 0
Articulated trucks: single 3 axle trailer: 5 axle rig 410 346 245 0
Articulated trucks: single 2 axle trailer: 5 axle rig 581 478 347 0
Articulated trucks: single trailer: 6 axle rig 813 753 486 0
Articulated trucks: B-double: < 9 axle rig 1,502 1,353 898 0
Articulated trucks: B-double: 9+ axle rig 1,636 1,543 979 0
Articulated trucks: Road train: 2 trailers 1,224 874 758 0
Articulated trucks: Road train: 3 trailers 1,778 940 702 0
Articulated trucks: > 6 axle rig (NEC) 814 625 487 0
Other trucks 60 80 36 0
Buses: 2 axle: GVM 4.5 to 10.0 tonne 179 223 107 0
Buses: 2 axle: GVM over 10.0 tonne 296 340 177 0
Buses: 3 axle 516 474 308 0
Buses: articulated 362 253 216 0
Page 30 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
4.2.5 A framework for enforcement
During the consultation process, the trucking industry stated a strong view that the
inclusion of enforcement costs could only be justified if there was a framework that linked
charges with enforcement activity and recognised both compliance and revenue from
enforcement. The industry was concerned that without such a framework, the recovery of
enforcement costs would not result in better, more targeted and efficient levels of
enforcement. It was also concerned about the quality of the data available on enforcement.
However, if a framework was in place, the industry considered it appropriate to recover
mass-related enforcement costs.
The NTC has considered the frameworks being developed to improve the consistency and
quality of enforcement. It notes that a national heavy vehicle enforcement strategy is
currently being developed, and a chain of responsibility laws are being implemented
around the country. This work will also improve the quality of enforcement data. More
importantly, NTC notes that it is currently undertaking a review of accreditation with the
intent of introducing an audited compliance based model to accreditation. This holistic
model acknowledges the considerable safety and productivity benefits associated with
accreditation and seeks to encourage greater participation in accreditation through the
regulatory and financial incentives. The model also incorporates features intended to lead
to more targeted enforcement activities.
The recovery of enforcement costs through charges better facilitates the provision of
financial incentives.
4.3 How should costs be allocated between vehicle classes?
The methodology the NTC used to allocate the cost base to be recovered through charges
to the different vehicle classes is based on the best available research, and was updated and
consulted on as part of the Third Determination process. This methodology is detailed in
Appendix B.
The Productivity Commission reviewed the methodology in detail as part of the PC
Inquiry. It found that the methodology was reasonable but conservative in nature (i.e. that
overall it favoured the trucking industry). The NTC also notes that in general, the trucking
industry supports the methodology. Although it disagrees with some of the cost allocations
in the NTC model (see section 6.2.2), the industry commented to the PC Inquiry that there
is transparency as well as a "high degree of accuracy in the current model"16. In addition,
industry representatives attending a technical workshop in May 2007 acknowledged that
the current models are an improvement to those used in the Second Determination.
4.3.1 The importance of VKT in allocating costs
The NTC would like to emphasise the importance of road use data, particularly vehicle
kilometres travelled (VKT) in the allocation of costs and derivation of charges. That is, the
heavy vehicle charges that apply to each vehicle class reflect that class' consumption of the
network.
Although the carrying capacity is also taken into account, it is the extent to which a vehicle
is used that determines the level of road wear attributable to that vehicle. For example, a
triple road train that travels only 30,000km a year consumes considerably less of the road
16
Neil Gow, ATA (PC Public Hearing, 6/11/06 Canberra)
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 31
infrastructure (and therefore has a lower road access cost) than a B-double that does
300,000km a year. Therefore, vehicle classes that on average do high kilometres will be
allocated a higher proportion of costs than vehicle classes that do low kilometres, even
though the latter might have a greater carrying capacity.
4.3.2 The reliability of road usage data
The road usage data the NTC uses in allocating the cost base between vehicle classes is
provided by the Australian Bureau of Statistics through its Survey of Motor Vehicle Usage
(SMVU). During consultation, the trucking industry expressed some concerns about the
quality of this data. The industry noted that the SMVU road usage numbers did not seem
to always accurately reflect actual road usage, particularly the data for road trains.
However, it conceded that the SMVU data set was the best nationally consistent data set
available on heavy vehicle road use.
The NTC considered the industry's views, particularly in relation to the data for road
trains' road usage. The NTC agreed that there seems to be considerable differences in
VKT between double (type 1) and triple (type 2) road trains of 120,691km and 180,919km
respectively. The NTC noted the SMVU sample size for this part of the heavy vehicle
fleet is particularly small. While this reflects the small proportion of the total fleet, it does
mean that the resulting data is less reliable.
Given this, the NTC undertook further analysis on the reliability of the SMVU road train
data. It found the standard error associated with road train VKT was sufficiently large that
the VKT for double and triple roads trains fell within a similar range applying a 95 per cent
confidence interval. On this basis, and given the significant impact VKT has on cost
allocation, the NTC has adopted a conservative approach and applied an average road train
VKT figure of 133,750 to both double and triple road trains. This has the impact of
increasing the cost allocated to double road trains from $35,611 to $38,055 and decreasing
the costs allocated to triple road trains from $68,342 to $47,323 (before unsealed travel
adjustments are made).
4.4 How should prices be set to fully recover heavy vehicle costs in
aggregate and ensure all vehicle classes at least recover their
attributable costs?
As Chapter 3 identified, the primary objectives for heavy vehicle charges under the 2007
Determination include ensuring that heavy vehicles in aggregate fully recover heavy
vehicle allocated expenditure, and that each vehicle class at least recovers its attributable
expenditure. The NTC considered the implications of these objectives, particularly the
objective related to the recovery of attributable expenditure, for B-doubles, road trains,
vehicle flexibility and the enforcement burden. It found that:
· setting charges for B-doubles to recover their attributable cost is not likely to create an
incentive for operators to substitute them with less safe vehicles
· setting charges for road train trailers to reflect the attributable cost of these trailers will
address the current under-recovery by triple road trains and over-recovery by double
road-trains
· the many road agencies already offer flexibility for heavy vehicles to switch between
registration classes at short notice
Page 32 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
· the net impact on rural and regional areas is negligible as the costs are simply
redistributed between road train types already servicing these areas
· the enforcement burden should be no greater, as governments must still ensure that
operators are correctly charged for their number of trailers; and
· a move to full recovery of attributable costs will result in registration charges for most
classes of vehicle increasing by a moderate amount or falling.
Given the above, the NTC believes that attributable cost recovery is appropriate and
consistent with other ATC principles and COAG requirements for heavy vehicle charges.
Therefore, it has treated this as a minimum requirement in developing the options for
setting charges.
The NTC's considerations and the options for setting charges are outlined below. Please
note that all the options result in full recovery of heavy vehicle allocated expenditure in
aggregate and full recovery of attributable costs, and none of the options result in over-
recovery. In addition, all options assume the inclusion of 2007/08 budget expenditure in
establishing the cost base as discussed in section 4.1, and reflect the changes in the
allocation of costs to double and triple road trains discussed in section 4.3.
4.4.1 Implications for B-doubles and road trains
The PC Inquiry found that based on Third Determination data, B-doubles and road trains
fail to recover both their attributed and allocated costs (p119 PC 2007). Therefore, the
objective that each vehicle class at least recovers its attributable expenditure has
considerable implications for these vehicle classes.
Impact on B-doubles
In 2000, the Second Determination capped charges for B-doubles - then a relatively new
class of heavy vehicle - at the level of road train charges to ensure there was no incentive
for operators to substitute B-doubles with less safe road trains. However, this cap
prevented B-doubles from recovering their attributable costs. This is because road trains'
attributable costs are lower than B-doubles reflecting the fact that they mainly travel on
unsealed roads in remote and regional areas (see Appendix B Vol II, for more detail).
The most recent SMVU data shows that, in most cases, B-doubles and road trains operate
on distinct networks. B-doubles increasingly operate in urban and port areas where road
trains do not have access. Therefore, the NTC's best assessment is that substitution is
unlikely to be a significant risk.
During consultations, the trucking industry suggested that it is more likely that B-doubles
would be substituted with 6 axle articulated semi trailer vehicles. The NTC considered the
relative efficiency of these two vehicle classes on the basis of net tonne kilometres and
found on average a B-double is still more efficient than a 6 axle articulated vehicle, even
with higher charges. The trucking industry was unable to provide the NTC with any
further compelling evidence of their substitution concerns.
The ATC asked the NTC to consider the implications for B-doubles and road trains which
do operate on the same network. This is a particular concern in WA where road trains
have the same access as B-doubles. The concern is that operators may substitute safer
B-doubles with compact road trains which face lower registration charges but have the
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 33
same carrying capacity. The NTC notes that this is a very local issue specific to WA
which will be more completely addressed through the broader reform program.
Impact on road trains
Under the Second Determination, double and triple road train prime movers are charged
the same weighted average charge (the difference in charges being the number of trailers)
to ensure double and triple trailer sets can be easily substituted.
As a result of this, triple road trains significantly under-recover their attributable costs,
while double road trains over-recover their fully allocated costs. The reason for this is that
the trailer charge currently does not reflect the actual infrastructure cost of a trailer.
Adopting the principle of attributable cost recovery by vehicle class and applying the same
charging methodology would differentiate the prime mover charges for double and triple
road trains.
4.4.2 Implications for vehicle flexibility and enforcement burden
The NTC's consultations indicated that while there is broad support for the principle of
attributable cost recovery, there are also concerns about the implications this may have for
vehicle configuration flexibility and the enforcement burden.
The trucking industry strongly put the view that operators should be able to change their
vehicle configuration to meet their needs for specific trips without facing adverse financial
implications. In order to enable a standard trailer axle charge, the draft RIS options
proposed that B-double, double road train and triple road train prime movers would all
have different registration charges. The trucking industry expressed concern that the
flexibility of the current charges arrangement would be lost by having a differentiated
charge for a prime mover that is the same, except for the trailer configuration.
Some jurisdictions expressed concern that a change to the charges structure would result in
a greater enforcement burden. This is because operators would be given an incentive to
register their prime mover in the most inexpensive class (a double road train) but run it as
part of a B-double or triple road train configuration.
In light of these concerns, and in consultation with the trucking industry, the NTC has
developed an additional charges option since the release of the draft RIS (Option C3). Like
Options C1 and C2, this option ensures that the objectives for cost recovery are met.
However, it better maximises the flexibility of a prime mover by providing a multi-
combinational prime mover charge. Cost recovery is achieved by differentiating the trailer
axle charge by the type of trailer, not by the vehicle configuration. This approach is
consistent with the modular approach to charging that the ATA proposed in its submission
to the draft RIS, and enables virtually any configuration of prime mover and trailers to be
accommodated through the charges schedule.
4.4.3 Option C1
Option C1 achieves full cost recovery of heavy vehicle allocated expenditure in aggregate,
and ensures that all vehicle classes recover their attributable costs. However, it allows for
vehicle classes to over- or under-recover their common costs. The option also ensures that
the minimum registration charge for heavy vehicles does not fall below the maximum
registration charge for light vehicles. This in line with the ATC pricing principle that
charges "should have regard to other pricing principles such as light vehicle charges" and
protects against perverse vehicle investment signals.
Page 34 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
Table 6 shows the charges that would result from this option when combined with the
Option b (partial inclusion of road agency enforcement costs, which is the NTC's preferred
option) and with option c (exclusion of all enforcement costs), and based on a cost base
that includes 2007/08 budget expenditure. Consistent with the current charges regime,
Option C1 has a standard trailer axle charge that necessitates a differentiated prime mover
charge for the heavier end of the fleet.
Table 6. Charges under Option C1 for select vehicles under different
enforcement scenarios
Charges under
Charges under
Option C1 +
Current charges Option C1 + no
partial
(2007/08) enforcement
enforcement
Fuel charge (cents/litre) 19.633 21.3 19.8
Prime Prime Prime
Registration charges ($ per vehicle) Total Total Total
mover Mover mover
Trailer charge per axle 355 365 365
2 axle rigid truck, 4.5 - 7t 355 355 365 365 365 365
3 axle rigid truck > 18.5t, no trailer 946 946 827 827 876 876
4 axle rigid truck over 25t no trailer 2,365 2,365 827 827 876 876
Heavy truck/trailer over 42.5 t 5,794 7,071 6,042 7,320
6 axle articulated truck 4,019 5,084 4,060 5,155 4,454 5,349
B-double 9 axle 5,911 8,041 13,796 15,986 14,402 16,592
Double road train 5,911 8,751 7,531 10,451 8,175 11,095
Triple road train 5,911 10,526 8,292 13,037 9,245 13,990
2 axle bus over 10 t 592 592 365 365 365 365
Registration share of charge
revenue 35.5% 36% 39%
The NTC notes that it may appear counter-intuitive that as the enforcement cost
component of the cost base falls, registration charges increase. This occurs because the
fuel charge falls. As a result, fuel charge revenues decrease by a greater amount than the
increase in registration charge revenues. So while registration charges increase slightly,
overall charges (i.e. fuel and registration) decrease as less enforcement cost is taken into
account.
4.4.4 Option C2
Option C2 achieves full cost recovery of heavy vehicle allocated expenditure in aggregate
and ensures that each vehicle class recovering its fully allocated expenditure. That is, each
vehicle class recovers its attributable expenditure and its share of common costs: there is
no over or under-recovery of costs by vehicle classes. The impact of this is that the fuel
charge does not increase to the same extent as under Option C1. However, registration
charges increase significantly for those vehicle classes that currently under-recover their
fully allocated costs by a considerable amount.
As with Option C1, the registration charges of vehicle classes that do not currently under-
recover their allocated expenditure increase moderately or even decrease under this option.
However, unlike Option C1, the minimum registration charge falls below the average
maximum registration charge faced by light vehicles. This is primarily because the lighter
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 35
end of the heavy vehicle fleet over-recovers its share of common costs under Option C1 to
accommodate the failure of B-doubles to do so. This result is inconsistent with the ATC
pricing principles (which require charges to have regard to other road pricing mechanisms)
and may lead to perverse outcomes at the boundary between light and heavy vehicles (i.e.
it creates an incentive for operators to purchase a vehicle over rather than under 4.5 tonnes
so that they face a lower registration charge).
Table 7 shows the charges under Option C2, again combined with Options a and b for the
inclusion of enforcement costs and based on a cost base that includes 2007/08 budget
expenditure. As under Option C1, the charges include a standard trailer axle charge and
differentiated prime mover charge for the heavier end of the fleet.
Table 7. Charges under Option C2 for select vehicles under different
enforcement scenarios
Charges under
Charges under
Option C2 +
Current charges Option C2 + no
partial
(2007/08) enforcement
enforcement
Fuel charge (cents/litre) 19.633 19.7 17.9
Prime Prime Prime
Registration charges ($ per vehicle) Total Total Total
mover Mover mover
Trailer charge per axle 355 365 365
2 axle rigid truck, 4.5 - 7t 355 355 235 235 234 234
3 axle rigid truck > 18.5t, no trailer 946 946 977 977 1,075 1,075
4 axle rigid truck over 25t no trailer 2,365 2,365 977 977 1,075 1,075
Heavy truck/trailer over 42.5 t 5,737 5,737 6,383 7,661 6,725 8,003
6 axle articulated truck 4,019 5,084 4,754 5,849 5059 6,154
B-double 9 axle 5,911 8,041 2,040 22,230 20,906 23,096
Double road train 5,911 8,751 8,957 11,877 9,827 12,747
Triple road train 5,911 10,526 9,986 14,731 11,207 15,952
2 axle bus over 10 t 592 592 298 298 403 403
Registration share of charge
revenue 35.5% 41% 44%
4.4.5 Option C3
Option C3 is the NTC's preferred option. It based on Option C1 but, as discussed above, it
seeks to ensure maximum vehicle flexibility through the modification of the charges
structure to allow a multi-combinational prime mover charge for B-doubles and road
trains. The objective that vehicle classes at least recover their attributable costs is achieved
by applying differentiated trailer axle charges instead of a uniform charge. Trailer
flexibility is maintained, as the cost of a particular trailer remains the same regardless of
the vehicle configuration it is used in. With this modification, charges become modular and
cost recovery is spread more evenly between the trailer and prime mover charges.
Table 8 shows the charges the result under Option C3, again combined with Options b and
c for the inclusion of enforcement costs and based on a cost base that includes 2007/08
budget expenditure.
Page 36 2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I
Table 8. Charges under Option C3 for select vehicles under different
enforcement scenarios
Charges under
Charges under
Option C3 +
Current charges Option C3 + no
partial
(2007/08) enforcement
enforcement
Fuel charge (cents/litre) 19.633 21.0 20.9
Prime Prime Prime
Registration charges ($ per vehicle) Total Total Total
mover Mover mover
2 axle rigid truck, 4.5 - 7t 355 355 380 380 350 350
3 axle rigid truck > 18.5t, no trailer 946 946 859 859 761 761
4 axle rigid truck over 25t no trailer 2,365 2,365 859 859 761 761
Heavy truck/trailer over 42.5 t 5,737 5,737 5,828 7,158 5,672 5,672
6 axle articulated truck 4,019 5,084 3,930 5,220 3,799 4,864
B-double 9 axle 5,911 8,041 7,050 14,340 5,050 13,090
Double road train 5,911 8,751 7,050 10,390 5,050 7,890
Triple road train 5,911 10,526 7,050 12,440 5,050 9,665
2 axle bus over 10 t 592 592 380 380 350 350
Trailer charges ($ per axle)
Standard trailer axle charge 355 380 355
Semi trailer tri-axle 355 430 355
B-double lead trailer - tandem axle 355 1,900 2,275
B-double lead trailer - tri axle 355 2,000 2,325
Road train dolly trailer 355 380 355
Registration share of charge
revenue 35.5% 37.2% 35.3%
Figure 9 below better illustrates how the charges under Option C3 apply to different
vehicles.
2007 Heavy Vehicle Charges Determination Regulatory Impact Statement Vol I Page 37
Figure 9. Application of charges under Option 3Cb to vehicles
Component cost Total
Vehicle
Prime mover + ( Trailer charge x number of axles ) registration
Articulated truck: 2 axle semi trailer: 5 axle rig
$3930 + ($380 x 2) $4,690
Articulated truck: tri axle semi trailer: 6 axle rig
$3930 + ($430 x 3) $5,220
B-double: 9 axle rig (tri axle lead trailer and tri axle semi trailer)
$7050 + (2,000 x 3) + ($430 x 3) $14,340
Road Train: 2 tri axle semi trailers (1 dolly)
$7050 + (430 x 3) + ($380 x 2) + ($430 x 3) $10,390
Road Train: 3 tri axle semi trailers (2 dollies)
$7050+(430 x 3)+(380 x 2)+(430 x 3)+(380x2)+(430 x 3) $12,440
4.5 What charges should apply to high-productivity vehicles?
The heavy vehicle industry is currently going through a period of considerable change,
with the COAG-supported implementation of a Performance Based Standards approach to
allow new heavy vehicle types to operate. These new vehicle types are likely to impose
additional costs on the road infrastructure, but have considerable productivity benefits.
However, because they do not fit with the current vehicle classifications, there are
constraints on the use of these vehicles.
To remove these constraints, the ATC directed the NTC to develop charges for these high-
productivity vehicles. It also indicated that these vehicles should recover their fully
allocated costs.
In the draft RIS, the NTC proposed an approach that involved a high-productivity vehicle
charge formula. Feedback on this approach was mixed, so the NTC developed an
alternative modular approach to charges - Option C3 discussed above - that
accommodates higher productivity vehicles. Each of these options is discussed below.
4.5.1 Higher productivity vehicle charge formula
In the draft RIS, the NTC proposed that a higher productivity vehicle charge formula to be
used to calculate charges unless the vehicle type can be accommodated within the
registration charge range for the nearest prescriptive vehicle type. It also proposed that:
· the formula be transparent and consistent with the current determination methodology
to enable to costing of new high-productivity charges
· vehicles that cause no additional damage to the network be mapped to existing
registration categories
· commonsense guidelines for the application of the formula to new vehicle types be
produced to minimise any perverse outcomes.
The NTC also proposed a formula that states that the annual registration charge equals the
allocated cost less the fuel charge revenue expected to be paid by the vehicle per annum,
and outlined the steps involved in this calculation (see Box 3). In addition, it outlined a
process for estimating the key input values for this formula, based on the expected values
for annual VKT, AGM and fuel usage; a first principles approach to determining the ESA
value; and estimating the PCU value given the relative length of the new vehicle compared
to a medium size passenger car.
Box 3: Steps involved in applying the higher productivity vehicle charges
formula
Step 1: To consider whether it is appropriate to apply the formula to the new vehicle or to map to
an existing vehicle class.
Step 2: To derive the allocated cost which is based on the sum of attributable and non-attributable
(common) costs.
Allocated cost = [(AGM unit cost*AGM value)+(ESA unit cost* ESA value)+(PCU unit cost*PCU
value)+ (VKT unit cost)+(non attributable unit cost)]* annual VKT
Where:
AGM unit cost = 0.14 cents per tonne kilometre
ESA unit cost = 3.44 cents per ESA kilometre
PCU unit cost = 0.33 cents per PCU kilometre
VKT unit cost = 1.18 cents per kilometre
Non-attributable unit cost = 2.26 cents per kilometre.
These unit costs are set at the average unit costs across the entire network that
the NTC has derived from its cost allocation and road use modelling.
Noting the following:
AGM is average gross mass
ESA is equivalent standard axles
PCU is passenger car unit
VKT is vehicle kilometres travelled
Step 3: To derive annual fuel charge revenue based on projected fuel economy and annual travel.
Annual fuel charge revenue = NTC derived fuel charge * fuel usage per kilometre* annual VKT.
The NTC fuel charge that applies at the time will be used to set the "NTC derived fuel charge".
Step 4: To derive the registration charge by deducting the annual fuel charge revenue from the
allocated cost.
In submissions in response to the draft RIS, stakeholders expressed mixed views on the
higher productivity formula and estimation of the data inputs for this formula. For
example:
· Australian Livestock Transporters Association (ALTA) commented that it would be
simpler and more effective to develop a charging system for higher productivity
vehicles based on the current "class-by-class" registration calculations, such as via a
"multi-combination registration fee" that "could be stepped to reflect the higher/newer
combinations".
· Australian Rail Track Corporation (ARTC) expressed general support for the higher
productivity formula, provided that the incremental pricing for higher productivity
vehicles was fully cost/risk reflective.
· Australian Trucking Association (ATA) opposed a formula which estimates a charge
for higher productivity vehicles based on individualised fuel consumption, kilometres
travelled and average gross mass projections, stating that this will result in an
"individualised mass-distance charge administered under the auspices of individual
road agency permit systems". It argued that this returns the administration of nationally
consistent heavy vehicle charges to the individual road agency permit fee system
prevalent in the 1980s. ATA also put the view that:
- The current charges schedule can be adequately accommodate "modular" vehicles
commonly referred to as higher productivity vehicles such as B-triples, quad-axle
semis etc. This can be achieved through either the existing fixed charge per axle or
based on the application of "PCU, ESA, GVM, VKT and fuel consumption
relationships" which should enable a revised "charging structure for trailers"
applying a "well reasoned building block approach" so that there is an established
charge for the additional axle or trailer.
- The allocated cost for higher productivity vehicles that have more than one trailer
(e.g. B-double, B-triple) should not include the non-attributable cost since these
type of vehicles do not recover their full common costs under the registration
charges as per Option C1 (assuming partial recovery of enforcement costs).
· Cement Industry Federation (CIF) expressed similar views to the ATA (see above).
· The Department of Transport, Energy & Infrastructure (SA) stated that the proposed
approach higher productivity charges will generate a number of administrative issues,
including additional resource requirements, as it includes operating the new vehicle
types under a permit system. It also commented with reference to B-triples, that a
simple system will become a complex system and recommends that B-triples are
classed and charged as double road trains. In addition asked how infrastructure
expenditure and road use statistics specific to higher productivity vehicles will be
isolated from future PAYGO determinations.
· National Farmers Federation (NFF) noted that the higher productivity formula does not
provide clarity on how the higher productivity vehicles will be charged and expressed
concern that this would not provide certainty for operators looking to invest in new
technology, with the "potential to deter them from choosing the higher productivity
option".
· Queensland Rail (QR) stated that pricing for higher productivity vehicles should be
based on full cost recovery and also reflect the direct costs of infrastructure changes
required for their operation.
· Queensland Transport (QT) supported mapping higher productivity vehicles that are
not expected to cause additional road damage to existing vehicle registration
categories. However, it noted that data needed for the higher productivity formula may
not be readily available. As a result of this, it suggested that there may be a need for
jurisdictions to share empirical data, and for the development of standardised estimated
techniques (e.g. fuel consumption rates) and commissioning of additional studies of
particular freight tasks.
In direct consultation with the ATA, the NTC developed an example calculation for a
hypothetical B-triple configuration. During this consultation, ATA suggested that the
formula inputs (such as annual VKT, ESA rate, AGM in tonnes, PCU value and fuel usage
per kilometre) should be estimated so that they are appropriately relative to an existing
vehicle class that is comparatively the same as the higher productivity vehicle given the
characteristics of the new higher productivity vehicle. They also expressed the view that
the B-triple is just a B-double with an extra trailer and the charging system should evolve
to a modular concept in which there is a simple charge for any additional trailers.
During the public hearings, the NTC presented the higher productivity formula and the
example B-triple calculation. Similar comments were received to that expressed by ATA
including:
· There has to be some appropriate relativity between new vehicle types and existing
vehicle types. There was significant discussion around maintaining appropriate
relativities at the public hearings in WA and NSW.
· Most of the higher productivity vehicles can be accommodated under the existing
charging schedule. This was highlighted at the public hearings in Melbourne and
Canberra.
· In addition, at the Canberra public hearing, a number of participants (including the
ALTA and the ATA) suggested that a revised charging approach could involve
charging trailers at different rates depending on the type of trailer and the number of
trailers in the overall vehicle configuration - a "modular vehicle concept". The ATA
further recommended that one prime mover charge could be applied to all vehicles that
have more than one trailer (a multi-combinational prime move charge), thereby
reducing the possibility of inappropriate substitution between vehicle classes at the
higher mass end range.
4.5.2 Modular approach to charges
Based on the stakeholder comments in submissions and at the public hearings, the NTC
developed a modular approach to charges that accommodates higher productivity vehicles.
This approach - Option C3 discussed above - consists of a revised registration charging
schedule that allows for modularisation of the trailer component of the registration charge
for vehicles that have trailers into different components based on:
· the type of axle groupings that make up the trailer axles (that is, excluding the prime
mover axle groupings)
· the number of axle groupings
· the number of axles within each axle grouping.
The NTC prefers this modular approach. It notes that several stakeholders suggested a
modular approach during the consultative process. The NTC considers that it is a simple
method for charging vehicles regarded as higher productivity vehicles. Importantly, it is
consistent with the Determination objective that each vehicle class should recover at least
its attributable costs.
Whilst these vehicles may not fully recover their allocated costs, their charges are set at a
level comparable to substitute vehicles and are therefore more appropriate. It is expected
that full allocated cost recovery will result from the broader price reform process.
Under the modular approach, a registration charge for higher productivity vehicle types
that have an additional axle (such as a Quad-axle semi compared to a 6-axle articulated
truck) or an additional trailer (such as a B-Triple compared to a B-Double) can easily be
generated from the charges schedule. Table 9 shows how the registration charge for three
vehicle types, which could be categorised as higher productivity vehicles, can be
constructed through the recommended schedule of charges.
Table 9. Modular charge components of higher productivity vehicles
Vehicle Modular Components Resulting charge
Quad-Axle · 1 x short-combination prime mover $5,650
Semi
· 1 x 4 axle semi trailer
Quad-Tri B- · 1 x multi-combination prime mover $16,340
Double
· 1 x 4 axle lead trailer
· 1 x 3 axle semi trailer
B-Triple · 1 x multi-combination prime mover $20,340
· 2 x 3 axle lead trailer
· 1 x 3 axle semi trailer
If the modular approach under Option C3 is adopted, the NTC considers that there is no
need for the higher productivity formula to be used as the basis for establishing a
registration charge for new vehicle types. The reasons for this are as follows:
· Many of the higher productivity vehicles are simply existing vehicle types with more
trailers or axles than are currently allowed. For example, a B-Triple is the same as a B-
Double except it has one additional 3 axle lead trailer, and a quad-tri B-Double is the
same as a B-double except it has one more axle on the lead trailer. The modular
approach allows for the setting of a registration charge for these vehicles.
· Other more innovative higher productivity vehicles may have a different length and
average mass compared to similar vehicle types (based on axle groupings), which may
result in a slightly different registration charge under the higher productivity formula
approach compared to an approach based on modularised trailer charging. However,
the degree of accuracy generated via the higher productivity formula is not necessary
for the following reasons:
- The charges for existing vehicle types are based on a range of vehicles classified
under each class which will each have a length and average gross mass that is most
likely higher or lower than the average length and average gross mass used for each
vehicle class in the costing model (sourced from the survey of motor vehicle data
from ABS). Therefore, applying the modularised approach to trailer charging for
new innovative vehicles is similar to the current approach to setting a registration
charge for existing vehicles, which do not necessarily confirm to the average for the
vehicle class.
- New innovative vehicles would have to be a good deal shorter or longer in length
than current vehicles classes to have an impact on the allocated cost under the
higher productivity formula, since the PCU unit cost is relatively small compared to
the other unit costs.
In addition, the NTC's analysis indicates the modular approach and the formula result in
similar registration charges for higher productivity vehicles that have an additional trailer
or axles compared to existing vehicle types.17 For example, Table 10 shows that the
registration charges derived using the different approaches for a B-Triple are very similar.
This further supports the justification for the modular approach, and suggests that the
higher productivity formula can be used to validate the modular approach to setting the
trailer component of the registration charge.
Table 10. Registration charges for B-Triples and B-Doubles derived using
the different approaches
B-double B-triple Difference
Charge using modular approach $14,340 $20,340 $6,000
Charge using high productivity formula $14,913 $20,418 $5,505
Note: the higher productivity formula charges exclude non-attributable costs are per the revised higher
productivity formula in Appendix H.
In the NTC's view, the difference of around $5,500 between the charges for B-Doubles
and B-Triples under the higher productivity formula provides a strong justification for the
charge of $2,000 per axle for lead trailer axles (or $6,000 in total for a B-Triple) under the
modular approach. A detailed calculation of the registration charge for the B-Triple vehicle
under the higher productivity formula is provided in Appendix H. This appendix also
includes a similar comparison of vehicle configurations that have quad-axles on the semi-
trailer, which provides justification for the magnitude of the fourth axle trailer charge
under the modular approach.
The modular approach to developing the trailer charge component of the registration
charge will involve defining the type of trailer axle groupings that make up a vehicle's
configuration. This differential (modular) trailer charging approach can be used to
determine the trailer component of the registration cost for any vehicle, including PBS
vehicles, based on the trailer axle group types. It is not anticipated that there will be any
vehicles that cannot fit into this modular approach.
In the case of Performance Based Standards (PBS) vehicles, the NTC considers that a
potentially effective approach is for the PBS Review Panel (PRP) to decide how to
modularise the new vehicle into its components (the PRP could also set up guidelines that
would assist it in this process). However, if there is a new innovative vehicle that is
unlikely to be a PBS vehicle, the jurisdictions can modularise this vehicle into its
components in a manner that they deem consistent with the trailer types (this is expected
this to be an extremely small amount of vehicles).
If the practical application of these guidelines does not suitably enable an appropriate
classification of the trailer axles of a new innovative vehicle, the Performance Based
Standards Review Panel can assess the vehicle configuration and modularise the vehicle's
trailer axles into its component parts.
17
The higher productivity formula used in this analysis has taken into account the feedback received from
public consultations. This feedback has led NTC to revise the formula such that input values (such as annual
VKT, ESA value, PCU value and fuel usage) and other aspects of the formula are estimated in a way that is
relative to existing vehicle classes and is also simple to calculate. The revised higher productivity formula is
outlined in Appendix H.
Incremental prices are not considered in this Determination. Under the Road Reform Plan,
COAG has required a detailed review, including trials, to assess the feasibility of
incremental pricing by December 2008.
4.6 Should charges under the 2007 Determination be phased in?
The charges that result from the NTC preferred options include both increases for prime
movers and trucks in some heavy vehicle classes and decreases for others. The introduction
of differential trailer charges will also result in large increases for some trailer types. To
mitigate the impact of charge increases, the draft RIS included two options for phasing in
charges over a period of either two or three years.
The NTC notes that in principle, COAG supports the phasing in of charges under the 2007
Determination. However, it also notes that this will mean that charges do not fully recover
expenditure until the final year of implementation.
Consultation on the draft RIS revealed that although some operators preferred to
implement the Determination fully in year one, there was a strong preference for a phase in
period of at least three years. The trucking industry indicated that such a phase in period
would better enable it to either absorb or pass on the increased cost.
In the draft RIS, the NTC proposed a phasing in schedule that sought to recover a greater
proportion of costs in year one, to take into account that in subsequent years operators
would also face annual adjustment increases. However, the Brisbane focus group indicated
a strong preference for greater weight being placed on the later years:
"It is definitely going to take a year for us to figure out what our fleet should really
look like, because of all of the issues around rates and getting new rates out of
customers and the types of vehicles you run...a more balanced introduction would
be better"18
Therefore, the NTC has changed its phase in methodology to better address these concerns.
The tables below present the options for a two or three year phasing in period. For
simplicity of comparison, the phasing in options have been demonstrated only for the
charges under Option C1 and C3, both assuming partial recovery of enforcement costs, and
a cost base that includes 2007/08 budget expenditure. Please note that charges being
phased in are still subject to an annual adjustment, so the charges in the tables below are in
nominal terms (i.e dollars of the day) and do not include any future annual adjustment.
However, as discussed earlier, when 2007/08 budget expenditure is included in calculating
in the cost base an annual adjustment is not required in 2008 and is unlikely to be required
in 2009.
Table 11 shows charges Option C1 phased in over two and three years. The following
principles were applied to the phasing in of charges under this option:
· The fuel charge is implemented in full in year 1.
· If prime mover registration charges have increased only marginally or have fallen, the
charge is passed through in full in year one.
18
T Knowles, Brisbane Focus Group, 3 August 2007
· For the two-year phase-in, if the charge has increased significantly, it is phased in
evenly over the two years.
· For the three-year phase-in, if the charge for a vehicle class has increase by $2,000 or
less, the charge for that class is phased-in over two years, on the same basis described
above. If this charge has increased by more $2,000, it is evenly phased in over three
years.
Table 11. Option C1 with a two or three year phase in of registration
increases (nominal)
2-year phase in 3-year phase in
Current Year 1 Year 2 Year 1 Year 2 Year 3
Fuel charge 19.633 21.3 21.3 21.3 21.3 21.3
Registration charges ($
per vehicle)
Trailer charge per axle 355 365 365 365 365 365
2 axle rigid truck, 4.5 -7
tonnes 355 365 365 365 365 365
3 axle rigid truck over
18.5 tonnes, no trailer 946 827 827 827 827 827
4 axles rigid truck over 2,365 827 827 827 827 827
25t
Heavy truck/trailer over 5,737 6,422 7,071 6,422 7,071 7,071
42.5 tonnes
6 axle articulated truck 5,084 5,155 5,155 5,155 5,155 5,155
B-doubles 8,041 12,044 15,986 11,824 14,453 15,986
Double road train 8,751 9,641 10,451 9,941 10,451 10,451
Triple road train 10,526 11,847 13,037 11,450 12,243 13,037
2 axle Bus over 10 tonnes 592 365 365 365 365 365
Under recovery ($m) 168 46 0 60 26 0
Table 12 and 13 show charges Option C3 phased in over a two or three year period. The
NTC applied the following principles in phasing the charges under this option:
· The fuel charge increase is implemented in year 1.
· For truck and prime mover registration charges, all increases and decreases are fully
implemented in year 1, with the exception of heavy truck trailers charges. In this case,
the increase in the vehicle component of the registration charge is phased in equally
over three years. This exception is due to the large increase proposed, which has partly
resulted from reclassification of SMVU data and feedback from stakeholders on the
impacts of this increase.
· For trailers, the increase in the standard trailer per axle rate is implemented in year 1.
Where a differential trailer axle charge is proposed, the charge is phased in over three
years with the year 1 charge being equivalent to the standard trailer axle rate and the
balance being implemented evenly in the remaining years.
The phasing in of new trailer charges allows trailer owners a period of time to adjust to the
new charges and formalise a trailer fleet management strategy to minimise exposure to the
increased charges. At the same time, the approach allows registration authorities time to
modify their registration systems and re-train staff to accommodate a differential trailer
axle charge system. The NTC's preferred option is for the three-year phase in period
(shown in Table 13).
Table 12. Option C3 with a two year phase in of registration increases
(nominal)
2 year phase in
Current Prime mover Year 1 total Year 2 total
07/08
Fuel Charge 19.633 21.0 21.0
Registration Charges ($ per
vehicle)
2 axle rigid truck, 4.5 - 7 tonnes 355 380 380 380
3 axle rigid truck over 18.5 859
tonnes, no trailer 946 859 859
4 axle rigid truck over 25t no
trailer 859 859 859
Heavy truck/trailer over 42.5
tonnes 19 5,737 5161 6,491 7,158
6 axle articulated truck 5,084 3930 5,070 5,220
B-double 9 axle 8,041 7050 9,330 14,340
Double road train 8,751 7050 10,090 10,390
Triple road train 10,526 7050 11,990 12,440
2 axle bus over 10 tonnes 592 380 380 380
Annual under-recovery ($m) 168 83 0
Trailer charge per axle Year 1 Year 2
Standard trailer axle charge 355 380 380
Semi trailer tr-axle 355 380 430
B-double lead trailer - tandem
axle 355 380 1,900
B-double lead trailer - tri axle 355 380 2,000
Road train dolly trailer 355 380 380
19
Note the prime mover registration charge for this class of vehicle has been phased in over 2 years. This
figure represents the year 1 prime mover charge. The prime mover charge in years 2 and 3 is $5,828
Table 13. Option C3 with a three year phase in of registration increases
(nominal)
3 year phase in
Current Prime Year 1 total Year 2 total Year 3 total
07/08 mover
Fuel Charge 19.633 21.0 21.0 21.0
Registration Charges ($
per vehicle)
2 axle rigid truck, 4.5 - 7
tonnes 355 380 380 380 380
3 axle rigid truck over
18.5 tonnes, no trailer 946 859 859 859 859
4 axle rigid truck over 25t
no trailer 859 859 859 859
Heavy truck/trailer over
42.5 tonnes 20 5,737 5161 6,491 7,158 7,158
6 axle articulated truck 5,084 3930 5,070 5,145 5,220
B-double 9 axle 8,041 7050 9,330 11,835 14,340
Double road train 8,751 7050 10,090 10,240 10,390
Triple road train 10,526 7050 11,990 12,215 12,440
2 axle bus over 10 tonnes 592 380 380 380 380
Annual under-recovery
($m) 168 83 39 0
Trailer charge per axle Year 1 Year 2 Year 3
Standard trailer axle
charge 355 380 380 380
Semi trailer tr-axle 355 380 405 430
B-double lead trailer -
tandem axle 355 380 1,140 1,900
B-double lead trailer - tri
axle 355 380 1,190 2,000
Road train dolly trailer 355 380 380 380
4.7 How should charges be adjusted annually?
The current annual adjustment mechanism (specified in the Automatic Annual Procedure
for Heavy Vehicle Charges Regulatory Impact Statement, September 2001) is based on
changes in road expenditure from year to year and an assumption about the level of fleet
growth. As discussed in Chapter 4, this adjustment:
· cannot exceed CPI and cannot be below zero
· applies a uniform percentage increase to the registration charge for all vehicle classes,
and
· does not apply to the fuel-based charge.
As a result, the annual adjustment does not enable charges to continue to recover heavy
vehicle allocated expenditure in aggregate between determinations, and exacerbates any
under- or over-recovery by vehicle classes.
20
Note the prime mover registration charge for this class of vehicle has been phased in over 2 years. This
figure represents the year 1 prime mover charge. The prime mover charge in years 2 and 3 is $5,828
COAG has asked the ATC to direct the NTC to further develop the annual adjustment
arrangements to address these shortcomings, noting that any new arrangements may need
to be phased in.
The draft RIS set out four options for further developing the annual adjustment
arrangements to ensure that charges continue to recovery heavy vehicle allocated
expenditure in aggregate between determinations, and to remove cross-subsidisation across
vehicle classes. The NTC notes that to ensure charges continue to recover costs in
aggregate, the fuel component will need to be adjusted in the same way as the registration
component. It further notes that this is consistent with the Energy White Paper titled
"Securing Australia's Energy Future" (2004), which stated that the future objective of fuel
taxation for heavy vehicles is to link the road user charge component of the federal fuel
excise to the NTC's annual adjustment mechanism.
The four options and stakeholder comments on these options are outlined below.
4.7.1 Option A1: Maintain the current adjustment process with
modifications and inclusion of fuel indexation
This option consists of the current adjustment process for registration charges (as specified
in the Automatic Annual Procedure for Heavy Vehicle Charges Regulatory Impact
Statement, NRTC September 2001) with the following modifications:
· Updated formula components so as to align with the new 2007 Determination cost
allocation model including:
- new A,B and C Factors and Road Use Factor (see Appendix E, Vol II). These
factors allow for changes in road expenditure, vehicle kilometres travelled by both
light and heavy vehicles and number of vehicles.
- replacing the three-year moving average (to determine changes in road expenditure)
with a seven-year moving average. This seven-year moving average is based on a
seven-year average of real expenditure instead of the previous approach of using
nominal expenditure (see Appendix F, Vol II).
· The indexation of the fuel-based charge by the Annual Adjustment Formula used to
index registration charges. This may require changes to the Fuel Tax Act 2006.
4.7.2 Option A2: Option A1 with removal of the cap and floor
This option is the same as Option A1 (outlined above) but also includes the removal of the
CPI cap and 0 per cent floor. This removal means that this option better enables charges to
continue to recover allocated expenditure in aggregate over time than Option A1. For
example, the annual adjustment could not increase charges sufficiently to recover the large
increase in road expenditure over 2007 and 2008 (see Figure 2) if increases are capped by
the CPI.
However, like Option A1, this option does not ensure that any increase in charges resulting
from the annual adjustment is allocated between vehicle class according to their road
usage. As a result, it will inevitably result in over and under-recovery between vehicle
classes over time. For example, if one vehicle class' contribution to the overall road task
changes significantly over time, this could result in changes to the relative cost allocation
per vehicle between vehicle types.
In the draft RIS, the NTC proposed two potential approaches to address this issue,
including undertaking more frequent determinations and monitoring changes in key
variables to determine when a recalculation of charges is warranted. After considering
stakeholder feedback (see below) the NTC now considers the preferred approach is to:
· Undertake an annual review to determine whether key variables have moved
sufficiently to warrant a new determination. (Appendix G outlines the variables that
should be monitored as part of this process.)
· Undertake a new determination at least every five years (i.e., if not already undertaken
as a result of the annual review).
When combined with the above approach, Option A2 is the NTC's preferred option.
4.7.3 Option A3: Indexation of both registration and fuel charges
Under this option both fuel and registration charges would be indexed by either the CPI or
the Road Construction and Maintenance Price Index (RCMPI). RCMPI is calculated by
BTRE, and is the index the NTC uses to generate a real series of road expenditure in the
cost allocation model. The application of the CPI in the annual adjustment methodology
therefore represents an inconsistency with the Determination methodology. However, it
was adopted due to its simplicity.
One of the key benefits of Option A3 is its simplicity. However, it does not ensure that the
resulting charges match the estimated cost of road use over time, and therefore may result
in the need for major corrections in subsequent determinations. This is because changes in
road expenditure are driven by changes in the price of inputs (e.g. construction materials)
and changes in real output or activity. The use of a price index such as CPI or RCMPI
would only capture the change in the price of inputs, and not the change in the real output
or amount of construction work that has been undertaken. In addition, CPI and RCMPI are
only proxies for the price of inputs.
Figure 10 compares the estimated movement in arterial road expenditure to the CPI and
RMCPI over the period 1999/00 to 2007/08 (with the final year of this series, 2007/08,
based on forecast data). This comparison shows that arterial road expenditure has increased
at a rate that is considerably more than the increase in both the RCMPI and CPI over this
period. The implication of this is that changes in RCMPI and CPI have historically not
been representative of changes in road expenditure.
Figure 10. Comparison of changes in road expenditure to changes in
RCMPI and CPI (2000/01 = 100.0)
210
190
170
150
130
110
90
0 1 2 3 4 5 6 7 8F
9/0 0/0 1/0 2/0 3/0 4/0 5/0 6/0 7/0
199 200 200 200 200 200 200 200 0
20
Arterial Road Expenditure RCMPI CPI (All Groups)
4.7.4 Option A4: Annual re-calculation of charges
This option requires updating expenditure and road usage data each year, assuming that the
cost allocation rules and methods of charge calculation do not change. The benefit of this
option is that, as well as ensuring cost recovery in aggregate over time, it ensures that each
vehicle class is allocated the correct amount of cost according to its usage. However, the
complexity behind heavy vehicle charges means that this process is unlikely to be
undertaken as an automatic adjustment and would be more akin to a normal determination.
There are also other problems with this approach:
· The process may lead to annual charges volatility, because the fuel and registration
charges could go up or down depending on changes to the fleet. This is inconsistent
with general regulatory pricing principles of consistency, predictability and certainty.
As a result, it may be difficult for operators to manage forward contracts.
· The process may require a consultation process as it would lead to differentiated
changes in charges. This may make it more difficult to meet an annual timetable.
· The process is resource-intensive and may involve significant legislative and
administrative difficulties for governments.
4.7.5 Stakeholder comments on the options
In submissions, stakeholders expressed differing views on the options. No stakeholders
supported Option A1, and some rail industry and road agency stakeholders supported
Options A2 and A3 and A4. Trucking industry stakeholders did not support any of the
options, but argued for the retention of the current annual adjustment arrangements (see
Table 14 for a summary of stakeholder views).
Table 14. Summary of stakeholder submission comments on options for
annual adjustment process
Option Stakeholder Comments
A1 Maintain current None
process with
modifications
and inclusion of
fuel indexation
A2 Option 1 with Australasian Supports a charging option that fully recovers road and
removal of the Railway related expenditure, and notes that the CPI cap "is... one
cap and floor Association of the reasons for charges falling short of expenditure".
Supports Option 2 assuming that Option 4 is too difficult to
implement.
South Considers that the CPI cap has contributed to aggregate
Australian cost under-recovery, particularly in times of escalating
Department of road maintenance prices and expenditure. Also notes that
Transport, because the annual adjustment does not currently apply
Energy & to fuel this is a major contributor to aggregate under-
Infrastructure recovery.
QR Supports Option 2 on the basis that Option 4 may be
problematic for a number of reasons including "price
volatility, complexity and data availability".
Queensland Believes Option 2 retains a degree of "simplicity whilst
Transport maintaining aggregate cost recovery".
A3 Indexation of Asciano Considers Option 3 is likely to have less harmful effects
registration and on parties that are "least able to manage the cost
fuel charges by impacts". Also does not approve of the 7 year average
CPI or RCMPI used in Options 1 and 2.
Engineers Prefers Option 3 with RCMPI as it is simple, is a less time
Australia consuming process, meets "the full costs of road use" and
avoids further deterioration of competitive neutrality.
A4 Annual Australian Rail Considers that only an annual recalculation of charges will
recalculation of Track achieve "full cost recovery by each vehicle class".
charges Corporation Acknowledges issues with this approach including price
volatility, complexity and data availability and states that it
would have no objection to Option 2 being applied.
None of the National Considers removing CPI cap on registration fees or
above Farmers expanding the adjustment process to include fuel would
Federation remove the "incentive for Governments to ensure the
maximum utilisation of road spend". This reflects its
concern that there is poor accountability of funds allocated
to road projects.
Australian Supports retention of current methodology. Considers
Trucking current charges already result in significant over-recovery
Association and over-recovery will increase if the CPI cap is removed
and annual adjustments extended to fuel.
Australian Supports the ATA's view on basis that the "current
Cement arrangements are already over-recovering from heavy
Industry Fed'n vehicles".
Stakeholders at the public hearings also expressed a mixed range of views. At the Canberra
hearing, some argued that if the annual adjustment had been applied to the fuel charge
historically then we would be in an over-recovery situation now, while others argued that
the current adjustment process has resulted in significant under-recovery thereby providing
the case for change to a structure that delivers cost recover.
At the Canberra and Sydney hearings, trucking industry representatives commented that
their industry would not be as concerned with annual adjustments if it was confident that
government spending on roads was efficient and delivered productivity improvements for
the industry.
Some stakeholders made specific comments on the options proposed in the draft RIS:
· In relation to Option A1, some argued that the zero per cent floor should be removed: if
governments cut spending on roads then charges should fall (Brisbane).
· In relation to Option A3, some put the view that the CPI is not an appropriate index
since the costs measured in the CPI are largely unrelated to the transport industry
(Adelaide and Sydney).
· In relation to Option A4, some commented that if there is a new determination each
year, charges will be volatile, which is a problem for operators that are locked into
contracts (Sydney). Others opposed this option because it would require going through
the current determination process on an annual basis (Brisbane).
Several parties expressed views on how to deal with over- and under-recovery between
vehicle classes as part of the annual adjustment process:
· QR recommended that an annual review be conducted as a "check and balancing
mechanism" to ensure that each vehicle class is recovering its fully allocated costs
throughout the life of the Determination.
· Queensland Transport suggested that Option 2 will result in over or under-recovery for
different vehicle classes and that new determinations will be necessary to correct any
distortions.
· SA DTEI stated that the preferred solution is to monitor changes in parameters to
gauge whether they are experiencing changes of a substantial nature that would re-
warrant a re-calculation of charges using updated road expenditure and road usage
data.
· Some Queensland-based stakeholders considered that the annual adjustment needs to
take into account that the fleet mix changes over time through, for example, a
mechanism that triggers a determination once certain variables get beyond a range -
say "10 per cent" of their original value.
After considering all stakeholders' comments, the NTC considers that Option A2,
combined with an annual review to determine whether key variables have moved
sufficiently to warrant a new determination is warranted and a charges determination at
least every five years is the most appropriate approach for ensuring that the annual
adjustment process enables charges to continue to recover heavy vehicle allocated
expenditure in aggregate and ensure there is no cross-subsidisation across vehicle classes.
Its reasons are as follows:
· Option A2 will achieve COAG's requirement that annual adjustment arrangements
ensure "the ongoing delivery of full expenditure recovery in aggregate" in a way that is
formula-driven, relatively simple, and will not require a new determination each year.
This option also has a reasonable amount stakeholder support. In addition, when this
option is combined with an annual review process and more frequent determinations, it
will minimise "ongoing cross-subsidisation across different heavy vehicle classes'.
· The NTC does not favour Option A1 because it would not achieve COAG's
requirements about ongoing cost recovery and removal of cross-subsidisation, and
there is not stakeholder support for this option.
· The NTC does not favour Option A3 (which involves indexation via a CPI or RCMPI
measure) because the historical correlation between CPI and road expenditure is weak.
There is also little stakeholders support for this option.
· Although Option A4 is the most accurate way to achieve COAG's requirements about
ongoing cost recovery and removal of cross-subsidisation, the NTC does not favour
this option because it would introduce unnecessary charges volatility and require a
significant amount of maintenance and consultation. Many stakeholders who
commented on Option A4 expressed similar views.
· The NTC does not accept some stakeholders' view that there is no need to change from
the current annual adjustment process (which includes a CPI cap and excludes fuel
adjustments) as it believes the premise used to support this view (that current charges
are already resulting in significant over-recovery) is invalid.
The NTC notes that a small number of parties opposed the change to a seven-year average
in the annual adjustment formula. However, it considers that this change is important as it
is required to ensure consistency with any new determination.
The NTC also notes that one stakeholder suggested that all of the increase that would result
from an annual adjustment should apply only to the registration charge component (and not
the fuel-based component). The NTC does not favour this approach since it would lead to
major adjustments to registration and fuel charges at the time of the next determination
since the fuel charges would have incurred no change from one determination to the next.
5. ASSESSMENT OF POTENTIAL IMPACTS
The charges that will result from the NTC's recommendations for the 2007 Heavy Vehicle
Charges Determination - that is, charges under Option C3, with partial inclusion of
enforcement costs and inclusion of 2007/08 budget expenditure in the cost base, and a
phase-in period of up to three years for registration charges - will have an impact on the
heavy vehicle industry. One of the primary drivers of these impacts is the increase in the
cost base due to increased expenditure on roads. Another is the fact that the charges ensure
that all vehicle classes at least recover their attributable costs, which means that charges
will increase for those vehicle classes that currently under-recovery these costs. However,
the impact is not uniform across vehicle classes and is relatively small compared to other
costs operators face.
Further, the expected impact on the heavy vehicle industry is somewhat moderated by the
fact that only one in four of the 260,000 heavy vehicles in Australia provide commercial
`hire and reward' services (although this sector accounts for over half of the road freight
task). For most of the 200,000 companies that operate heavy vehicles, transport is
ancillary to their main business, particularly in the construction and farming industries.
The sections below discuss the impacts of the NTC's recommendations on the fuel-based
charge component, the registration charge component, vehicle operating costs, industry
production costs, end users, competition, government financing, and productivity and
safety.
5.1 Impact on fuel-based charge
Option C3 will increase the fuel charge by 1.367 cents per litre. This increase is less than
the increase proposed in the Third Determination recommendations (2.467 cents per litre).
It will be implemented through a reduction in the fuel rebate from 18.51 cents per litre to
17.143 cents per litre. The effect will vary considerably in dollar terms on owner-drivers
and fleet owners, depending on the distances their vehicles travel.
The increase in the fuel-based charge will add about 1.3 per cent to the effective fuel costs
per litre paid by heavy vehicle operators after the fuel rebate is taken into account, based
on current diesel prices. In comparison the overall rise in diesel fuel prices since mid 2004
is 30 per cent, despite a fall off from the price peaks experienced in 2006.
5.2 Impact on registration charge
The changes to the registration charge component under Option C3 will affect the
registration costs of heavy vehicles, and the revenue from this charge collected by the
jurisdictions.
5.2.1 Impact on heavy vehicles
Under Option C3, all vehicles and vehicle-trailer combinations experience a change in
registration charges. Around 25 per cent of vehicles experience a decrease in their
registration charge. The remaining 75 per cent of vehicles and 100 per cent of trailers will
experience an increase in their registration charge.
The impact of increases in registration charges on vehicles such as B-doubles and road
trains will require adjustment by the industry to incorporate its effect into freight rates and
contractual arrangements. For this reason, the NTC's preference is for a three-year phase-
in for vehicle types where large registration increases will apply, to assist transport
operators in planning and negotiating future contracts.
5.2.2 Impact on jurisdictions' registration revenue
The charges under Option C3 will lead to increases in the total revenue generated by
registration charges (see Table 15), and mostly lead to increases in the revenue generated
by registration of specific vehicle classes (see Table 16). Both these tables exclude post
2007/08 annual adjustment impacts and assume constant usage figures.
Table 15. Registration revenue by jurisdiction ($ `000s)
Percentage
change in
revenue
Current Proposed Proposed Proposed 2009/10
2007/08 revenue revenue revenue compared to
State/territory revenue 2008/09 2009/10 2009/10 2007/08
NSW 150,313 150,144 159,228 166,778 11.0
Victoria 171,433 172,147 185,841 197,894 15.4
Queensland 146,881 149,445 160,107 169,816 15.6
SA 57,859 58,750 64,478 69,982 21.0
WA 86,169 87,452 90,940 94,113 9.2
Tasmania 14,940 14,864 15,726 16,503 10.5
NT 7,972 8,421 8,651 8,858 11.1
ACT 2,860 2,806 2,961 3,084 7.8
Total 638,428 644,030 687,933 727,028 13.9
Table 16. All jurisdiction registration revenue by vehicle class ($ `000s)
Proposed revenue after
Current 2007/08 full implementation Percentage change
Vehicle class revenue 2009/10 in revenue
Rigid trucks 219,384 216,664 -1.2
Articulated trucks 252,589 257,538 2.0
B-Doubles 85,489 164,540 92.5
Road trains 50,336 59,709 18.6
Special purpose trucks 11,325 11,862 4.7
Buses 19,305 16,715 -13.4
Total 638,428 727,028 13.9
5.3 Impact on vehicle operating costs
The impact of the charges under Option C3 will have a direct influence on transport
operator vehicle operating costs. The NTC used the recently updated ARRB HDM IV
model (ARRB 2006a) to assess this impact on the vehicle operating costs (as at mid 2007)
for each heavy vehicle class. This model looks at average vehicle impacts within each
heavy vehicle class and the results are subject to the assumptions made. Although it
cannot provide exact impacts that apply to all transport operators of a vehicle type, it does
provide illustrative examples of the magnitude of the impact that might be experienced.
Table 17 shows the likely impact on total vehicle operating costs of Option C3 during the
phase-in period for some key heavy vehicle types. For example, the table shows that a B-
double that has average vehicle class characteristics in terms of load and distance travelled
per annum faces a rise of 2.8 per cent after charges are fully phased-in.
Table 17. Change in average vehicle operating costs for key vehicle types
Vehicle type 2007 average Percentage Percentage Percentage
vehicle operating change in change in change in
costs $ Year 1 Year 2 Year 3
2 axle rigid truck 4.5 to 7 22,100 0.4 0.4 0.4
tonnes (no trailer)
3 axle rigid truck over 18 37,400 0.2 0.2 0.2
tonnes (no trailer)
Heavy truck trailer over 116,200 1.1 1.7 1.7
42.5 tonnes
6 axle articulated truck 124,800 0.5 0.5 0.6
9 axle B-double 278,200 1.0 1.9 2.8
Double road train 252,200 1.0 1.1 1.1
Triple road train 301,300 1.0 1.0 1.1
Note: annual percentage changes are not cumulative
The example for a B-double is based on an `average' vehicle that travels 179,000 km per
annum. However, for a shorthaul B-double operator that travels around 120,000
kilometres per annum, vehicle operating costs will increase by 3.9 per cent as a result of
the increases in both the fuel and registration charges under Option C3. In contrast, a
longhaul B-double operator that travels 240,000 kilometres per year will face a 2.3 per cent
increase in its vehicle operating costs due to the higher operating costs associated with
operating greater distances.
The NTC has also undertaken impact analysis using alternative models as the ATN-PKF
model (2007) and the TransEco cost model. These alternative models showed the impact
to be similar as the impacts described above.
The overall impact on vehicle operating cost is not significant. This is because registration
costs represent only a relatively small share of a heavy vehicle operators' annual costs (see
Table 18).
Table 18. Changes in registration costs as a share of average vehicle
operating costs
Vehicle type Current Percentage Percentage Percentage
registration share in share in share in
share Year 1 Year 2 Year 3
2 axle rigid truck 4.5 to 7 1.6 1.7 1.7 1.7
tonnes (no trailer)
3 axle rigid truck over 18 2.5 2.3 2.3 2.3
tonnes (no trailer)
Heavy truck trailer over 4.9 5.5 6.1 6.1
42.5 tonnes
6 axle articulated truck 4.1 4.0 4.1 4.2
9 axle B-double 2.9 3.3 4.2 5.0
Double road train 3.5 4.0 4.0 4.1
Triple road train 3.5 3.9 4.0 4.1
The total impact of the registration charges and fuel-based charge under Option C3 is
shown in Table 19 relative to total vehicle operating costs. In the case of B-doubles, the
total heavy vehicle charges rise from around 10.4 per cent currently to 12.9 per cent.
Table 19. Changes in total heavy vehicle charges as a share of average
vehicle operating costs
Vehicle type Current charge Percentage Percentage Percentage
share share in share in share in
Year 1 Year 2 Year 3
2 axle rigid truck 4.5 to 7 6.4 6.9 6.9 6.9
tonnes (no trailer)
3 axle rigid truck over 18 8.6 8.8 8.8 8.8
tonnes (no trailer)
Heavy truck trailer over 11.2 12.2 12.7 12.7
42.5 tonnes
6 axle articulated truck 11.2 11.7 11.8 11.8
9 axle B-double 10.4 11.3 12.1 12.9
Double road train 10.5 11.5 11.5 11.6
Triple road train 10.5 11.4 11.5 11.5
5.3.1 Impact on road user charges per net tonne kilometre
Once fully implemented, Option C3 ensures charges per net tonne kilometre for B-doubles
and road trains remain lower than for articulated and rigid trucks (see Figure 11).
Figure 11. Road user charges per net tonne kilometre (once fully
implemented)
4.5
4.0
Cents per net tonne kilometre
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
3 axle rigid Heavy truck 6 axle 9 axle B- Double Triple road
truck over trailer over articulated double road train train
18.5 42.5 tonnes truck
tonnes
5.3.2 Impact on the vehicle fleet
An NTC-commissioned survey of B-double operators in 2005 (NTC 2005c) found that
operating costs would need to increase by 15-25 per cent before they would consider
moving back to semi-trailers. As Table 17 indicates, the increase in charges for B-doubles
under Option C3 are only around 2.8 per cent.
5.3.3 Case studies of impact on operational costs
Because the impacts of its recommended charges will vary across operators, the NTC
commissioned CRA International (2007) to assess these impacts on specific types of
operations. These case studies were undertaken with the assistance of the trucking
industry, which provided data on the specific operations.
Case study 1: Inbound livestock transport for an abattoir in regional NSW
Description
The case study evaluated the inbound transport cost associated with a typical one-year kill
at the abattoir. Over 80 per cent of the livestock processed was sourced from five regions
in NSW, with 11 per cent of the livestock sourced from Queensland and the remainder
came from Victoria and SA. B-doubles and double road trains serviced over 85 per cent of
the inbound livestock transport task by value.
Impacts
For this operation, the total truck running costs would increase by:
· 0.4 per cent for a 6-axle articulated truck
· 1.8 per cent for a 9-axle B-double
· 0.7 per cent for double road trains.
As a share of total vehicle operating costs, registration costs would rise from 1.8 per cent
to 2.6 per cent, while fuel costs would remain steady at 26.8 per cent (Figure 12).
For the entire operation, overall vehicle operating costs would rise by $91,000 per annum
which would represent a rise of 1.2 per cent from its total cost base of $7.6 million. It is
expected that the three year phase-in will assist operators to pass on those increases.
Figure 12. Case study 1: impact on vehicle operating cost shares
100%
1.8% 2.6%
90% 12.9% 12.8%
80%
70% 26.8% 26.8%
Registration
60%
Maintenance
% Share
50% 21.4% Fuel
21.1%
Crew
40%
Capital & Insurances
30%
20% 37.1% 36.7%
10%
0%
Existing share Share if NTC charges
implemented
Case study 2: Linehaul operation based in South East Australia
Description
This operation employs over 200 vehicles, of which more than 65 per cent are 9 axle B-
doubles. It is involved in the transport of bulk materials, general freight, liquids, livestock
and the local distribution of freight. The kilometres travelled by its B-doubles are
significantly higher than the kilometres travelled by its 6 axle articulated trucks.
There are also significant differences in the kilometres of travel involved in the different
linehaul activities. In particular, B-doubles involved in general freight and livestock
transport undertake fewer kilometres of travel per vehicle than B-doubles involved in other
linehaul activities.
Impacts
For this operation, linehaul costs would increase by between 1.7 per cent (for local
distribution) and almost 3 per cent (for general freight). As a share of total vehicle
operating costs, registration costs would rise from 2 per cent to 3.2 per cent, while fuel
costs would fall slightly from 31.1 per cent to 31.0 per cent (Figure 13).
In overall dollar terms, annual vehicle operating costs would rise by $590,000 per annum.
This represents an increase of 1.6 per cent on its total annual cost base of $36.5 million. It
is expected that the three year phase-in will assist operators to pass on those increases.
Figure 13. Case study 2: impact on vehicle operating cost shares
100%
2.0% 3.2%
90%
31.1% 31.0%
80%
70%
60%
Registration
% Share
50% Fuel
Other inputs
40%
66.9% 65.8%
30%
20%
10%
0%
Existing share Share if NTC charges
implemented
Case study 3: Bulk haul operation in regional Victoria
Description
This operation uses seven 9 axle B-doubles and three 6 axle articulated trucks to transport
grains and other bulk materials. The operator provided data on a truck-by-truck basis,
which reflects the fact that the trucks can be involved in the haul of grain on one occasion
and another bulk material on the next occasion. The revenue from its bulk haul operations
is predominately obtained from operations undertaken by B-doubles.
Impact
As a share of total vehicle operating costs, registration costs will increase from 1.7 per cent
to 2.8 per cent, and fuel costs will remain steady at 26.6 per cent for this operation (Figure
14). Its annual vehicle operating costs will rise by $59,000 or 1.4 per cent, from a total
cost base of $4.13 million per annum. It is expected that the three year phase-in will assist
operators to pass on those increases.
Figure 14. Case study 3: impact on vehicle operating cost shares
100%
1.7% 2.8%
90%
26.6% 26.6%
80%
70%
60%
Registration
% Share
50% Fuel
Other inputs
40%
71.7% 70.7%
30%
20%
10%
0%
Existing share Share if NTC charges
implemented
Case study 4: mine haul operation in Northern Territory
Description
This operation employs quad axle prime movers to haul ore from several locations to a
central point for processing. It employs multi-combination vehicles consisting of 9 quad
axle prime movers pulling B-doubles with two following trailers. There is also one spare
vehicle, which is a quad axle prime mover that pulls a B-double and one trailer. During
the period assessed over 95 per cent of its revenue was obtained from operations of the
quad road trains. The operator's contract with the mine involves a payment per tonne of
ore carried from the mine site to the central processing point, and the mine supplies the
fuel.
Impact
For this operation, registration and fuel costs represent about 21 per cent of its total
calculated vehicle operating costs. This is much smaller than the share that these costs
account for in three case studies above. This is partly because the mine supplies its fuel,
but it is mainly due to the fact that the mine haul operation costs more to run per unit of
output than the other case studies.
Because of these higher unit costs, the NTC's recommendations will have a smaller
percentage impact on the vehicle operation costs of this operation. As a share of total
vehicle operating costs, its registration costs will increase from 0.8 per cent to 1.2 per cent,
and its fuel costs will increase from 20.7 per cent to 20.9 per cent (Figure 15). Its annual
vehicle operating costs will rise by around $112,000 or 0.7 per cent, from a total cost base
of $15.2 million per annum. It is expected that the three year phase-in will assist operators
to pass on those increases.
Figure 15. Case study 4: impact on vehicle operating cost shares
100%
0.8% 1.2%
90% 20.7% 20.9%
80%
70%
60%
Registration
% Share
50% Fuel
Other inputs
40% 78.5% 77.9%
30%
20%
10%
0%
Existing share Share if NTC charges
implemented
Case study 5: prime mover owner-operator
Description
This operator provides a prime mover registered as a B-double prime mover to a freight
forwarder and does not own any trailers himself.
Impact
The owner-driver will be affected by increases in the registration charge for the B-double
prime mover and the fuel-based charge. The cost of registering his B-double prime mover
will rise by 19 per cent or $1,139, taking the annual registration cost from $5,911 to
$7,050. However, his overall increase in vehicle operating costs will be just 0.8 per cent in
Year 1, because of the phase-in period.
As a share of total vehicle operating costs, his registration costs will increase from 1.7 per
cent to 2.0 per cent, while his fuel costs will rise slightly from 34.5 per cent to 34.7 per
cent (Figure 16).
Figure 16. Case study 5: impact on vehicle operating cost shares
100%
1.7%
2.0%
90%
80% 34.5% 34.7%
70%
60%
Registration
% Share
50% Fuel
Other inputs
40%
30% 63.8% 63.3%
20%
10%
0%
Existing share Share if NTC charges
implemented
Case study 6: freight forwarder
Description
This operator is a large freight forwarder that makes extensive use of owner-driver prime
movers and operates a fleet of 300 B-double trailers.
Impact
Freight forwarders with B-double lead trailers and tri-axle semi-trailers are expected to
experience the largest impact as a result of the NTC's recommendations, although the
phase-in period will mean that the increases in trailer costs wont be felt immediately. For
this operator, the overall impact on its annual vehicle operating costs will be an increase of
$2.5 million or 1.9 per cent, from its cost base of $137 million per annum. It is expected
that the three year phase-in will assist the operator in passing on those increases.
As a share of total vehicle operating costs, registration costs will increase from 1.2 per cent
to 2.8 per cent, while fuel costs will fall slightly from 13.7 to 13.6 per cent (Figure 17).
The very low fuel cost share compared to the other case studies is due to the fact the
owner-drivers it utilises pay for much of the fuel costs.
Figure 17. Case study 6: impact on vehicle operating cost shares
100%
1.2% 2.8%
90% 13.7% 13.6%
80%
70%
60%
Registration
% Share
50% Fuel
85.1% 83.6% Other inputs
40%
30%
20%
10%
0%
Existing share Share if NTC charges
implemented
5.4 Impacts on industry production costs
The extent to which the changes in heavy vehicle operating costs discussed above will flow
through to industry and the economy can be determined using the latest Input Output tables
produced by the Australian Bureau of Statistics for 2001/02 (ABS 2006b). Overall, the
effects of the proposed charges on industry production costs are estimated to be small.
This is because road transport costs represent just 1.8 per cent of the overall intermediate
input costs for Australian industry (including both domestic and export-related
production). For export-related production only, road transport costs represent 3.2 per
cent.
The NTC expects that the industries with the highest share of road transport costs relative
to total intermediate input costs will most affected by the recommendations. These are the:
· cement, lime and concrete slurry industry (13 per cent)
· sawmill products industry (11 per cent)
· non-metallic minerals and plaster products industry (8 per cent), and
· meat and meat products industry (7 per cent).21
In translating the impact of the proposed new heavy vehicle charges onto industry inputs, it
is important to realise that it is only the net change in road transport vehicle operating costs
that flows through to industry, and ultimately to domestic consumer prices and export
prices. Therefore, given that heavy vehicle charges make up less than 5 per cent of overall
21
These shares are based on total production whether for domestic or export end use. Data by industry on an
export-only basis is not available.
heavy vehicle operating costs, the impact of even large changes in heavy vehicle
registration costs is significantly reduced by the time it flows through into industry input
costs.
For example, under charges Option 3C, B-double registration charges will rise by 78 per
cent once fully phased-in from their 2007/08 level. Put in context, this increase will make
the share of registration charges in B-double operating costs increase from 2.9 per cent to
5.0 per cent, with overall B-double operating costs based on an average vehicle increasing
by 2.8 per cent. If we look at the cement industry (which is the most sensitive to road
transport cost changes), and assume it is only serviced by 9 axle B-doubles for its input
requirements, then the effect on the cement industry can be calculated by multiplying the
increase in B-double operating costs by the share of road transport in its overall input costs.
In this case, a 2.8 per cent increase in B-double operating costs multiplied by 13 per cent
equals a 0.36 per cent impact on the cement industry's overall input costs.
For the export sector, road transport contributes 3.2 per cent of overall input costs. Taking
the expected increase in B-double operating costs under Option C3, which is largest
increase across all vehicle classes, the impact on the export sector would be a rise in input
costs of 0.1 per cent. However, again these effects are based on averages. There will be
individual businesses that will incur greater or lesser impacts on their production costs
depending upon where they are positioned relative to the average.
5.5 End user impacts
5.5.1 Impacts on the price of consumer goods
The flow-through impact of the NTC's recommended charges to consumer prices is
difficult to assess, due to the lack of available information. However, research by the
BTRE (2000) has found that transport costs contribute to just under 5 per cent of grocery
retail prices in the major cities, between 5.5 per cent and 6 per cent in rural and remote
areas. The impact of the recommended charges on a trolley containing $100 worth of
grocery items is shown in Table 20. This shows that:
· For retail outlets dependent on B-doubles, the maximum additional cost per $100
trolley of goods would be 17 cents. This level of impact would occur in remote areas,
and the in other areas would be less.
· For retail outlets dependent on road trains, the maximum impact would be an extra 7
cents per $100 trolley of goods in remote areas.
These estimates are based on averages, and consumer price impacts will vary depending on
individual transport operator's circumstances and the decisions made by individual retail
outlets on cost mark-ups.
Table 20. Impact on $100 worth of groceries (cents)
Area Vehicle Type Year 1 Year 2 Year 3
Urban 2 axle rigid truck 4.5 to 7 2 2 2
tonnes (no trailer)
3 axle rigid truck over 18 1 1 1
tonnes (no trailer)
Heavy truck trailer over 42.5 5 8 8
tonnes
6 axle articulated truck 2 3 3
9 axle B-double 5 9 13
Rural/Remote 2 axle rigid truck 4.5 to 7 3 3 3
tonnes (no trailer)
3 axle rigid truck over 18 1 1 1
tonnes (no trailer)
Heavy truck trailer over 42.5 7 10 10
tonnes
6 axle articulated truck 3 3 4
9 axle B-double 6 11 17
Double road train 6 6 7
Triple road train 6 6 7
Note: annual cost changes are not cumulative
5.5.2 Ability to pass on cost increases
The overall impact of cost increases will be less significant for larger hire and reward
operators who already have contractual arrangements in place, particularly for fuel cost
increases. Generally, smaller transport operators, with less negotiating power and
administrative resources, are less able to pass on cost increases.
The NTC expects the extra cost for both fuel and registration will be passed on to end
users. However, it understands that, due to the highly competitive and diverse nature of
the trucking industry, there is no set process for this to occur. The industry's management
of the significant increases in the price of fuel since 2004 - when the TransEco Linehaul
fuel cost index rose by 33 per cent between the June quarter of 2004 and the March quarter
of 2007 without major disruptions to the supply chain - suggests that it has had recent
experience in negotiating with its customers to pass on cost increases. However, in
general, it is expected that the larger the fleet size of a transport owner/operator, the
stronger the bargaining power and more successful they will be being able to pass on cost
increases from heavy vehicle charges.
5.5.3 Impacts on primary producers
There may be considerable concern about the impact of recommended charges on
Australia's primary producers, particularly in light of the current drought and its impact on
economic activity.
While the NTC recognises that this is an important issue, it is outside its mandate to
resolve. However, it should be pointed out that each jurisdiction is able to, and generally
does, provide concessions for primary producers. These concessions, which are in the
order of 40-50 per cent, recognise that primary producers generally operate vehicles well
below average usage. The current concessions available for primary producers are listed
Appendix K of Volume 2 of the RIS.
To maintain uniformity of charges, the NTC supports a uniform approach being taken in
the application of primary producer concession schemes.
5.5.4 Impacts on small businesses
The NTC's recommended charges will have impacts on small businesses, but on average
they are not expected to be significant, particularly due to the low share of registration
charges in annual vehicle operating costs. The largest impacts will be on those businesses
that have vehicles that travel a lot less than the national average for that vehicle class.
Compliance costs and the administrative burden are likely to be unchanged.
The NTC recognises that owner-operators and small businesses with multi-combination
vehicles will not be as well placed as large fleet operators to renegotiate contracts to take
account of heavy vehicle charge increases. However, the NTC does not expect the impacts
of its recommended charges on their own will result in significant disruption to economic
activity either on a national or regional basis.
5.6 Impacts on competition
National heavy vehicle charges do not provide any restrictions on competition. The
charges are set to recover road expenditure, and therefore simply reflect the costs of road
use associated with different types of vehicles.
Differences in charges for different types of vehicles reflect differences in the costs to
government of providing and maintaining roads for different vehicles, while ensuring that
appropriate price signals are delivered vis-à-vis light vehicle charges, environmental
concerns regarding emissions and relative safety of different vehicle configurations.
Neither the existing nor the recommended heavy vehicle charges:
· impose methods of work on operators
· directly restrict the number of operators in the industry
· advantage one operator compared to another, regardless of size, or
· erect barriers to entry to the industry.
The levels of charges and the way in which they are administered has little, if any, impact
on methods of work employed by different operators. Heavy vehicle charges have no
bearing on the number of operators in the industry, as there is no restriction on the number
of vehicles that can be registered or the number of operators that can register heavy
vehicles. As all operators with the same vehicle type pay the same charges, which are
commensurate with their share of road expenditure, and the charges do not vary with the
number of vehicles registered by any one operator, they do not advantage large versus
small operators.
As is currently the case, a large component of the recommended charge (two thirds) is
levied as a variable charge through diesel excise payments. Consequently, fixed annual
charges are a relatively small component of the charges. They are small in comparison to
the capital costs of heavy vehicles and therefore do not constitute barriers to entry to the
road transport industry. Typically, the fixed annual charge on registration of a heavy
vehicle represents between 2 per cent and 5 per cent of the total costs of operating the
vehicle.
The impacts of the recommended charges on road/rail competition are likely to be small.
Registration charges for the vehicle classes that compete most directly with rail (i.e., B-
doubles and triple road trains) are subject to the largest increases, to ensure that they at
least recover their attributable expenditure. However, as registration charges are a small
proportion of total vehicle operating costs, it is likely that the impact of these increases on
the relative competitive position of road freight will be marginal.
5.7 Implications for government financing
5.7.1 The need for road investment
There is considerable evidence that governments' increasing investments in building and
upgrading road infrastructure are necessary to improve the productivity and safety of the
trucking industry, and that heavy vehicle charges need to keep pace with these investments
to make the improvements possible. For example:
· The NTC's Twice The Task report (February 2006) highlighted the importance of
continuing productivity, safety and pricing reform to address the growing freight task.
· COAG's National Reform Agenda (10 February 2006) for quad axle groups, B-triples
and Performance Based Standards recognises that significant infrastructure investment
is required to improve access for this `new generation' of heavy vehicles.
· Multi-combination vehicles, such as B-doubles and road trains, currently under-recover
their costs. The Productivity Commission and COAG recently endorsed the principle
of individual vehicle classes `paying their way'. This recognises the investment
needed on major freight corridors, which are generally used by these heavier vehicles.
· An Australian Industry Group survey (Transport & Logistics Operations in Australian
Manufacturing 2006) found that better infrastructure plays an important role in
reducing general transport costs. Heavy vehicle charges can contribute to freight link
upgrades, removing bottlenecks and reducing logistics costs for exports, particularly as
the freight task grows.
Although heavy vehicle charges are not directly hypothecated into heavy-vehicle-specific
end uses, the funds raised under the PAYGO system are a proxy for future heavy vehicle
road expenditure requirements that are necessary to maintain the network. Given that road
expenditure benefits both light as well as heavy vehicles, the general level of road
expenditure both current and future planned investment has important implications for the
heavy vehicle industry in improving access and catering for the growth in land freight
requirements.
5.7.2 Charges contribution to road investment
Even though two thirds of heavy vehicle charge revenue is collected through fuel charges
(which goes to Federal Treasury as consolidate revenue), a fair proportion of registration
revenue is either directly or indirectly hypothecated by the states into road-related
expenditure.
Two jurisdictions - NSW and SA - direct vehicle registration revenue both for light and
heavy vehicles to a fund that is specifically required to be used on road expenditure by the
road authority. Queensland's vehicle registration revenue initially goes to its Treasury's
consolidated revenue, but is then 100 per cent reallocated to the road authority for
expenditure on roads. Also, revenue from the Federal Interstate Registration scheme is
forwarded directly to the Federal Department of Transport and Regional Services for
redistribution to jurisdictions based on a tonne-km travel formula for most jurisdictions. In
effect, up to 60 per cent of registration revenue is either directly or indirectly hypothecated
to road-related expenditure. In addition, the level of heavy vehicle charges has an
important influence on the level of available state-sourced funds for road expenditure in
NSW, SA and Queensland.
5.8 Impact of road investment on heavy vehicle productivity and safety
5.8.1 Case studies of improved productivity
There is very little information available on the quantitative benefits of road investment for
heavy vehicle productivity. However, it is clear that some projects have very important
influences on the operating costs of heavy vehicle operators that use the new or upgraded
roads in question, through savings in travel time and fuel costs, which result in higher
productivity and lower operating costs. For example, road projects such as the
Albury/Wodonga Bypass and Craigieburn Bypass have undoubtedly had an impact on
operating costs for heavy vehicle users using the Hume Highway. These projects have
reduced both travel time and fuel costs.
The Deer Park Bypass in Victoria, which is a $331 million project to construct 9.3km of
four-lane freeway between the Western Highway and Western Ring Road in Melbourne,
will also provide substantial benefits to the heavy vehicle industry. The current road
carries 70,000 vehicles per day of which 10 per cent are heavy vehicles. This project will
result in reduced and more reliable travel times and more direct access to the Western Ring
Road and Melbourne ports. Its estimated benefit to the heavy vehicle industry - based on a
30-year timeframe and a discount rate of 7 per cent - is of the order of $98 million in 2007
dollar terms. Of this, 90 per cent is due to travel time savings, 9 per cent to vehicle
operating cost savings and 1 per cent to accident savings.
5.8.2 Case studies of improved safety
National Heavy Vehicle Safety Strategy
Approximately 330 people are killed each year in Australia in crashes involving heavy
vehicles (which represents 20 per cent of road fatalities) and three times as many are
injured, costing around $2 billion annually.
The Monash University Accident Research Centre (Austroads 2005b) estimates that
improved road investment - including shoulder sealing, audible edge lines, passing lanes
and rest areas - will contribute at least a 38 per cent of the total future reduction in heavy-
vehicle-related road deaths and casualties under the current National Heavy Vehicle Safety
Strategy. Other contributing factors will be effective use of speed delimiters 30 per cent,
better fatigue management 18 per cent, increased seatbelt use by heavy vehicle drivers 9
per cent and safer heavy vehicles 5 per cent.
Black spot and general road improvement programs
The Monash University Accident Research Centre also estimates that for each $100
million spent on black spot programs, at least 20 lives will be saved (including four related
to heavy vehicle crashes) (Austroads 2005a). For each $100 million spent on general road
improvements, at least 1.5 lives will be saved (including 0.3 lives related to heavy vehicle
crashes). By 2010, the number of fatalities prevented per year in Australia as a result of
road improvements will total 453, of which 144 lives will be saved from black spot
expenditure and 309 from general road improvement expenditure. Of the 453 lives saved,
91 will relate to reduced heavy vehicle crashes.
5.9 Potential productivity improvements
Over the last two years, COAG has agreed to a wide-ranging reform program, including
pricing reform and regulatory harmonisation. However, it is critical that these initiatives
are not seen in isolation. The economic benefits from any single initiative will be
influenced by the extent to which other reforms are implemented. If the full benefits of
reform are to be realised, a range of policy levers must be used, and supported where
required by targeted infrastructure investment.
In a highly competitive global market, the road transport industry must continue to pursue
productivity improvements and lower prices. This is particularly important given the
changing nature of manufacturing and distribution, with these activities becoming more
transport intensive. In addition, in export markets that are highly price sensitive,
improvements in productivity directly impact on national competitiveness.
As noted in this RIS, industry has acknowledged its responsibility for and indicated
preparedness to continue `paying its way' with respect to road infrastructure. It has also
indicated that it is looking to work with governments to unlock productivity opportunities
made available through 2007 Heavy Vehicle Charges Determination.
The NTC's consultations, as well as other discussions occurring as part of the NTC's
broader work program, identified priority areas where industry and government could
direct their efforts. These priorities can be categorised into three broad areas:
· initiatives currently being progressed through the COAG endorsed NTC work program
· targeted infrastructure improvements.
· other regulatory reforms - not currently included in the program
5.9.1 COAG-endorsed NTC work program
In February 2006 COAG committed to the implementation of performance-based standards
(PBS). The potential productivity benefits arising from full implementation of PBS is well
documented. While the NTC is working closely with jurisdictions to meet COAG's
timelines, industry is concerned that governments continue to pursue these initiatives as a
matter of priority.
The broader issue of access to the network for high-productivity vehicles continues to be a
critical imperative. While development of the B-triple network is a priority for some
operators, increasing access for vehicle configurations such as the Super B-doubles22 is a
priority for those operators transporting containerised freight. Super B-doubles can move
two 40 ft containers in one trip. Thus enabling increased access for these vehicles will lead
to benefits in terms of reducing the time taken to clear containers from the wharves,
improving landside efficiency, and limiting the total number of trucks required to
undertake the containerised transport task. The NTC's recommended charges provides a
pricing solution that should facilitate increased access, by ensuring they pay the
appropriate cost for access to the road network.
A challenge for governments is responding to the differing needs of the transport industry,
in markedly differing locations. It is evident that the requirements of rural transport
operators are significantly different to those transporting port traffic in urban areas. Some
industry representatives have indicated that governments need to consider these issues
from a sectoral perspective, rather than as a homogenous transport task.
5.9.2 Targeted infrastructure improvements
Targeted infrastructure improvements are also critical to allow increased access to higher
productivity vehicles. While truck technology has improved, road infrastructure has not
kept pace. In consultations, stakeholders provided several examples where limited
additional road investment would achieve considerable productivity benefits:
· The Australian Livestock Transporters Association (ALTA) prepared a comprehensive
case study examining non-price barriers to productivity improvements in livestock
transport operations. This case study cites examples of where lack of suitable right and
left turn lanes limited the use of higher productivity vehicle combinations.
· South Australian wine industry stakeholders commented that they have requested
construction of a roundabout in the Barossa Valley to enable B-double access to a
winery. They have been advised that they must contribute 25 - 30 per cent of
construction costs, despite only being responsible for 0.8 per cent of total traffic.
Further, there is effectively a funding demarcation between local councils, as those
surrounding the Barossa region see little value in upgrading roads that will largely
benefit the Barossa Valley.
These examples exemplify industry's concerns regarding the perceived lack of
coordination across governments with respect to road funding and provision. Road
responsibilities are dispersed across all three tiers of government. There may be little
incentive for a local council or state/territory to invest in road improvements if they do not
capture a significant proportion of benefits.
It is also worth noting that the question of targeted investment goes beyond governments to
the customers of transport operators. A number of examples were provided of where
primary producers, across a range of industries, had not upgraded entry to their farms to
enable entry of higher productivity vehicles. This is an area where governments can play a
leadership role by bringing together producers, operators and transport agencies to look at
opportunities for productivity improvements from origin to destination.
22
Also known as High Efficiency Container Transport (HECT) vehicles
5.9.3 Other regulatory reforms
Industry continues to raise the broader concerns about regulatory fragmentation. Key
issues include:
· inconsistent implementation of previous NRTC/NTC reforms
· differing permit requirements
· livestock loading regulations in NSW.
The extent of impact varies by jurisdictions, and some of these issues are being addressed
through current projects such as National Accreditation, compliance strategy, the national
heavy vehicle enforcement strategy and the COAG reform program (current NTC
projects).
6. CONSULTATION
6.1 The consultation process
Following the formal direction from the ATC to commence work on a new determination,
the NTC prepared a draft RIS which it published on 6 July 2007. The draft RIS was
informed by the previous Third Determination consultation process in 2005, the PC
Inquiry in 2006, discussions (including a technical workshop in May 2007) with industry
representatives and government, and analyses of potential impacts of changes in the level
of charges.
The publication of the draft RIS commenced a formal public consultation process. The
NTC interested parties to make written submissions, receive industry briefings and/or
participate in public hearings that involved focus group discussions. It received 22 written
submissions and held focus groups in Melbourne, Sydney, Brisbane, Adelaide, Perth,
Canberra and Darwin23 between the 1st and 16th of August 2007. It also undertook further
discussions with trucking industry representative groups (including the Australian
Trucking Association and its member associations and the National Farmers Federation)
and with government.
This extensive consultation led to significant changes to the NTC's recommendations,
particularly to address industry views about maintaining flexibility in the heavy vehicle
fleet and ensuring that pricing structures support high-productivity vehicles without
creating an administrative burden.
Submissions in response to the draft RIS were received from:
Number Stakeholder Abbreviation
1 Australian Rail Track Corporation ARTC
2 National Farmers Federation NFF
3 National Association of Forest Industries NAFI
4 Cement Industry Federation CIF
5 Asciano (formerly Pacific National and Patrick) Asciano
6 Australasian Railway Association ARA
7 Peter Crisp MP (Member for Mildura) Crisp
8 NSW Farmers Federation NSWFF
9 Warwick Moppett (Mayor, Gilgandra Shire Council) WM
10 Australian Trucking Association ATA
11 Quinn Transport Quinn
12 Department of Transport, Energy and Infrastructure (SA) DTEI
13 QR (Queensland Rail) QR
14 South Australian Freight Council SAFC
Community and Public Sector Union - State Public Services
15 CPSU
Federation Group
23
Focus group presentations and transcripts are available on the NTC website.
16 Australian Automobile Association AAA
17 Queensland Transport QT
18 Australian Livestock Transporters Association ALTA
19 Engineers Australia EA
20 Bus Industry Confederation BIC
21 Roads & Traffic Authority (NSW) RTA
22 Betts Transport Betts
6.2 Major issues raised and the NTC's response
Many of the issues raised by stakeholders during the consultation process have been
discussed earlier in this report. However, this section summarised the main points raised
and the NTC's response.
6.2.1 The treatment of enforcement costs
Description of the issue
Submissions from the trucking industry stakeholders - including the Australian Trucking
Association, National Farmers Federation, Cement Industry Federation, the National
Association of Forest Industries, Australian Livestock Transporters Association, South
Australian Freight Council and the Bus Industry Confederation - did not support inclusion
of any enforcement costs in the cost base to be recovered through charges. The main
reason given was that it would impose an indiscriminate and inefficient cost on heavy
vehicle road users and that compliant operators (particularly those who are accredited)
would face in effect a "double take".
In contrast, other stakeholders - including the Australasian Railway Association, Asciano,
Australian Rail Track Corporation, QR and the NSW Roads & Traffic Authority -
supported the full inclusion of enforcement costs. Their main reasons were the fact that full
recovery of enforcement costs occurs in other transport industries and the Productivity
Commission's comment that costs of enforcing heavy vehicle mass and speed restrictions
are appropriately covered through road user charges.
Engineers Australia, Queensland Transport and the Department of Transport, Energy and
Infrastructure (SA) supported the inclusion of only mass-related enforcement costs. Their
reasons were that heavy vehicle charges focus on the recovery of road-related expenditure
and enforcement related to reducing overloading results in an extension in the life of
pavements. Therefore, mass-related enforcement is a substitute for increased road
maintenance and is a legitimate cost related to infrastructure.
NTC's response
The NTC found that there is an in-principle argument for the inclusion of enforcement
costs, but that the ATC pricing principles limit the inclusion of enforcement costs to
infrastructure-related enforcement (i.e. mass-related enforcement). Further, it found that
the partial recovery of the road agency enforcement costs reported to the NTC sufficiently
approximates mass-related enforcement costs.
It is important that a holistic approach to enforcement is taken. Therefore, the NTC
supports future charging adjustments and determinations recovering the administrative
costs of the National Heavy Vehicle Enforcement Strategy and provide a funding pool for
financial incentives for industry participation in accreditation (thereby reducing the
enforcement burden on jurisdictions).
6.2.2 The methodology for estimating heavy vehicle charges revenue
Description of the issue
The Australian Trucking Association (ATA) indicated concern over the NTC's
methodology for calculating charges revenues that determine the level of over or under-
recovery of heavy vehicle allocated expenditure. The NTC's methodology calculated that
currently heavy vehicle charges under-recover this expenditure by $168m per year.
The ATA claimed that the NTC's methodology was fundamentally flawed, and that
according to its own approach to the calculation, heavy vehicles currently over-recover
their allocated expenditure by $130m per year.
A number of other trucking industry stakeholders, including the Cement Industry
Federation, the National Farmers Federation, National Association of Forest Industries and
the Australian Livestock Transporters Association, supported the ATA's approach to the
calculation.
The NTC's response
The NTC responded to the ATA's concern by engaging Meyrick and Associates to conduct
a thorough critique of both the ATA and NTC approaches to calculating heavy vehicle
charges revenue (see Appendix C). It notes that the ATA's approach differs from its own
in that it:
· includes revenues associated with a sulphur excise charge
· includes revenues associated with petrol excise cost recovery
· includes revenues associated with metropolitan boundary excise differentials, and
· Uses a different the method for indexation: the ATA calculates fuel and registration
revenues as at the year of representative usage, and indexes the resulting revenue by
the change in the CPI to bring it into current dollar terms.
Meyrick concluded that it is inappropriate to include revenues associated with the sulphur,
petrol and metropolitan boundary excises as these excises are no longer collected. In
addition, they are not related to infrastructure provision (and therefore are outside of the
Determination scope as stated in the ATC pricing principles). Meyrick also concluded that
the ATA method of indexation is inappropriate and that even if it were appropriate to index
the registration charge, it is inappropriate to index the fuel charge which has remained
constant at 19.633 cents per litre.
While the case for the exclusion of non-infrastructure-related revenues that are no longer
collected by governments is fairly clear, the NTC considers it is important to explain why
the ATA's method of indexation is flawed.
The NTC's methodology works on the basis of averages that provide representative
expenditure and usage. Instead of taking one year of actual expenditure, an average of
seven years historic expenditure is deemed to represent a typical annual expenditure figure.
This is matched by an average usage figure over the same seven-year period - the usage
figures in the median year of the expenditure period is deemed to represent average usage.
Current charges are then applied to the usage figures of that representative year, to give a
representative level of recovered charges revenue in real terms, calculated in a consistent
manner to the cost base that charges are to recover. No further indexation is required as
current charges are used to calculate revenues.
The draft RIS used a representative usage year of 2004, as this is the midpoint of the
seven-year period used to calculate average expenditure (2000/01 - 2006/07). The final
RIS adopts more recent expenditure data (2001/02 - 2007/08), and therefore uses 2005
usage data.
The need to derive the registration and fuel charge revenue estimates is due to the fact that
registration revenue actual data is not available from all states and territories, and the fuel-
based charge revenue (which is collected by Federal Treasury and accounts for two thirds
of overall heavy vehicle charge revenue) is not available.
6.2.3 Estimation of the allocated cost base
Description of the issue
Leaving aside the issue of heavy vehicle enforcement costs, the appropriateness of the
allocated cost base and the methodologies used to derive that cost base is an ongoing topic
of debate. The ATA and other trucking industry stakeholders tend to support the view that
the NTC overestimates the cost base for heavy vehicles particularly in areas such as the
estimation of Equivalent Standard Axle (ESA) values for heavy vehicles and the way in
which weathering impacts are treated.
In contrast, the rail industry considers that the NTC underestimates the true heavy vehicle
cost base. The Australasian Railway Association, Australian Road Track Corporation, QR
and the Department of Transport Energy and Infrastructure (SA) all submitted that the
NTC underestimates the ESA impacts.
The NTC's response
As part of its Third Determination workings, the NTC commissioned research to evaluate
the way in which the cost base is derived, in order to improve confidence in the NTC's cost
allocation methodology. This work and the methodologies use by the NTC to estimate
heavy vehicle allocated costs were supported in the final report of the Productivity
Commission's review of Road and Rail Freight Infrastructure Pricing. The NTC has not
been provided with any reason to modify its cost allocation methodology from that used in
the Third Determination.
6.2.4 Impacts of differential multi-combination prime mover charges
Description of the issue
A number of stakeholders - including the Australian Trucking Association, Australian
Livestock Transporters Association, Quin Transport, National Farmers Federation,
National Association of Forest Industries and the South Australian Freight Council -
submitted that the NTC's draft RIS preferred option would have adverse impacts on the
trucking industry's productivity, due to the impact of large differentials in prime mover
charges between multi-combination prime mover types.
These stakeholders argued that moving away from having the same prime mover charge
for different types of B-doubles and road trains would upset the flexibility of the trucking
industry, due to differing network accessibility issues, which would have negative impacts
on productivity and would force transport operators to always have to register a prime
mover at the highest multi-combination registration level even if only a small part of
annual trips required that type of use.
The NTC's response
The NTC responded to these views by revising the recommended charges option in this
Final RIS. The recommended option now includes a single multi-combination prime mover
charge.
6.2.5 The inability of industry to pass on large increases in charges
Description of the issue
Trucking industry stakeholders, such as from the Australian Trucking Association,
Australian Livestock Transporters Association, Cement Industry Federation, National
Association of Forest Industries and the South Australian Freight Council, submitted that
their industry will have a lot of difficulty passing on increases in heavy vehicle charges,
particularly increases in the registration charge component. Smaller transport operators,
such as Quinn Transport and Betts Transport, and the National Farmers Federation and
NSW Farmers Federation submitted that their members are very much price takers and
would be unable to pass on cost increases.
The NTC's response
The NTC considers that its preferred for phasing in its recommended charges over three
years should help address this issue by allowing businesses time to plan and renegotiate
their contracts. In addition, the impacts will be reduced for those who receive either
primary producer or non-primary producer concessions (see Appendix K and L).
6.2.6 Concern over the adoption of the high-productivity vehicle formula
Description of the issue
In the draft RIS, the NTC proposed the use of a high-productivity vehicle formula to derive
charges for vehicles that fall into this category. These sorts of vehicles are essentially those
going through the Performance Based Standards system and include B-triple and quad axle
vehicles that have been approved through the PBS system.
Stakeholders such as the Australian Trucking Association and the Cement Industry
Federation did not see a need for this formula and were of the view that the current
charging schedule could be used to effectively charge these vehicles.
The Department for Transport Energy and Infrastructure (SA) also expressed concern over
the administrative arrangements required to support such a formula.
The NTC's response
The NTC responded to these concerns by assessing the extent to which high-productivity
vehicles could be effectively mapped to the charges schedule. The net result of this work,
particularly the adaptation of the charges schedule to incorporate differential trailer axle
charging, has enabled almost all high productivity vehicles to now be mapped onto the
proposed new charges schedule, including PBS approved B-triples and quad axle vehicles.
6.2.7 Need for productivity offsets by opening up the network more
Description of the issue
Stakeholders such as the Member for Mildura, Peter Crisp MP, and the National Farmers
Federation advocated the need for government-agreed productivity offsets to accompany
any increase in heavy vehicle charges. Participants in the focus groups discussions that the
NTC conducted in most capital cities also echoed these views.
The trucking industry's view was that because the industry and its users were often price
takers that could not readily pass on charge increases, the industry's usual way of coping
with cost increases (such as those from international oil price movements, wage rises etc)
was to look for productivity gains to offset the cost increases.
The NTC's response
This issue as well as the NTC's response is discussed in detail in section 5.9 of this report.
The NTC has no mandate to recommend productivity offsets tied to the heavy vehicle
charging. However, currently there are a number of initiatives being driven in particular
by COAG which will result in productivity offsets over the medium to longer term. Some
of these initiatives are already incorporated into the NTC work program.
7. RECOMMENDATION
The NTC recommends the follow heavy vehicle charge schedule (Table 21) which is
subject to a three year phase-in.
Table 21. Recommended schedule of charges after phasing in
DIVISION 1 - LOAD CARRYING VEHICLES ($) - July 2010
Vehicle Type 2 axle 3 axle 4 axle 5 axle
Trucks
Truck (type 1) 380 652 652 652
Truck (type 2) 652 859 859 859
Short combination truck 652 859 1593 1593
Medium combination truck 5828 5828 6295 6295
Long combination truck 8036 8036 8036 8036
Prime Movers
Short combination prime mover 1000 3930 4322 4322
Multi-combination prime mover 7050 7050 7755 7755
DIVISION 2 - LOAD CARRYING TRAILERS ($)
Axle group type (per axle charge ($))
Single axle Tandem Tri-axle Quad-axle
axle and above
Trailer type
Pig Trailer 380 380 380 380
Dog Trailer 380 380 380 380
Semi Trailer 380 380 430 430
B-Double lead trailer and B-triple lead 1900 1900 2000 2000
and middle trailers
Converter dolly or low loader dolly 380 380 380 380
DIVISION 3 - BUSES ($)
Bus Type 2 axle 3 axle 4 axle
Bus (type 1) 380
Bus (type 2) 380 2087 2087
Articulated bus 380 380
DIVISION 4 - SPECIAL PURPOSE VEHICLES ($)
Special purpose vehicle (type P) No charge
Special purpose vehicle (type T) 248
Special purpose vehicle (type O) Calculated using the formula:
310 + (310 x Number axles over 2)
PERMIT FEES
The charge for the grant of permit to operate a vehicle over 125 tonnes carrying an indivisible load is
to be calculated as
: 4 cents x ESA-km
These charges, which are consistent with Option C3, meet the primary objectives for the
2007 Heavy Vehicle Charges Determination listed in Chapter 3, which include that:
· road expenditure allocated to heavy vehicles in aggregate is fully recovered
· each vehicle class at least recovers its attributed expenditure, so that there are no cross-
subsidies between vehicle classes
· charges accommodate high-productivity vehicles
· charges are consistent with the ATC approved pricing principles
· charges are updated so that they continue to fully recover costs between
determinations.
In addition, the recommended charges allow maximum vehicle configuration flexibility
and are administratively simple, which meets the needs of trucking industry and state and
territory government stakeholders. Further, they include a phase-in period of up to three
years for registration charges, which establishes a manageable implementation path for
vehicle operators.
The NTC notes that the implementation of a 2007 Heavy Vehicle Charges Determination
is only the first step in the reform process outlined by COAG in its meeting of 13 April
2007. But crucially, the Determination will enable investment in a safer and more
productive road network while the reform process continues.
The NTC's recommended charges for selected vehicles are shown on Table 22. The
sections below summarise the recommended charges and the basis for their
recommendation, and discuss their implications for compliance costs, implementation, and
legislative change.
7.1 Recommended heavy vehicle charges
As indicated above, the NTC recommends the heavy vehicle charges contained in Table
21. In calculating these charges, the NTC:
· included 2007/08 budget expenditure in the seven-year average expenditure figure used
in establishing the cost base (Option CB1)
· partly included enforcement costs in the cost base (Option b)
· allocated costs in line with the methodology developed as part of the Third
Determination workings, except for a modification to address trucking industry
concerns about the costs allocated to double and triple road trains
· adopted a revised charges structure that allows maximum vehicle flexibility and
accommodates higher productivity vehicles within the charges schedule (Option C3)
· adopted a phase-in period of up to three years for the recommended registration
charges
· modified the annual adjustment process by updating some of the formula components
and removing the cap and floor on the adjustment, and recommended introducing an
annual review to determine whether key variables have changed sufficiently to warrant
a new determination, and undertaking a charges determination at least every five years
(Option A2).
Table 22. The NTC's recommended heavy vehicle charges for selected
vehicles with phasing (nominal)
3 year phase in
Current Prime Year 1 total Year 2 total Year 3 total
07/08 mover
Fuel Charge (cents) 19.633 21.0 21.0 21.0
Registration Charges ($
per vehicle)
2 axle rigid truck, 4.5 - 7
tonnes 355 380 380 380 380
3 axle rigid truck over
18.5 tonnes, no trailer 946 859 859 859 859
4 axle rigid truck over 25t
no trailer 859 859 859 859
Heavy truck/trailer over
42.5 tonnes 24 5,737 5,161 6,491 7,158 7,158
6 axle articulated truck 5,084 3,930 5,070 5,145 5,220
B-double 9 axle 8,041 7,050 9,330 11,835 14,340
Double road train 8,751 7,050 10,090 10,240 10,390
Triple road train 10,526 7,050 11,990 12,215 12,440
2 axle bus over 10 tonnes 592 380 380 380 380
Annual under-recovery
($m) 168 83 39 0
Trailer charge per axle Year 1 Year 2 Year 3
Standard trailer axle
charge 355 380 380 380
Semi trailer tr-axle 355 380 405 430
B-double lead trailer -
tandem axle 355 380 1,140 1,900
B-double lead trailer - tri
axle 355 380 1,190 2,000
Road train dolly trailer 355 380 380 380
Each of these components of the NTC's recommended charges option is discussed in more
detail in the sections below.
24
Note the prime mover registration charge for this class of vehicle has been phased in over 2 years. This
figure represents the year 1 prime mover charge. The prime mover charge in years 2 and 3 is $5,828
7.1.1 Inclusion of 2007/08 budget expenditure in the cost base
In calculating the expenditure figure to be included in the cost base, the NTC used an
average of seven years' expenditure data, including 2007/08 budget expenditure and actual
expenditure for 2001/02 to 2006/07. This resulted in a cost base of $1,953m.
The NTC preferred this option to the alternative (which included 2006/07 budget
expenditure) because:
· It ensures that the expenditure figure used to calculate the cost base is as up-to-date as
possible, reducing the lag in the recovery of the current year of expenditure.
· Although it leads a higher cost base than the alternative option, the resulting higher
charges can be phased in over up three years and so will create less of a price shock for
vehicle operators.
· It is administratively simpler, because it avoids the need for an annual adjustment to
occur on the same date as new charges under the 2007 Determination begin to be
implemented.
· It is consistent with the current methodology.
7.1.2 Partial inclusion of enforcement costs in the cost base
In calculating the cost base, the NTC took the view that it is appropriate for heavy vehicle
charges to recover the costs associated with enforcing mass constraints, as the primary
objective of these constraints is to manage road wear (and thus avoid expenditure on road
maintenance). In addition, because of the difficulties in separating mass-related and safety-
related costs, the NTC took the view that the enforcement costs reported by road agencies,
discounted to account for the fact that the NSW road agency undertakes significantly more
safety-related enforcement than road agencies in other jurisdictions, is a reasonable proxy
for mass-related costs.
In reaching this view, the NTC considered the PC Inquiry's finding that "the costs of
enforcing heavy vehicle mass and speed restrictions through road user charges". It also
considered the ATC pricing principle that states that heavy vehicle charges should enable
"full recovery of allocated infrastructure costs". The NTC concluded that only the recovery
of mass-related enforcement is appropriate, as safety-related enforcement costs cannot be
considered to be infrastructure costs and therefore their recovery through heavy vehicle
charges would be inconsistent with the ATC's current pricing principles.
7.1.3 Allocation of costs
The methodology the NTC used to allocate the cost base to the different vehicle classes is
based on the best available research, and was updated and consulted on as part of the Third
Determination process. The Productivity Commission has found that this methodology is
reasonable although conservative in nature. In general, the methodology also has the
support of the trucking industry.
The methodology relies on road usage data from the Australian Bureau of Statistics'
Survey of Motor Vehicle Usage (SMVU) to allocate costs. In response to trucking
industry concerns about the quality of this data, the NTC reviewed the data and undertook
further analysis on the reliability of the road train data. It found the standard error
associated with road train VKT was sufficiently large that the VKT for double and triple
roads trains fell within a similar range applying a 95 per cent confidence interval. Given
the significant impact VKT has on cost allocation, the NTC applied an average road train
VKT figure of 133,750 to both double and triple road trains. This had the impact of
increasing the cost allocated to double road trains from $35,611 to $38,055 and decreasing
the costs allocated to triple road trains from $68,342 to $47,323 (before unsealed travel
adjustments are made) compared the draft RIS.
7.1.4 Adoption of a revised charges structure
The NTC adopted a revised registration charges structure that is based on Option C1 (the
preferred option in the draft RIS), but which allows greater vehicle configuration flexibility
by establishing a multi-combinational prime mover charge for B-doubles and road trains.
The objective that vehicle classes at least recover their attributable costs is achieved by
applying differentiated trailer axle charges instead of a uniform charge. Trailer flexibility
is maintained, as the cost of a particular trailer remains the same regardless of the vehicle
configuration it is used in. These modifications mean that charges are modular and cost
recovery is spread more evenly between the trailer and prime mover charges.
In addition, the modular charge structure means that higher productivity vehicles are
accommodated within the charges schedule. The NTC considers this is preferable to the
use of higher productivity formula as proposed in the draft RIS, on the grounds that it is
simpler and NTC analysis indicates that results in very similar charges to the formula.
The NTC is conscious that although registration charges constitute a relatively small
proportion of vehicle operating costs, its recommended registration charges for some
vehicles represent a considerable cost increase. This is particularly the case for vehicles in
classes that are currently under-recovering their attributable costs. Nevertheless, the NTC
prefers its recommended charges for the following reasons:
· As indicated above, they meet all the primary objectives for the 2007 Heavy Vehicle
Charges Determination
· Unlike Options C1 and C2, they maintain maximum vehicle configuration flexibility
and accommodate higher productivity vehicles
· The charges under Option C1 provide for a greater increase in registration charges for
vehicle classes that are current under-recovering their attributable costs,
· The charges under Option C2 do not adequately adhere to the pricing principle of
having "regard to other pricing applications, such as light vehicle charges..." because
they include a registration charge for two axle rigid vehicles that is below the mid point
of the range of maximum charges for light vehicles.
7.1.5 Adoption of a phase-in period of up to three years for registration
charges
As in previous determinations, the NTC's recommended charges comprise a fuel-based
charge and registration charges. The recommended charges are to be implemented from 1
July 2008.
However, the recommended registration charges will result in cost increases for prime
movers and trucks in some heavy vehicle classes, and the introduction of differential trailer
axle charges will result in large cost increases for some trailer types. In recognition of this,
the recommended charges schedule includes a phase-in period of up to three years. Under
this schedule:
· The increased fuel-based charge is fully implemented in Year 1.
· For truck and prime mover registration charges, all increases and decreases are fully
implemented in Year 1, except those for heavy truck trailers. In this case, the increase
in the vehicle component of the registration charge is phased in equally over three
years. This exception is due to the large size of the increase, which has partly resulted
from reclassification of SMVU data, and feedback from stakeholders on the impacts of
this increase.
· For trailer registration charges, the increase in the standard trailer per axle rate is fully
implemented in Year 1. Where a differential trailer axle charge is proposed, the charge
is phased in over three years with the Year 1 charge being equivalent to the standard
trailer axle rate and the balance being implemented evenly in the remaining years.
The NTC notes that this phasing-in will result in a continued under-recovery of
expenditure in Years 1 and 2. However, both the jurisdictions and heavy vehicle operators
have indicated that it is necessary, to provide them with sufficient time to make the
operational and system changes required to accommodate the new charges schedule.
7.1.6 Modification to the annual adjustment process
The NTC has modified the current annual adjustment process by:
· Updating the formula components to align with the new 2007 Determination cost
allocation model
· Removing the CPI cap and 0 per cent floor on registration charge increases
· Indexing the fuel-based charge by the Annual Adjustment Formula used to index
registration charges.
In addition, the NTC recommends that it undertakes an annual review to evaluate whether
key variables have moved sufficiently to warrant a new determination and that a charges
determination occurs at least every five years (if not already undertaken as a result of the
annual review).
The NTC considers that this approach to the annual adjustment (Option A2) is preferable
to the alternative approaches it considered. It will ensure that charges continue to recover
heavy vehicle allocated expenditure in aggregate in a way that is formula-driven, relatively
simple, and will not require a new determination each year. In addition, when combined
with an annual review process and more frequent determinations, it will minimise
"ongoing cross-subsidisation across different heavy vehicle classes".
The NTC notes that implementing its recommended modifications to the annual
adjustment process will require changes to the Fuel Tax Act 2006, to allow for the
automatic indexation of road user charges.
7.2 Compliance issues
The NTC considers that its recommended heavy vehicle charges will not create any
compliance issues, because the compliance costs associated with heavy vehicle charges are
negligible.
7.3 Implementation issues
The key issues associated with the NTC's recommended charges schedule stem from the
move away from just one standard trailer axle registration charge that applies to all trailer
types, regardless of the trailer axle configuration. The recommended charges schedule
introduces a differential trailer axle registration charges system based on breaking down
trailers into five main categories and having differential trailer axle charges applying in
some cases.
The feedback that the NTC has received from registration authorities to date indicates that
although each trailer type is separately registered and categorised in their registration
systems, the proposed five key trailer categories are generally not categorised readily under
the five main groups. Therefore, system changes and associated staff training will be
required.
These changes will take some time to implement, and it is unlikely that necessary changes
will be implemented fully before 1 July 2008, when the 2007 Determination is due to come
into effect. However, as discussed in section 7.1.5 above, the recommended charges
schedule phases in differential trailer axle charges over three years, and charges higher
than the standard trailer axle charges do not take effect until 1 July 2009. This should
provide registration authorities with sufficient time make the necessary system changes
and undertake staff training.
The registration authorities have indicated that these system changes could be reasonably
costly. For example, NSW RTA estimates that IT, paper and staff training costs associated
with the system changes could equal $3 million. However, this would be a one-off
expense, which the NTC believes is justified to enable a more efficient heavy vehicle
charging system to be implemented.
The NTC has been advised that the recommended charges schedule (including the
introduction of differential trailer axle registration charges) will have no impact on the
National Exchange of Vehicle and Driver Information System (NEVDIS).
7.4 Legislative issues
If approved by the ATC, the recommended annual registration charges will be set out in
the form of a model Act made under the National Transport Commission Act 2003. This
approach is consistent with the requirements of the Inter-Governmental Agreement for
Regulatory and Operational Reform in Road, Rail and Intermodal Transport (the IGA).
The model Act will not be `operative', in that it will not create any legally enforceable
rights or obligations for any party. It will instead provide an authoritative depository for
the content of the agreed reform. The model Act will appear as a schedule to Regulations
made under the National Transport Commission Act 2003 on the Federal Register of
Legislative Instruments in accordance with the provisions of the Legislative Instruments
Act 2003. This approach will facilitate the continued referencing of the national charges by
jurisdictions.
The charges set out in the model Act will supersede those currently contained in the Road
Transport Charges (Australian Capital Territory) Act 1993. The location of the charges in
that Act was a product of the template legislative reform mechanism adopted by the
National Road Transport Commission.25 This approach has been replaced by the model
legislation system set out in the IGA. The template legislation is to be repealed once all
jurisdictions have removed any remaining references to it.
The model Act will continue to reflect the key concepts (such as determined charges and
the annual adjustment process) and definitions contained in the Road Transport Charges
(Australian Capital Territory) Act 1993. It will depart from them as necessary, to reflect
any matters agreed by the ATC that are not currently provided for (such as the phasing in
of certain registration charges).
The recommended fuel-based charge will, as is currently the case, be determined by the
responsible Commonwealth Minister under the Fuel Tax Act 200626 in the form of a
disallowable legislative instrument. The Commonwealth Department of Transport and
Regional Services will liaise with the Attorney-General's Department to ensure the
appropriate fuel tax instruments are drafted. These instruments will be registered and
tabled in Parliament in accordance with the relevant legislative requirements.
The processes outlined above will, subject to the passage of the necessary legislation in
each State and Territory, provide the basis for updated heavy vehicle charges to become
effective from 1 July 2008.
25
Under the template approach, the legislation prepared by the National Road Transport Commission was
approved by the Australian Transport Council. This legislation was then enacted by Commonwealth
Parliament, and applied in the Australian Capital Territory and the Jervis Bay Territory. It was intended that
each State and the Northern Territory would then enact legislation, adopting the Commonwealth legislation
by reference.
26
The Fuel Tax Act 2006 allows the Commonwealth Minister for Transport to set the effective level of duty
payable on fuel for heavy vehicles.
8. REFERENCES
ARRB Transport Research (2006a) HDM IV Heavy Vehicle Cost Model
ARRB Transport Research (2006b) Analysis of ABS Input/Output Tables for 2001/02
Asciano (2007) Asciano Submission to the National Transport Commission Re: 2007
Heavy Vehicle Charge Determination, July
Australian Bureau of Statistics (2006) Survey of Motor Vehicle Use, Cat No. 9208.0
various issues
Australian Industry Group (2006) Transport & Logistics Operations in Australia
Australasian Transport News-PKF Pty Ltd (2007), Truck Operating Cost Model
Austroads Road Safety Handbook (2005a) Volume 2, Report on Road Improvement as a
Road Safety Countermeasure by Monash University Accident Research Centre
Austroads Road Safety Handbook (2005b) Volume 3, Improving Heavy Vehicle Safety by
Monash University Accident Research Centre
Bureau of Transport and Regional Economics (2000) Transport Costs in Regional City-
Country Price Differentials, Canberra, unpublished
The Council of Australian Governments (2007) COAG National Reform Agenda -
Competition Reform, April
CRA International (2007) Case Studies of the Effect on Operator Costs of the NTC's 2007
Heavy Vehicle Charges
The Inter-Governmental Agreement (2003) (IGA) for Regulatory and Operational
Reform in Road, Rail and Intermodal Transport
Meyrick and Associates (2007) Assessment of Heavy Vehicle Charge Recovery Estimates,
August
National Road Transport Commission (1998) Updating Heavy Vehicle Charges:
Technical Report, NRTC, Melbourne
National Road Transport Commission (2000) Updating Heavy Vehicle Charges:
Regulatory Impact Statement, NTC, Melbourne
National Road Transport Commission, (2001) Annual Adjustment Procedure for Heavy
Vehicle Charges - Initial Adjustment: Regulatory Impact Statement, NRTC,
Melbourne
National Transport Commission, (2005a), Review of Heavy Vehicle Axle Load Data,
NTC, Melbourne
National Transport Commission, (2005b), Review Local Road Use, NTC, Melbourne
National Transport Commission, (2005c), A Survey and Analysis of Heavy Vehicle Fleet
Costs and Sensitivities in Vehicle Choice, September 2005 (unpublished)
National Transport Commission, (2005d), Third Heavy Vehicle Pricing Determination
Technical Report, NTC, Melbourne
National Transport Commission (2006), Third Heavy Vehicle Charges Determination
Regulatory Impact Statement, NTC, Melbourne
Productivity Commission (2006) Road and Rail Freight Infrastructure Pricing, Report no.
41, Canberra, December
VicRoads (2004), Annual Report 2003/04, Appendices on Compliance and Enforcement
9. GLOSSARY OF TERMS
Term Definition
AGM Average Gross Mass (an average of the total mass of a
vehicle and its load per kilometre travelled).
Attributable costs Costs of providing and maintaining roads that vary depending
on the use of the road system by different types of vehicles.
These costs are directly attributable to vehicles.
CPI Consumer Price Index.
Equivalent Standard A measure of the relative road wear of different axles
Axles (ESA) carrying different loads, calculated as:
4
load
ESA =
reference load
where the reference load varies depending on the number of
axles in the axle group and the types of tyres it is fitted with.
Externalities Externalities can be of a detrimental or beneficial nature.
Detrimental externalities are the result of an activity that
causes damage to others with no corresponding compensation
paid by those who generate the externality such as noise, air
pollution and greenhouse gas emissions. Beneficial
externalities are the result of activity which causes incidental
benefits to others with no corresponding compensation
provided to those who generate the externality.
Gross Vehicle Mass The maximum mass the manufacturer or road authority has
(GVM) rated the vehicle as safe to carry.
Heavy vehicle Vehicle 4.5 tonnes and above GVM.
Higher Mass Limits A scheme which allows for increases to general access mass
(HML) limits provided the vehicle is operated in accordance with
conditions stipulated for HML.
High productivity This is a heavy vehicle that does not meet current prescriptive
vehicle specifications based on mass, volume, height, vehicle/trailer
length and/or axle configuration due to productivity related
improvements to the vehicle.
For these vehicles it is proposed that a high productivity
vehicle charge formula apply unless the vehicle type can be
accommodated within the registration charge range for the
nearest prescriptive vehicle type.
IGA Inter-Governmental Agreement.
Incremental pricing Heavy vehicle pricing that would operate in addition to the
existing heavy vehicle charges. The aim of incremental
Term Definition
pricing is to provide opportunities for charges to be levied for
specific activities, mainly (but not exclusively) to allow
vehicles to operate at higher masses or with additional access.
Non-attributable costs Costs of providing roads that have little relation to road use.
(common costs) Examples include the costs of repairing storm or flood
damage and the costs of building a minimum possible
standard of road or bridge. Some pavement wear occurs
because road building materials deteriorate with age and
weather. This wear would occur regardless of whether
vehicles used the road or not and is therefore non-attributable
to vehicles.
NTK Net Tonne Kilometres
PAYGO Pay-as-you-go approach used to determine the amount to be
recovered from vehicles through the pricing system. Under
this approach, current levels of construction and maintenance
expenditure are assumed to reflect the annualised costs of
providing and maintaining roads for the current level of
traffic.
PCU Passenger Car Equivalent Units.
PCU-km Passenger Car Equivalent Unit kilometres.
RCMPI Road Construction and Maintenance Price Index.
SMVU Survey of Motor Vehicle Use.
VKT Vehicle Kilometres Travelled.
2007 HEAVY VEHICLE CHARGES
DETERMINATION
REGULATORY IMPACT
STATEMENT VOLUME 2
APPENDICES
December 2007
Prepared by
National Transport Commission
National Transport Commission
2007 Heavy Vehicle Charges Determination: Regulatory Impact Statement
Appendices
Report Prepared by: National Transport Commission
ISBN: 1 921168 72 2
REPORT OUTLINE
Date: December 2007
ISBN: 1 921168 72 2
Title: 2007 Heavy Vehicle Charges Determination
Regulatory Impact Statement Volume 2 Appendices
Address: National Transport Commission
Level 15/628 Bourke Street
MELBOURNE VIC 3000
E-mail: ntc@ntc.gov.au
Website: www.ntc.gov.au
Type of report: Regulatory Impact Statement
Objectives: To improve transport efficiency, productivity and
equity, reduce administration costs, improve road
safety, and promote nationally consistent regulatory
reform
NTC Programs: Pricing
Purpose: Appendices to Regulatory Impact Statement
CONTENTS
A. PAYGO COST BASE............................................................................................5
A.1 The PAYGO approach to determining the cost base................................................. 5
A.2 Deriving allocated road expenditure from reported road expenditure........................ 5
A.3 Updated components using 2007 Determination costing model................................ 6
A.3.1 Arterial road expenditure ............................................................................................... 6
A.3.2 Local road expenditure.................................................................................................. 7
A.4 Summary of allocable expenditures........................................................................... 9
A.5 Impact of seven versus three year averaging .......................................................... 10
A.6 Estimating road use ................................................................................................. 12
A.7 Road use changes since the Second Determination ............................................... 12
A.7.1 B-doubles .................................................................................................................... 12
A.7.2 Road train vkt modification and its impacts ................................................................. 12
A.7.3 Special purpose vehicles............................................................................................. 13
A.7.4 Heavy truck trailer combinations ................................................................................. 13
B. COST ALLOCATION ..........................................................................................16
B.1 Local road use ......................................................................................................... 16
B.2 Update of ESA relationships .................................................................................... 16
B.3 Cost allocation rules ................................................................................................ 17
B.4 Cost allocation results before road train adjustment................................................ 18
B.4 Cost allocation results after road train adjustment................................................... 19
B.4.1 Adjustment for road train travel on unsealed roads ........................................ 19
B.4.2 Road train community service obligation........................................................ 20
B.4.2 Adjustments made to allocated cost due to road train factors ........................ 20
B.4.3 Allocated cost by road type ............................................................................ 22
B.4.4 Allocated cost changes since the Second Determination............................... 22
C. METHODOLOGY FOR CALCULATING CHARGE RECOVERY .......................25
C.1 Introduction .............................................................................................................. 25
C.2 ATA initial approach to estimating heavy vehicle charge revenue........................... 26
C.2.1 Revenue from fuel ....................................................................................................... 26
C.2.2 Revenue from vehicle registrations ............................................................................. 26
C.3 ATA submission approach of estimating heavy vehicle charge revenue................. 27
C.4 Comparison of methods........................................................................................... 27
C.5 Critique .................................................................................................................... 28
C.5.1 Inclusion of low sulphur diesel cost recovery charge .................................................. 28
C.5.2 Treatment of petrol fuelled heavy vehicles and metropolitan heavy
vehicles less than 20 tonnes ....................................................................................... 30
C.5.3 Indexation of fuel charges ........................................................................................... 31
C.5.4 Using the RCMPI as an index ..................................................................................... 31
C.5.5 Using CPI as an index................................................................................................. 32
C.6 Conclusion ............................................................................................................... 32
D. THE NTC CHARGING MODAL ..........................................................................33
D.1 Current structure of charges .................................................................................... 33
D.2 Major factors that determine heavy vehicle charges within the NTC
charge modal ........................................................................................................... 33
E. ANNUAL ADJUSTMENT ....................................................................................35
E.1 Current annual adjustment methodology ................................................................. 35
E.2 Updated components using 2007 Determination costing model.............................. 37
F. COST BASE FOR THE ANNUAL ADJUSTMENT .............................................41
F.1 Seven versus three year average of road expenditure ............................................ 41
F.2 Real versus nominal road expenditure .................................................................... 41
F.3 Calculation of change in rural arterial expenditure % .............................................. 42
G. ANNUAL ADJUSTMENT - MONITORING OF CHANGES IN KEY
VARIABLES ....................................................................................................... 43
G.1 Key variables ............................................................................................................43
G.2 Recovery of attributable costs ..................................................................................43
Scenario 1: Constant changes across the vehicle fleet........................................................ 44
Scenario 2: Only B-double road use is varied ...................................................................... 46
H. High productivity vehicles ............................................................................... 49
H.1 Allocated cost formula ..............................................................................................50
H.1.1 Unit costs..................................................................................................................... 50
H.1.2 Other adjustments to costs.......................................................................................... 51
H.1.3 Non-attributable cost ................................................................................................... 51
H.1.4 AGM value................................................................................................................... 51
H.1.5 ESA value.................................................................................................................... 52
H.1.6 PCU value. .................................................................................................................. 54
H.1.7 Annual VKT ................................................................................................................. 55
H.1.8 Fuel use....................................................................................................................... 56
H.2 B-triple example calculation......................................................................................57
I. FULL SCHEDULE OF REGISTRATION CHARGES ......................................... 59
J. IMPACTS ON STATE/TERRITORY REVENUES .............................................. 64
J.1 Registration revenue implications of recommended option......................................64
K. PRIMARY PRODUCER CONCESSIONS .......................................................... 68
L. NON PRIMARY PRODUCER REGISTRATION CONCESSIONS ................... 69
LIST OF TABLES
Table 1. Arterial road construction and maintenance expenditure including
2007/08 budget data in 2007/08 $m.............................................................. 7
Table 2. Local road construction and maintenance expenditure in 2007/08 $m..... 9
Table 3. Expenditure excluded from allocation process including 2007/08
budget data in 2007/08 $m.......................................................................... 10
Table 4. Total road expenditure, three year versus seven year averaging
($2007/08 m) .................................................................................................. 11
Table 5. Changes in rigid truck trailer combination usage since the Second
Determination ............................................................................................... 13
Table 6. Road use data by vehicle type .................................................................... 14
Table 7. Allocation of attributable costs to measures of road use ........................ 18
Table 8. Unit costs for heavy vehicles by road type including 2007/08 budget
data ................................................................................................................ 19
Table 9. Costs allocated to each vehicle class after road train adjustments $m.. 21
Table 10. Costs allocated by road type: attributable and non-attributable costs
after road train adjustments in 2007/08 $m............................................... 22
Table 11. Heavy vehicle allocated cost per vehicle - changes since the Second
Determination ............................................................................................... 23
Table 12. Summary of heavy vehicle allocated cost changes since the Second
Determination ............................................................................................... 24
Table 13. Key changes in proportions of costs allocated since the Second
Determination ............................................................................................... 24
Table 14. Calculation of the value of sulphur emissions .......................................... 29
Table 15. Cumulative average annual growth rates to generate D factors.............. 37
Table 16. Over-recovery of attributable costs ............................................................ 44
Table 17. Over-recovery of B-double attributable cost with constant variation in
key variables across vehicle classes ......................................................... 46
Table 18. Unit costs for revised formula..................................................................... 50
Table 19. Closest like vehicle matching tables .......................................................... 54
Table 20. Schedule of registration charges for the 2007 Determination ................. 59
Table 21. Current charges schedule 2007/08 ............................................................. 60
Table 22. Option C3 charges schedule at the end of phase in excluding annual
adjustment .................................................................................................... 61
Table 23. Mapping vehicle categories to the charging schedule ............................. 62
Table 24. Registration revenue by jurisdiction ($000) ............................................... 64
Table 25. All jurisdiction registration revenue by vehicle class ($000) ................... 64
Table 26. NSW revenue from registration charges ($000)......................................... 65
Table 27. Vic revenue from registration charges ($000) ........................................... 65
Table 28. Qld revenue from registration charges ($000) ........................................... 65
Table 29. SA revenue from registration charges ($000) ............................................ 66
Table 30. WA revenue from registration charges ($000) ........................................... 66
Table 31. Tasmania revenue from registration charges ($000) ................................ 66
Table 32. NT revenue from registration charges ($000) ............................................ 67
Table 33. ACT revenue from registration charges ($000).......................................... 67
Table 34. Primary producer heavy vehicle registration concessions...................... 68
LIST OF FIGURES
Figure 1. Figure 1 NTC approach contrasted with ATA initial approach .................27
Figure 2. NTC approach contrasted with ATA submission approach......................28
Figure 3. Charge modal flow chart ..............................................................................34
Figure 4. Current annual adjustment methodology (developed in 2001).................36
Figure 5. Current sensitivity factor values .................................................................36
Figure 6. Comparison of old and new D values .........................................................38
Figure 7. New annual adjustment formula ..................................................................39
Figure 8. New simplified annual adjustment formula ................................................39
Figure 9. Comparison of old and new adjustment factors .......................................40
Figure 10. Over-recovery of B-double attributable cost with variation in B-double
road use variables.........................................................................................48
Figure 11. Relative PCU factor.......................................................................................55
Figure 12. Regression of average VKT against AGM...................................................55
Figure 13. Regression of fuel use against AGM...........................................................57
Figure 14. B-Double and B-triple example calculation ................................................58
PAYGO COST BASE
NTC's costing methodology consists of Pay-As-You-Go (PAYGO) cost estimates and a
cost allocation model which allocates costs on the basis of vehicle characteristics and
usage. The model works on an aggregate basis and is reliant on a system of averaging. It
does not address the considerable diversity in fleet, usage and network. These
characteristics of the model and the data collected also make it difficult to accurately
disaggregate specific jurisdictional and Auslink heavy vehicle expenditure.
The Productivity Commission supported the continual use of PAYGO in the short term
until a more appropriate alternative is developed. As part of its assessment, the
Productivity Commission validated the current cost allocation methodology, although
noted it was conservative in nature. Therefore the NTC's models have adopted (for the
most part) the same PAYGO cost estimation and cost allocation methodology as applied in
the Third Determination.
The PAYGO approach to determining the cost base
PAYGO is based on the idea that all expenditure, including capital expenditure, is fully
recovered in the year it is incurred.
The current road network is the result of construction activity that occurred previously
when traffic levels were lower. The amount spent now is based on expected traffic levels
over the coming fifteen to thirty years, which can be expected to be higher - that is, it
provides for both current and future traffic. Consequently, construction costs in the current
year might be higher than those that are rightly the share of the current traffic.
The amount currently spent on maintenance is the result of accumulations in pavement and
bridge wear over the past twelve months to twenty years, caused by past traffic which was
less than at current levels. Consequently, maintenance costs attributed to the current year
might be expected to be smaller than the true share of maintenance costs (which are yet to
be incurred) resulting from the current traffic.
These two effects are taken to negate each other under the PAYGO approach, so that the
amount spent in the current year approximates the true share of costs associated with the
current traffic.
The PAYGO cost base is derived from reported road expenditure, which includes both
arterial and local roads. Expenditure deemed not to be relevant to road use or which is
recovered from other fees is first excluded from the cost base. Adjustments are also made
to remove any double counting that may occur through the reporting process.
Deriving allocated road expenditure from reported road expenditure
The NTC uses two separate sources of road expenditure data. Arterial road expenditure is
obtained directly from jurisdictions on an annual basis. The expenditure is reported in the
format of a template developed by the NTC, which categorises expenditure specifically for
the purposes of cost allocation modelling. The categories are shown in Table 1 (apart from
categories G3 to G5 which are not included in NTC cost allocation). This data has been
collected since the early 1990s and is the best series available on arterial road expenditure
in Australia.
For the heavy vehicle charges determinations to date, the NTC has used three year
averages of road expenditure in calculating the allocable cost base. The data is converted
to real terms using BTRE Road Construction and Maintenance Price Index. The arterial
road expenditure data comprises an average of the two latest completed financial years as
well as the latest budget year. For local road expenditure there are lags in the availability of
data, such that the most recent year for which data are available is 2004/05. The NTC is
now proposing to use an average of seven years' worth of data as supported by the
Productivity Commission in its Final Report on Road and Rail Freight Infrastructure
Pricing, PC (2006). Consequently, the arterial road expenditure data relates to the years
from 2001/02 to 2007/08, while the local road expenditure data relates to the years from
1998/99 to 2004/05.
Updated components using 2007 Determination costing model
Arterial road expenditure
From the arterial road expenditure collected by the NTC from jurisdictions, the amounts
reported in categories G3 to G5 are excluded. Vehicle registration (G3) and driver
licensing (G4) are excluded because administrative fees are already charged for these
services. As such, including them could result in double counting. Including loan servicing
expenditure (G5) would violate the PAYGO principle that all capital is recovered in the
year it is incurred. Accordingly it is also excluded from the allocable cost base, see NTC
(2005d) Section 3.3 for further detail on unallocated expenditure.
In the past the NTC has not included expenditure relating to heavy vehicle enforcement.
However, in keeping with the findings of the Productivity Commission and a request from
the ATC to review the appropriateness of recovering this cost the NTC has included this
expenditure on an adjusted basis so that the proportion of the national total does not exceed
that of a jurisdiction's proportion of heavy vehicle kilometres travelled. A more complete
discussion of the principles for inclusion of this costs is in section 2.3.1 of Volume 1.
To estimate a common minimum level of enforcement the NTC has used a proxy for mass
related enforcement and as NSW has a disproportionately large share of the national
enforcement cost, this approach in effect reduces its enforcement expenditure from $66.4
million to $21.5 million. Total allocable enforcement expenditure is reduced from $110
million to $66 million (a reduction of $44 million).
Allocable arterial road expenditure can therefore be expressed as the reported expenditure
of $7,210 million less the sum of categories G3 to G5 of $709 million less $44 million of
category G2 for heavy vehicle enforcement expenditure, leaving $6,457 million.
Table 1 below shows how arterial expenditure has moved over time since the second and
third determinations. This table demonstrates that growth in expenditure between
categories is not uniform across time. The rate of growth in total arterial expenditure
masks a lot of variation between expenditure categories. This has implications for the
amount of the expenditure that is allocated to the heavy vehicle fleet, since the cost
allocation rules dictate that certain categories should be more attributable to heavy vehicle
use than others.
Table 23. Arterial road construction and maintenance expenditure
including 2007/08 budget data in 2007/08 $m
nd
2 2007 Det. Change 2007
Det. Det./2nd Det.
Expenditure Category
A Servicing and operating 450 711 58%
B Road pavement and shoulder construction
B1 Routine maintenance 386 425 10%
B2 Periodic surface maintenance 362 330 -9%
C Bridge maintenance/ rehabilitation 141 172 22%
D Road rehabilitation 750 477 -36%
E Low-cost safety/traffic 291 383 32%
F Asset extension/improvements
F1 Pavement improvements 821 1,130 38%
F2 Bridge improvements 359 426 19%
F3 Land acquisition, earthworks/other 1,562 2,084 33%
G Other miscellaneous activities
G1 Corporate services 260 252 -3%
G2 Enforcement of heavy vehicle regulations 110 110 0%
Totals 5,492 6,501 18%
A.3.2 Local road expenditure
Local road expenditure data is obtained from the Australian Bureau of Statistics. It is the
best available local road expenditure data available at present; however it is not reported in
the categories required by the NTC for the purposes of cost allocation modelling. Rather,
it is broken down by state and also capital/current expenditure. It is therefore necessary for
the NTC to estimate the proportion of the expenditure in each of its categories. This is
done by using the same proportions as for arterial road expenditure. The capital
component of the reported local expenditure is apportioned on the basis of expenditure
category F. The current component of the expenditure is apportioned based on expenditure
categories A-E.
The NTC acknowledges the limitations of this method of disaggregating the expenditure.
A project is currently being undertaken in conjunction with Austroads to obtain survey
evidence from local councils of the true breakdown of their expenditure in the NTC
classes. Unfortunately the results will not be available in time for use in the 2007
Determination.
A further adjustment that must be made to the local road expenditure relates to the
elimination of double counting of inter-governmental grants. The ABS Government
Financial Statistics reports expenditure by local councils on all roads, as opposed to all
expenditures on local roads themselves.
It is therefore necessary for the NTC to make adjustments to the ABS data to account for:
· financial assistance to councils from state governments for work on council
managed arterials;
· payments to councils from state governments for contract work on state managed
roads;
· spending by state governments on local access roads in unincorporated areas;
· direct spending by state governments on council managed local access roads; and
· any other direct state spending on local access roads.
Estimates of these expenditure totals are provided by the states as part of the NTC's data
collection process. Expenditure on the first two categories is included in the arterial
categories A-G, however it is also separately identified so that it can be subtracted from
total expenditure on roads by local governments which will assist in determining local road
expenditure. Accordingly, the adjustment to the ABS data is done by subtracting the sum
of the first two items and adding the final three.
The net effect of adjusting for these funding arrangements is that the reported local
government expenditure estimate from the ABS is normally reduced by about $300 million
per annum.
In the case of the current determination, a seven year average of the reported ABS local
government expenditure is $5,440 million in 2007/08 dollars. The adjustment described
above results in a reduction of this total by $303 million, giving a revised estimate of
$5,137 million. This is made up of $3,060 million in urban local road expenditure and
$2,076 million in rural local road expenditure.
Table 2 shows how local road expenditure has moved over time since the second and third
determinations. As with arterial expenditure, the rate of growth in the total masks a lot of
variation between expenditure categories. However, given that a significant proportion of
this expenditure is excluded from the allocable cost base (see below), the impact on the
heavy vehicle allocation is somewhat muted in comparison to that of arterial expenditure.
Table 24. Local road construction and maintenance expenditure in
2007/08 $m
nd
2 2007 Det. Change 2007
Det. Det./2nd Det.
Expenditure Category
A Servicing and operating 264 968 266%
B Road pavement and shoulder
construction
B1 Routine maintenance 245 501 104%
B2 Periodic surface maintenance 230 392 70%
C Bridge maintenance/ rehabilitation 88 221 152%
D Road rehabilitation 450 593 32%
E Low-cost safety/traffic 168 458 173%
F Asset extension/improvements
F1 Pavement improvements 833 585 -30%
F2 Bridge improvements 165 242 47%
F3 Land acquisition, earthworks/other 843 1,178 40%
Totals 3,286 5,137 56%
As in the Second Determination, the NTC has assumed (based on a survey of local
government road engineers) that 75% of urban local road expenditure and 50% of rural
local road expenditure exists solely to provide access, amenity, or provide for non-
motorised road users. In addition, much of this expenditure is likely to be recovered by
other fees such as council rates. Therefore allocable local road expenditure is expressed as
25% of urban local road expenditure, being $765 million, and 50% of rural local road
expenditure, being $1,038 million. Total allocable local road expenditure is therefore
equal to $1,803 million. It is not considered necessary to deduct any expenditure from the
arterial allocable cost base on these grounds. Arterial roads by definition do not serve
functions of purely providing access to individual properties. They are defined as roads
that link communities or other roads.
Summary of allocable expenditures
Combining the allocable local road expenditure (of $1,803 million) with the allocable
arterial road expenditure (of $6,457 million) as determined above, total allocated road
expenditure is therefore $8,260 million.
Table 3 summarises the process whereby the amount of expenditure considered to be
allocable for the purposes of heavy vehicle charging is derived from the data as it is
collected.
Table 25. Expenditure excluded from allocation process including 2007/08
budget data in 2007/08 $m
Arterial Local Total
Expenditure Type Roads Roads
Total road agency expenditure 7,210 5,137 12,347
Deductions
Expenditure recovered through other fees
Administration of vehicle registration 344 344
Administration of licensing 209 209
Loan interest 156 156
Council expenditure providing for all-weather 3,334 3,334
access, amenity and non-motorised road users
Part of enforcement expenditure not included 44 44
Total deductions 753 3,334 4,087
Total allocated 6,457 1,803 8,260
Impact of seven versus three year averaging
As discussed, road expenditures have been taken as an average over seven years for this
charges determination. For the purposes of comparison, the following table shows what
the road expenditure figures would be if averaged over the most recent three years instead.
This shows that using seven year averaging road expenditure is around 6% lower than if
the traditional three year averaging in used. The lower road expenditure estimate under
seven year averaging reduces the impact of the sharp increase that has occurred in recent
years in arterial road expenditure since the Federal Auslink road funding program has
come into effect. The Auslink program in particular has boosted capital expenditure in the
F1 to F3 expenditure categories whuch is reflected by the much higher road expenditure
estimates in the 3 year averaging data compared to the 7 year averaging.
Table 26. Total road expenditure, three year versus seven year averaging
($2007/08 m)
3 year 7 year Change 7
year/3 year
Expenditure Category
A Servicing and operating 1,631 1,678 2.9%
B Road pavement and shoulder
construction
B1 Routine maintenance 852 926 8.7%
B2 Periodic surface maintenance 676 721 6.7%
C Bridge maintenance/ rehabilitation 372 394 5.9%
D Road rehabilitation 990 1,070 8.1%
E Low-cost safety/traffic 872 841 -3.6%
F Asset extension/improvements
F1 Pavement improvements 2,074 1,715 -17.3%
F2 Bridge improvements 735 668 -9.1%
F3 Land acquisition, earthworks/other 3,849 3,262 -15.3%
G Other miscellaneous activities
G1 Corporate services 251 252 0.4%
G2 Enforcement of heavy vehicle 111 110 -0.9%
regulations
Totals 12,413 11,637 -6.3%
Estimating road use
Road use estimates for the cost allocation process are derived from ABS Survey of Motor
Vehicle Use (SMVU) statistics. This data provides estimates of:
· numbers of vehicles;
· total and average travel (Vehicle Kilometres Travelled);
· average gross mass-km (gross tonne-km), including the weight of the truck itself;
· the loads it carries and the amount of travel empty and laden, and average gross mass
per km (tonnes/km); and
· total fuel consumed (litres) and the rate of fuel consumed per 100 km (litres/100 km).
As with previous Determinations, trends in vehicle kilometres travelled, gross-tonne
kilometres, numbers of vehicles and fuel consumed were estimated for each vehicle
category. This determination incorporates an additional two year's SMVU data (compared
to the Third Determination), meaning the trends are based on the years 1999 to 2005
(trends were estimated using linear least squares regressions). Using a trend allows
fluctuations between individual years resulting from the survey sampling process to be
minimised. Based on these trends, an estimate was made of road use in 2005. This was
used in preference to the raw data for 2005 as there can be greater confidence that it
reflects actual levels of use.
Road use changes since the Second Determination
The similarity of this process to that of the Second and Third Determination means that
there have been few significant shifts in vehicle utilisation patterns. There are however, a
couple of exceptions.
B-doubles
B-doubles have continued the strong growth rates evidenced since the Second
Determination. For example 9 axle B-doubles have experienced a decline in average
distance traveled and average gross mass of 12% and 9% respectively as these vehicles
have now changed from long haul vehicle to now widespread use in both rural and urban
areas.
Road train vkt modification and its impacts
Concerns were raised during the consultation process with the extent of the difference
recorded for average distance traveled for double road trains versus triple road trains based
on the results of the ABS Survey of Motor Vehicle Usage. As allocated cost per heavy
vehicle type is very sensitive to the estimate of average VKT the NTC looked more closely
at the SMVU data. The industry view was that in practice these two heavy vehicle types
have similar annual average VKT.
The NTC investigation of the data found that there is small sample size used for vehicles in
these two classes and the confidence levels in the survey data based on a 95% confidence
interval resulted ion an overlapping of the top end of the double road train annual average
vkt and the lower end of the triple road train annual average VKT. Based on these findings
the NTC concluded that it was reasonable to use a weighted average VKT for both of these
heavy vehicle classes such that both the double and triple road train vehicle types are
modelled on having the same annual average VKT. The impact of this is to increase the
allocated cost for double road trains and decrease the allocated cost for triple road trains
due to the higher number of recorded double road trains relative to triple road trains.
Special purpose vehicles
Special purpose vehicles appear to have declined in most aspects of their utilisation.
However they represent a very small proportion of the fleet and accordingly this does not
strongly influence the overall distribution that much.
Heavy truck trailer combinations
It is noteworthy that the treatment of the heavy truck trailer category within the SMVU has
resulted in some changes to the relative usage of those vehicles and the smaller rigid truck-
trailer combinations. Previously there was no separate SMVU category for the heavy truck
trailers, and numbers had to be estimated based on estimated proportions of the lighter
rigid truck-trailers.
Now that this separate category is available, it seems that these trucks are utilised more
widely than was indicated by the previous estimation methods. Therefore lighter truck
trailer combinations are less prevalent. The flow-on effects of these parameter changes are
not straightforward, since there is an interaction of these effects (as well as the changed
expenditure profile). Table 5 illustrates these changes.
Table 27. Changes in rigid truck trailer combination usage since the Second
Determination
Vehicle type Number Total VKT GVM.kms Total Fuel
vehicles Use (litres)
3 axle with trailer < 42.5t -6% -22% -15% -11%
4 axle with trailer <42.5t 59% 54% 67% 57%
Heavy truck trailer 42.5t and over 79% 63% 40% 40%
Table 28. Road use data by vehicle type
Vehicle class Number Distance
Vehicles Travelled Fuel Use PCU-km ESA-km AGM-km
(million (million (million PCU- (million (million
km) litres) km) ESA-km) tonne-km)
Light vehicles
Motor cycles 332,547 1,571 94 1,571
Passenger cars 8,718,103 122,725 13,585 122,725
Passenger vans & light
buses 220,211 3,527 495 3,527
4WDs: passenger 1,578,093 27,869 3,581 27,869
4WDs: light commercial 701,330 12,901 1,689 12,901 566 25,034
Light commercial 1,285,000 23,326 3,114 23,326 958 37,057
Light rigid trucks 77,236 1,649 265 1,649 78 5,526
Rigid trucks
2 axle rigid trucks
No trailer: 4.5-7t 47,443 725 147 1,450 38 3,086
No trailer: 7-12t 85,975 1,949 464 3,899 337 13,591
No trailer: over 12t 44,899 968 281 1,936 951 10,558
With trailer 13,439 318 92 636 282 3,380
3 axle rigid trucks
No trailer:4.5-18t 3,213 60 22 120 41 690
No trailer:over 18t 42,102 1,161 483 2,321 1,683 18,751
With trailer: <42.5t 6,402 307 139 921 361 8,069
4 axle rigid trucks
No trailer:4.5-25t 1,120 13 5 26 16 250
No trailer: over 25t 4,571 151 70 301 213 3,036
With trailer: <42.5t 263 20 11 60 33 650
Heavy truck trailers over
42.5t 7,208 533 268 1,600 1,651 16,817
Articulated trucks
3 axle rig 1,320 23 10 68 15 345
4 axle rig 4,186 182 71 545 219 3,989
3 axle trailer: 5 axle rig 1,541 69 31 207 157 1,959
2 axle trailer: 5 axle rig 4,783 304 151 911 540 7,864
6 axle rig 34,991 3,111 1,593 9,332 7,111 102,883
B-doubles < 9 axle rig 1,702 280 157 1,118 913 12,291
B-doubles 9 axles & > 7,862 1,407 835 5,629 4,994 72,476
Double road trains 3,098 414 279 1,657 1,897 24,793
Triple road trains 1,309 175 140 875 988 15,297
Artics > 6axle NEC 2,075 185 119 554 435 9,643
Special Vehicles 12,323 146 42 292 226 3,577
Buses
2 axle 3.5-4.5t 5,833 126 20 252 6 403
2 axle 4.5-10t 11,847 298 61 595 23 1,607
2 axle over 10t 19,535 812 312 1,625 569 8,123
3 axle 2,215 125 46 375 155 1,899
Articulated 440 17 9 52 13 289
All vehicles 13,284,216 207,447 28,683 230,928 25,470 413,937
Heavy vehicles 365,861 13,752 5,839 37,107 23,862 345,916
Number Number Distance PCU'
Vehicle class Vehicles trailers travelled Fuel Use s ESA's AGM
km/veh l/100km
Light vehicles
Motor cycles 332,547 0 4,725 6.0 1 0.00 0.00
Passenger cars 8,718,103 0 14,077 11.1 1 0.00 0.00
Passenger vans & light
buses 220,211 0 16,018 14.0 1 0.00 0.00
4WDs: passenger 1,578,093 0 17,660 12.9 1 0.00 0.00
4WDs: light commercial 701,330 0 18,395 13.1 1 0.04 1.94
Light commercial 1,285,000 0 18,152 13.3 1 0.04 1.59
Light rigid trucks 77,236 0 21,354 16.1 1 0.05 3.35
Rigid trucks
2 axle rigid trucks
No trailer: 4.5-7t 47,443 0 15,284 20.3 2 0.052 4.26
No trailer: 7-12t 85,975 0 22,673 23.8 2 0.173 6.97
No trailer: over 12t 44,899 0 21,563 29.1 2 0.982 10.91
With trailer 13,439 20,158 23,676 29.0 2 0.887 10.62
3 axle rigid trucks
No trailer:4.5-18t 3,213 0 18,743 37.1 2 0.685 11.46
No trailer:over 18t 42,102 0 27,567 41.6 2 1.450 16.16
With trailer: <42.5t 6,402 9,603 47,964 45.2 3 1.174 26.28
4 axle rigid truck
No trailer:4.5-25t 1,120 0 11,400 40.4 2 1.277 19.56
No trailer: over 25t 4,571 0 32,971 46.7 2 1.416 20.15
With trailer: <42.5t 263 394 76,626 54.2 3 1.637 32.29
Heavy truck trailers over
42.5t 7,208 10,811 73,983 50.3 3 3.096 31.54
Articulated trucks
3 axle rig 1,320 1,981 17,074 43.5 3 0.676 15.32
4 axle rig 4,186 6,279 43,358 39.0 3 1.205 21.97
3 axle trailer: 5 axle rig 1,541 2,312 44,848 44.7 3 2.271 28.35
2 axle trailer: 5 axle rig 4,783 7,174 63,509 49.7 3 1.776 25.89
6 axle rig 34,991 52,487 88,900 51.2 3 2.286 33.07
B-doubles < 9 axle rig 1,702 5,105 164,307 56.2 4 3.265 43.96
B-doubles 9 axles & > 7,862 23,587 178,988 59.4 4 3.549 51.50
Double road trains 3,098 13,940 133,750 67.3 4 4.578 59.84
Triple road trains 1,309 9,814 133,750 80.0 5 5.647 87.41
Artics > 6axle NEC 2,075 3,112 89,038 64.4 3 2.357 52.21
Special Vehicles 12,323 0 11,850 28.4 2 1.546 24.50
Buses
2 axle
3.5-4.5t (light vehicle) 5,833 0 21,598 15.5 2 0.05 3.20
4.5-10t 11,847 0 25,119 20.5 2 0.077 5.40
over 10t 19,535 0 41,585 38.4 2 0.701 10.00
3 axle 2,215 0 56,398 37.1 3 1.239 15.20
Articulated 440 0 39,553 51.9 3 0.746 16.60
All vehicles 13,284,216
Heavy vehicles 365,861 166,757
COST ALLOCATION
The initial approach taken in establishing options for the 2007 Determination has been to
largely adopt the Third Determination methodology.
B.1 Local road use
Local road use estimates have historically been one of the weakest areas of research for the
estimation of heavy vehicle cost responsibilities, but as part of the Third Determination, a
major study was undertaken which has provided far more defensible data.
The key finding from this study on local road use (NTC 2005b) is that there is a much
higher percentage of travel on local roads than was previously assumed.
· Light vehicles undertake 37% of their travel on local roads, compared with the Second
Determination estimate of 35%.
· Rigid trucks and buses travel 30% on local roads compared with a Second
Determination average of 25%.
· Heavy vehicles travel 16% on local roads compared with an average of 5% in the
Second Determination.
These estimates provide a useful indication of the proportion of travel on local and arterial
roads for different vehicle classes, which is vital in apportioning road expenditure to each
vehicle class.
Some commentators believe that the approach used, while a significant improvement on
the previous estimates, will systematically over-estimate use of the larger heavy vehicles
on local roads. This is because the selection of traffic count sites is believed to be likely to
be biased towards sites where there are more of the larger vehicles. Consequently the cost
base used in this determination uses a lower estimate of local road use for the larger
vehicles of 10%.
The NTC has completed a program of work to verify the findings of the study through a
larger survey. The results of this work verified the earlier study's results. However, the
methodology for capturing survey results was still subject to the same over-estimation bias
and the 10% share used in the Third Determination has continued to be used in this
Determination.
B.2 Update of ESA relationships
Measures of deep pavement wear are determined using the Equivalent Standard Axle
(ESA) measure. Average ESA's for the heavy vehicle charging categories used in the
charges determination are calculated using a series of predictive equations developed
through regression analysis relating gross vehicle mass and weigh in motion (WIM) data.
The equations used in the Second Determination were based on the best available
information at the time. However this was considered to be far less comprehensive and
statistically reliable compared to the updated analysis conducted for use in the Third
Determination.
While some stakeholders have outlined how this analysis could be improved, it is still
thought that these results are the most robust available. Accordingly, the NTC proposes to
continue to use the ESA equations used in the Third Determination. More detailed
discussion on the ESA work commissioned by the NTC during the Third Determination
and the results are provided in the following NTC reports: (2005b), (2005d) Appendix E
and (2006a) Section 6.3.
B.3 Cost allocation rules
Heavy vehicle cost allocations are derived through a series of rules. These describe the
basis upon which each of the expenditure categories should be distributed across vehicle
classes. The rules are based on the best available scientific information on the
relationships between road use and road expenditure needs. In a number of cases, these
relationships are not well understood. Nevertheless, compared to other countries, Australia
has gone to some effort to attempt to establish well-founded relationships on which to base
its cost allocation rules.
In addition, some expenditure categories, or proportions thereof, are not considered to be
directly related to vehicle use. However it is thought that they should be recoverable on
the grounds that they are common, fixed or non-attributable costs.
The cost allocation rules are based on the following measurements of vehicle use, which
are either provided by or derived though the SMVU data series discussed in Appendix B:
· VKT: vehicle kilometres travelled;
· ESA-kms: Equivalent Standard Axle kilometres travelled, which is a measure of deep
pavement wear;
· PCU-kms: Passenger Car Unit kilometres travelled, which is a measure of relative
road space requirements based on the size of the vehicle;
· AGM-kms: Average Gross Mass kilometres travelled, which is a measure of the mass
impacts on the road pavement in general.
· HV VKT: Heavy vehicle kilometres travelled, which is a measure of the relative
amount of heavy vehicle travel.
A summary of how these vehicle use parameters inform the cost allocation rules is
provided in Table 7.
In general, road expenditure categories that are highly relevant to heavy vehicle use are
allocated on the basis of ESA-km, AGM-km, PCU-km or HV VKT. Where expenditure is
allocated on the basis of VKT, the light vehicles fleet will absorb most of the apportioned
expenditure since it represents the bulk of total kilometres travelled.
Table 29. Allocation of attributable costs to measures of road use
Percentage of cost that varies with:
Attributable costs
Non-
AGM-
Heavy attrib.
Vehicle (VKT)
Expenditure Category km
VKT PCU-km ESA-km VKT
A Servicing and operating
100 0 0 0 0 0
expenses
B Road pavement and
shoulder maintenance
B1 Routine maintenance 0 38 0 38 0 24
B2 Periodic maintenance 0 10 0 60 0 30
C Bridge maintenance and
rehabilitation 0 0 0 33 0 67
D Road rehabilitation 0 0 45 0 0 55
E Low cost safety/traffic
improvements 80 20 0 0 0 0
F Asset extension/
improvements
F1 Pavement components 0 0 45 0 0 55
F2 Bridges 0 15 0 0 0 85
F3 Land acquisition,
earthworks, other
0 10 0 0 0 90
extension improvement
expenditure
G Other miscellaneous
activities
G1 Corporate services 0 0 0 0 0 100
G2 Enforcement of heavy
0 0 0 0 100 0
vehicle regulations
While there remains some debate on the finer points of these cost allocation rules, the NTC
considers that its judgements on the application of the research outcomes underpinning
them represent the most defensible approach to cost allocation. The Productivity
Commission has acknowledged the acceptability of these judgements, noting that they fall
at the conservative end of the acceptable range. Given this endorsement and the COAG
timetable of delivery of this Determination the NTC proposes to continue with these cost
allocation parameters. Further detail on cost allocation by the NTC is provided the
following Third Determination publications: NTC (2005d) Chapter 5 and NTC (2006a)
Chapter 6.
B.4 Cost allocation results before road train adjustment
The result of this cost allocation process is that total allocated costs come to $8,260 million
with $1,977 million allocated to heavy vehicles and $6,283 million to light vehicles.
From this process unit cost rates for the two measured road types can be calculated as
shown in Table 8. These are calculated by taking the expenditure allocated using each
measure of road use and dividing it by the total amount of road use, based on that measure.
For example, arterial road expenditure allocated using distance travelled (i.e. VKT) on
arterial roads is divided by the total VKT on arterial roads. This gives the cost per
kilometre travelled for arterial roads. The same process was used to calculate unit rates for
other cost allocation parameters, for each of arterial roads, local roads and the total.
It is clear from these results that the expenditure allocated per ESA-km and AGM-km is
greater on local roads than on arterial roads, but expenditure allocated per kilometre
travelled and per PCU-kilometre is lower on local roads than on arterial roads. This is
because some types of vehicles spend more time on local roads than others. Consequently,
the share of total ESA-km, AGM-km, VKT and PCU-km for each vehicle type varies
between local roads and arterial roads. Although the proportion of expenditure allocated
using each parameter is the same on each road type, these shares are allocated between
vehicle types differently because of the difference in local road use.
Table 30. Unit costs for heavy vehicles by road type including 2007/08
budget data
Unit Parameter Arterial Local Total
Vehicle Kilometres Travelled (c/km) 1.39 0.58 1.22
Passenger Car Units (c/PCU-km) 0.37 0.23 0.34
Equivalent Standard Axles (c/ESA-km) 3.41 4.50 3.58
Average Gross Mass (c/tonne-km) 0.12 0.31 0.14
Non-attributable costs (c/km) 2.80 1.10 2.44
B.4 Cost allocation results after road train adjustment
The allocated cost results above are modified marginally to accommodate some special
circumstances concerning road trains which are explained in detail below. The net result is
that there is re-distribution of total allocated costs with heavy vehicle allocated cost falling
by $24 million to $1,953 million and light vehicle allocated cost increasing by $24 million
to $6,307 million.
B.4.1 Adjustment for road train travel on unsealed roads
The $1,977 million of allocable heavy vehicle expenditure is adjusted to take account of
road train travel on unsealed roads. The aggregate model used to allocate costs to vehicle
classes has two limitations that are problematic for road train costs, but are not a significant
factor for other vehicle types. The model treats all roads the same - it does not reflect the
differing factors impacting on costs on unsealed roads; and it does not take account of the
fact that some arterial road expenditure is not warranted by traffic levels but is necessary to
support remote or small regional communities.
The cost allocation process assumes that all roads deteriorate or wear out in the same way
as sealed roads, and that the contribution of different vehicles to this wear is measured by
equivalent standard axles (ESAs). However, unsealed roads deteriorate with the effects of
rainfall, wind, wheel passes and to some extent the tonnes carried. Allocating pavement
wear costs to road trains using ESA-km that include their use of unsealed roads will
therefore overestimate their share of costs.
Road train operators have indicated that a significant amount of their travel is on unsealed
roads. The NTC undertook a process of gathering information from operators and
associations on the extent to which this is so, see NTC (2006a) Appendix F for further
detail on the results of this survey. The values tend to be focused around 30-35%, with
double road trains falling towards the lower end of this estimate, and triple road trains
toward the higher. Therefore, respective reductions of 30 and 35% were made to the costs
allocated to double and triple road trains based on their ESA-km. This expenditure was re-
allocated to the fleet on the basis of vehicle kilometres travelled (VKT). This is consistent
with treating the expenditure that was inappropriately allocated to road trains as either a
servicing and operating cost for the network or as a non-attributable cost. Since light
vehicles travel significantly greater distances in total than heavy vehicles, this re-allocation
resulted in proportionately more costs being allocated to light vehicles than heavy vehicles.
The net result is that heavy vehicle allocated costs are reduced from $1,977 million to
$1,953 million.
In the absence of any better information, the NTC has applied these assumptions in the
development of options for the 2007 Determination.
B.4.2 Road train community service obligation
The issue of dealing with road expenditure in remote areas based on community needs was
raised in the Third Determination consultation process. The NTC sought responses from
road authorities regarding the level of road expenditure that falls into this category. Road
authorities were unable to provide an accurate estimate of this expenditure due to
definitional issues, but available estimates were generally in the range of 2 to 7%. The
NTC used an estimate of 5%to be used in the absence of any firmer indication of the size
of this factor. This was applied as a way of reducing the recoverable allocated costs of
road trains, since these are the only vehicles whose access is restricted such that they travel
exclusively in these areas. This amounts to $7.6 million across the road train vehicle
classes.
Typically, the decision to grant Community Service Obligations is made by central
agencies in light of full information of funding arrangements. Since it is not the role of the
NTC to make funding decisions, it has determined that this $7.6 million should be
recoverable by other vehicles within the fleet, and as such has no impact on the total heavy
vehicle allocated cost.
B.4.2 Adjustments made to allocated cost due to road train factors
The impact of the road train adjustments are to modify attributable costs as shown in Table
9
Table 31. Costs allocated to each vehicle class after road train
adjustments $m
New Total
Old New Non- Allocated
Attributable attributable attributable Cost
Motor cycles 15.7 15.9 33.9 49.7
Passenger cars 1225.1 1240.4 2644.4 3884.8
Passenger vans & Light buses 35.2 35.7 76.0 111.7
4WDs: passenger 278.2 281.7 600.5 882.2
4WDs: light commercial 192.2 193.8 278.0 471.8
Light commercials & Other 331.4 334.3 502.6 836.9
Light rigid trucks 28.6 28.8 35.5 64.4
Rigid trucks
2 axle no trailer: 4.5-7t 19.1 19.2 16.5 35.7
2 axle no trailer: 7-12t 68.6 68.9 44.3 113.2
2 axle no trailer: over 12t 69.9 70.0 22.0 92.0
2 axle with trailer 21.7 21.7 7.2 29.0
3 axle no trailer: 4.5-18t 3.7 3.7 1.4 5.1
3 axle no trailer: over 18t 114.1 114.3 26.4 140.7
3 axle with trailer < 42.5 t 32.8 32.9 7.0 39.9
4 axle no trailer: 4.5-25t 1.2 1.2 0.3 1.5
4 axle no trailer: over 25t 15.6 15.6 3.4 19.0
4 axle with trailer: < 42.5t 2.7 2.7 0.5 3.2
Heavy truck trailers over 42.5t 100.5 100.6 12.1 112.7
Articulated trucks
3 axle rig 1.5 1.5 0.6 2.1
4 axle rig 17.5 17.5 4.7 22.3
3 axle trailer: 5 axle rig 9.9 9.9 1.8 11.7
2 axle trailer: 5 axle rig 37.2 37.3 7.9 45.2
6 axle rig 468.8 469.2 81.1 550.4
B-doubles < 9 axle rig 57.1 57.2 7.3 64.5
B-doubles 9 axles & > 316.4 316.6 36.7 353.3
Double road trains 107.1 90.6 10.8 101.4
Triple road trains 57.4 48.0 4.6 52.6
Artics > 6axle NEC 33.1 33.1 4.8 37.9
Special Purpose 17.7 17.8 2.8 20.6
Buses 2 axle 3.5 to <4.5t 2.5 2.6 2.9 5.4
Buses 2 axle 4.5 to 10.0 t 8.7 8.7 6.8 15.5
Buses 2 axle >10t 48.8 48.9 18.5 67.4
Buses 3 axles 11.1 11.1 3.3 14.3
Articulated 1.3 1.3 0.5 1.7
All Vehicles 3752.7 3752.7 4506.9 8259.6
Heavy Vehicles Only 1643.6 1619.5 333.2 1952.7
B.4.3 Allocated cost by road type
Table 10 shows the breakdown of allocated cost by road type and split between attributable
and non attributable costs.
Table 32. Costs allocated by road type: attributable and non-attributable
costs after road train adjustments in 2007/08 $m
Road Type
Vehicle Type Arterial Local Total
Allocated Expenditure
Light vehicles 4,866 1,441 6,307
Heavy vehicles 1,590 362 1,953
All vehicles 6,456 1,803 8,260
Non-Attributable
Light vehicles 3,389 785 4,174
Heavy vehicles 301 33 333
All vehicles 3,690 817 4,507
Attributable
Light vehicles 1,477 656 2,133
Heavy vehicles 1,289 331 1,620
All vehicles 2,766 987 3,753
B.4.4 Allocated cost changes since the Second Determination
Since the Second Determination there has been considerable change in heavy vehicle
allocated by vehicle type both in nominal and real terms, with most heavy vehicle types
experiencing a real fall in allocated cost, see Table 11.
However, despite most heavy vehicle types having a lower real allocated cost in aggregate
heavy vehicle allocated cost has risen marginally by 3% in real terms, see Table 12. The
reason for this is that where real increases have occurred they have tended to be in vehicle
categories with a relatively large number of vehicles. In particular the overall result is
influenced by the 53% real increase in allocated cost for the 2 axle no trailer rigid truck in
the 7 to 12 tonne GVM range which has by far the largest number of heavy vehicles
accounting for 23% of the total.
The differing movements between categories are due to various factors in particular
movements in annual average VKT, with the increase in annual average VKT of 52% for
the 2 axle no trailer rigid truck 7 to 12 tonne vehicle types, the main factor in the 53%
increase in allocated cost in real terms.
Table 33. Heavy vehicle allocated cost per vehicle - changes since the
Second Determination
Vehicle Class 2007 Det/2nd 2007 Det/2nd
2nd Det. 2007 Det Det Det
$/vehicle
$/vehicle Nominal
real $/vehicle Real change
nominal change
2007/08
Rigid trucks
2 axles
No trailer: 4.5-7t 540 802 751 39% -6%
No trailer: 7-12t 580 861 1,316 127% 53%
No trailer: over 12t 1,540 2,287 2,050 33% -10%
With trailer 1,070 1,589 2,155 101% 36%
3 axles
No trailer: 4.5-18t 1,060 1,574 1,586 50% 1%
No trailer: over 18t 2,470 3,668 3,341 35% -9%
With trailer < 42.5t 5,630 8,361 6,226 11% -26%
4 axles
No trailer: 4.5-25t 2,190 3,252 1,368 -38% -58%
No trailer: over 25t 3,390 5,034 4,162 23% -17%
With trailer: <42.5t 8,490 12,608 12,025 42% -5%
Heavy truck trailers over
42.5t 9,660 14,345 15,634 62% 9%
Articulated trucks
3 axle rig 2,910 4,321 1,614 -45% -63%
4 axle rig 5,160 7,663 5,322 3% -31%
3 axle trailer: 5 axle rig 17,080 25,364 7,624 -55% -70%
2 axle trailer: 5 axle rig 7,970 11,835 9,446 19% -20%
6 axle rig 15,940 23,671 15,729 -1% -34%
B-doubles < 9 axle rig 30,630 45,486 37,883 24% -17%
B-doubles 9 axles & > 36,630 54,396 44,932 23% -17%
Double road trains 32,050 47,594 31,091 -3% -35%
Triple road trains 46,090 68,444 38,192 -17% -44%
Artics > 6axle NEC 18,550 27,547 18,286 -1% -34%
Special Vehicles 2,090 3,104 1,670 -20% -46%
Buses
2 axle
4.5 to 10.0 t 850 1,262 1,304 53% 3%
>10t 2,500 3,713 3,449 38% -65%
3 axles 5,950 8,836 6,476 9% -61%
Articulated 4,620 6,861 3,909 -15% -6%
Table 34. Summary of heavy vehicle allocated cost changes since the
Second Determination
2007
Second Determination Determination Change
($m ($m real
nominal terms ($m) Nominal Real
Costs terms) 07/08
Total Road Agency Expenditure 6,423 9,538 12,347 92% 29%
All Vehicle Allocated Costs 4,570 6,786 8,260 81% 22%
Attributable Costs 1,860 2,762 3,753 102% 36%
Non-Attributable Costs 2,710 4,024 4,507 66% 12%
Heavy Vehicle Allocated Costs 1,283 1,905 1,953 52% 3%
Attributable Costs 1,065 1,582 1,620 52% 2%
Non-Attributable Costs 218 324 333 53% 3%
Table 13 shows the changes in some of the relativities between various aspects of allocated
costs since the Second Determination.
Table 35. Key changes in proportions of costs allocated since the Second
Determination
Second 2007
Determination Determination
All vehicle allocated costs/total road expenditure 71% 67%
All vehicle attributable costs/all vehicle allocated costs 39% 45%
Heavy vehicle allocated costs/all vehicle allocated costs 28% 24%
Heavy vehicle attributable costs/heavy vehicle allocated costs 83% 83%
METHODOLOGY FOR CALCULATING CHARGE RECOVERY
Meyrick and Associates were asked to assess the NTC and ATA methodologies for
calculating heavy vehicle charge revenues. The revenue estimate is compared against the
expenditure estimate to determine whether heavy vehicle charges over or under recover
expenditure. The remainder of this section is the final Meyrick report which NTC in
response to the request.
Introduction
The prime focus of this study is on explaining the differences between the NTC and ATA
approaches to heavy vehicle charge revenue estimates and making an assessment of which
approach is more valid.
The ATA put forward two approaches in response to the NTC Heavy Vehicle Charges
Draft RIS. The discussion of figures and methods outlined in this study relate to these.
The initial approach was provided to the NTC (in the form of a spreadsheet) prior to the
ATA's formal submission. This is referred to as `the initial approach'. The approach
discussed in the formal ATA submission to the NTC of 8 August 2007 is referred to as `the
submission approach'.
In the initial approach and, it is assumed in the submission approach, the ATA uses the
cost allocation base that is the preferred option in the draft RIS. This option includes
adjusted enforcement and has a total heavy vehicle allocated cost of $1,828 million.
However, in the initial approach, the ATA estimates heavy vehicle charge recovery at
$2,118 million compared to the NTC estimate of $1,697 million. This divergence is
reduced in ATA's submission approach to $1,959 million.
As outlined below, the differences are due to the ATA's broader definition of relevant fuel
charge revenues for inclusion, and its methods of indexing charge revenue to put into
2006-07 terms.
This report details:
1. The NTC approach to estimating heavy vehicle charge revenue
2. The ATA approaches to estimating heavy vehicle charge revenue
3. A comparison of the three methods to determine the points at which
divergence in the heavy vehicle charge estimates occur.
4. A critique of the elements of the ATA method which differ from the NTC
method including:
· The inclusion of an estimate of the costs recovered through the now defunct low
sulphur diesel excise in the fuel excise revenue element of the calculation
· The inclusion of petrol excise cost recovery in the fuel excise revenue element of
the calculation
· The inclusion of the metropolitan boundaries excise differential cost recovery in the
fuel excise revenue element of the calculation
· The use of the Road Construction and Maintenance Price Index (RCMPI) or CPI
to index revenue figures.
· NTC approach to estimating heavy vehicle charge revenue
In determining heavy vehicle charge revenue the NTC:
· takes the road usage data for the year that falls in the middle of the cost allocation
period -- in 2007, the arterial road expenditure period was 2000/1 to 2006/07 and
thus the middle year was 2003/04
·
multiplies 2003/04 road usage data by current registration and fuel charges of
19.633 cents per litre27 to determine revenue estimate in 2006/07 prices.
The 2006/07 heavy vehicle charge recovery in total equals $1,697 million, comprised of
$558 million in charges from registration and $1,109 million in fuel charges.
ATA initial approach to estimating heavy vehicle charge revenue
Revenue from fuel
In addition to the diesel excise cost recovery amount (calculated by taking 03/04 vehicle
profile fuel consumption, multiplied by the proportion of heavy vehicles using diesel
(98.25%), multiplied by the diesel excise recovery amount, which is as in NTC method,
19.633 cents per litre (for 2003/04)). the ATA added the following elements to determine a
nominal fuel cost recovery figure for the year ending October 2003/04:
· A petrol excise cost recovery amount (calculated by taking 03/04 vehicle profile
multiplied by the proportion of heavy vehicles using petrol (1.26%), multiplied by
the general excise rate of 38.143 cents/litre)
· A low sulphur diesel excise differential cost recovery (calculated by assuming 50
% of all diesel sold during the period of the differential (July 2003 to June 2006)
in question was low sulphur diesel (year ending 31 October 2005)
· A `metropolitan boundaries excise differential cost recovery' (estimated at $130
million in 06/07) derived from the cost of removing the revenue measure
calculated by the Australian Government.
Revenue from vehicle registrations
To determine heavy vehicle charge revenue, the ATA combined registration revenue for
the year ending October 03/04, and fuel charges for the year ending October 03/04 (as
described above), and indexed this by RCMPI to determine revenue estimate in 2006/07
prices.
Under this method, the 06/07 heavy vehicle charge recovery in total equals $2,118 million
comprised of $662 million in charges from registration and $1,456 million in fuel charges.
27
Since March 2001, the diesel excise cost recovery amount has been the net of the general excise rate of 38.143
cents/litre less the heavy vehicle diesel fuel rebate of 18.51 cents/litre = 19.633 cents/litre.
ATA submission approach of estimating heavy vehicle charge revenue
Following advice from the Allen Consulting Group, the ATA made the following changes
to the initial approach as described above:
· The RCMPI was replaced by the CPI in order to index the year ending October
03/04 usage data
· A `petrol excise cost recovery amount' was incorporated into the $130 million
(2006/07) cost recovery amount for the metropolitan vehicles exempted from the
on-road diesel grant.
This reduces the total 06/07 heavy vehicle charge recovery to $1,959 million, comprised of
$617 million in charges from registration and $1,342 million in fuel charges.
Comparison of methods
Figure 18and Figure 19 illustrate the points in the NTC and ATA approaches where the
value of the revenue estimate differs. Comparing Figure 18 with Figure 19 reveals the
changes between the ATA's initial and submission approaches.
Figure 18. Figure 1 NTC approach contrasted with ATA initial approach
Figure 19. NTC approach contrasted with ATA submission approach
Critique
The ATA approach results in significant divergences between its heavy vehicle charge
recovery figures and those of the NTC. The elements of divergence that demand critical
attention are:
· The inclusion of an estimate of the costs recovered through the now defunct low
sulphur diesel excise in the fuel excise revenue element of the calculation
· The inclusion of petrol excise cost recovery in the fuel excise revenue element of
the calculation
· The inclusion of the metropolitan boundaries excise differential cost recovery in
the fuel excise revenue element of the calculation
· The use of the Road Construction and Maintenance Price Index (RCMPI) and the
CPI to index revenue figures.
Inclusion of low sulphur diesel cost recovery charge
The NTC has sought previous advice regarding this issue (van Geldermalsen, May 2007),
which concludes that the inclusion of the cost is inappropriate and inconsistent with the
objectives of the NTC pricing work because:
1. the objective of the excise differential was to encourage the early production
and consumption take-up of low-sulphur diesel. The government mandated
the use of low sulphur diesel ( sulphur content of 50ppm) for its
environmental benefits over traditional diesel fuel sulphur content standards
(sulphur content of 500ppm). As such the differential supports environmental
objectives and provides support for industry in a transitional phase. In other
words, the differential is not related to recovery of road expenditure. In fact,
in announcing the measure the then Minster for Environment and Heritage Dr
David Kemp noted "This is the first time that government excise credits have
been directly tied to environmental performance," (Federal Minister for the
Environment and Heritage 2004).
2. This was a transitional charge only and was dissolved as of 1 January 2006.
Therefore, using it within a base that determines future charges is
inappropriate.
It is our view that these arguments are both sound.
Furthermore, it would be inappropriate for the 2007 Determination to incorporate into the
revenue base revenue which is related to an environmental externality, given the COAG
road reform plan to review PAYGO and the application of externalities being undertaken
post this Determination (NTC, 2007).
Under the current ATA methodology this charge is only incorporated into the cost
recovery side of the charging equation. If it could be justified that the sulphur diesel cost
recovery charge was related to the provision of infrastructure, and we argue above that it
cannot, and then the argument could follow that the value of sulphur emissions should be
added to the allocated cost base. A first cut estimate is outlined in Table 36. In this
estimate the cost of high sulphur diesel emissions is calculated at approximately $1 million
in the inner areas of larger capital cities (06/07) whilst the use of ultra low sulphur diesel
reduces this figure tenfold to approximately $100,000.
Table 36. Calculation of the value of sulphur emissions
Band 1* Band 2 Band 3 Band 4
06/07 AUD$ per $1,033,665 $397,843 $54,329 $4542
100 million litres of
high sulphur diesel
(500ppm) used
06/07 AUD$ per $103,366 $39,784 $25,433 $454
100 million litres of
ultra low sulphur
diesel (50 ppm)
used
* Inner areas of larger capital cities (Sydney, Melbourne, Brisbane, Adelaide and Perth).
Outer areas of large capital cities.
Other urban areas, including other capital cites (Canberra, Hobart and Darwin) and other urban
areas
Non-urban areas.
Worked example (Band 1 High sulphur diesel $ per 100,000,000)
The worked example below outlines the method used to determine Band 1 $ per hundred million
litres of high sulphur diesel used
Step Assumption Result Numeric
1 Determine pollutants from All pollutant is in the form of SO2
Sulphur
2 Determine sulphur content of 1 Using the atomic weight of 0.5
tonne of pollutant sulphur (32) and molecular weight
of oxygen (32), 0.5 tonne of
sulphur results in 1 tonne of
sulphur dioxide.
3 Determine equivalent tonnage Sulphur content of 500ppm 1000
of fuel for tonnage of Sulphur
4 Determine equivalent cost for a Using banded health costs of 0.01138
kg of fuel Sirikijpanichkul, A, Iyengar, M and
Ferreira L (2006)**
5 Determine cost in 2003 AUD Assume diesel density of 0.835 0.95023 cents per litre
per litre of fuel grams per milliliter as per 03/04 prices
Apelbaum 2005)
6 Index to 2006/07 Use CPI increase in absence of 1.034 cents per litre
further analysis of 06/07 prices
appropriateness of index
7 Convert cents per litre to $ per $1,033,665 Dollars per
hundred million litres 100 million
litres 06/07
prices
**Assumed Unit Health Costs for Pollutant Emissions in 2003 AUS $ per Tonne of SOx from Band 1 $11,380
Sirikijpanichkul, A, Iyengar, M and Ferreira L (2006)
Band 2 $4,380
Band 3 $2,800
Band 4 $50
Even if this method of calculation is considered appropriate, we argue that the temporal
nature of the excise differential (2004-2006) and the fact that the cost of sulphur emissions
has been effectively external to the operational decisions for the history of pricing apart
from 2004-06 results in it being inappropriate to retrospectively implement a value on the
allocated cost base.
Treatment of petrol fuelled heavy vehicles and metropolitan heavy vehicles
less than 20 tonnes
It is our understanding that the ATA initial approach of incorporating the petrol excise cost
recovery differs from the NTC in that it multiplies the petrol driven heavy vehicle fuel
consumption by the general excise rate of 38.143 cents per litre, rather than the NTC
excise cost recovery amount of 19.633 cents per litre. In its working spreadsheet the ATA
notes that this approach is used because `prior to 1 July 2006 petrol (sic) was not eligible
for the on-road diesel grant'.
The ATA has similarly argued that the cost recovery from fuel excise should also
incorporate a particular line to account for the revenue received from metropolitan heavy
vehicles less than 20 tonnes, given that they were not eligible to receive the 18.51 cents per
litre rebate. To estimate this element ATA has utilised a figure of $130 million for the
2006/07 year, a figure sourced from a Federal Government 2004 estimate of the reduction
in Federal Government revenue that would occur by incorporating these vehicles into the
rebate scheme.
Providing or not providing a rebate is a government taxation issue rather than a road
pricing issue per sé. The diesel rebate of 18.51 cents per litre is effectively a rebate of a
tax on diesel fuel to heavy vehicle operations. Whether the government chooses to allow
some vehicles to request a rebate while excluding others, in itself does not change the
agreed element of the fuel cost that is attributable to road costs (i.e., the 20 cents agreed to
as the fuel charge in the Second Determination which, given lack of indexation, has fallen
to the nominal figure 19.633 cents.)
Further to this argument is the fact that, like the sulphur diesel rebate, these rebate
exemptions only applied within the period of the determination. The inclusion of temporal
and historic exemptions does not improve the calculation of future heavy vehicle recovery
levels.
Although the treatment of the petrol excise issue changes in the ATA Submission approach
(whereby they appear to incorporate the petrol excise revenue estimate within the total
estimate of $130 million that they previously had for the metropolitan heavy vehicles) the
arguments above still hold.
Indexation of fuel charges
Although the current annual adjustment process allows for a certain level of indexation of
vehicle registration, the fuel charge has not been revised since agreed to in the second
determination. This charge of 20 cents has decreased in both nominal and real terms since
the second determination. Therefore, it can be argued that determining a fuel charge and
then using a price index to bring it to 2006/07 prices is highly inappropriate.
Using the RCMPI as an index
In its initial approach the ATA argues that the use of the RCMPI to index nominal cost
recovery values for the year ending October 2004 into 2006-07 prices is appropriate, given
that this index is utilised in the road expenditure side of the pricing determination.
Therefore, it argues, road costs and heavy vehicle revenue ought to be indexed using the
same approach.
It is our view that the use of the RCMPI to index any of the revenue elements is
inappropriate. The RCMPI does not reflect the change in the real value of money, nor is it
an index that tracks actual change in the cost of fuel or vehicle registration costs vis-à-vis
the other costs incurred by heavy vehicle transport operators.
A comparison of using the RCMPI's predecessor, the Road Construction Price Index
(RCPI), to adjust heavy vehicle registration charges, was undertaken in the development of
the Annual Adjustment process. It was found that of six options considered (including the
current `Adjustment formal approach') it was the least favourable across a number of
equity and efficiency objectives (NRTC, 2001).
The NTC method of indexation of vehicle registration charges through the annual
adjustment process is capped at the rate of CPI (and has a floor of current nominal
registration charges for each vehicle type). This method is considered more appropriate
and was endorsed at the meeting of the Australian Transport Council in May 2001, where
it was agreed that heavy vehicle registration charges would be adjusted annually by a
formula based on changes in road expenditure, modified to reflect changes in road use by
heavy vehicles.
Using CPI as an index
In the ATA submission approach the RCMPI is replaced with the CPI as index method for
both vehicle registration and fuel excise revenue. In calculations undertaken by the NTC it
was found that this indexing method yields over-estimates of the 2006/07 revenue for both
fuel excise and vehicle registration costs. In terms of fuel, the ATA submission approach
yields a road user charge of 21.143 cents. This is not in line with the actual value of 19.633
cents. As discussed in section 0, the application of any index on such a real value figure is
economically inappropriate and, in this case inflates the charge recovery levels
significantly above those in the NTC Method.
In terms of the vehicle registration the application of the CPI index on 2003/04 figures
outstrips the pace of the real increase in registration under the annual adjustment formula.
Conclusion
In critiquing the ATA approaches to estimating heavy vehicle charge recovery this paper
finds that:
· It is inappropriate to incorporate an estimate of the costs recovered through the
now defunct low sulphur diesel excise in the fuel excise revenue element of the
calculation, given the temporal nature of the element, the fact that it is not related
to road construction or maintenance and the COAG direction that this
determination should not incorporate externality costs.
· The ATA approach of incorporating revenue from the metropolitan boundaries
excise and the petrol excise cost recovery in the fuel revenue element is not
justified, given that the agreed to element of the fuel revenue that is related to the
cost of road provision is 19.633 cents.
· The ATA use of the Road Construction and Maintenance Price Index (RCMPI) or
CPI to index either the vehicle registration or fuel revenue does not result in a
more accurate representation of the actual revenue accrued from these charges
than the NTC approach. This is particularly the case with fuel revenue which has
not been inflated with price movements over the period of the determination.
THE NTC CHARGING MODAL
D.1 Current structure of charges
The current charging system comprises:
1. a fuel charge levied by the Australian Government through fuel excise (with the diesel
fuel rebate set so that the effective level of excise paid by heavy vehicles matches the
fuel charge agreed through the NTC's processes by the ATC); and
2. annual registration charges that vary by vehicle size (Gross Vehicle Mass), number of
axles and trailer configuration and which are levied by State and Territory governments.
D.2 Major factors that determine heavy vehicle charges within the NTC
charge modal
The pricing principles require that the combination of the fuel charge and annual
registration charges are set so that, on average, each class of heavy vehicle pays its share of
allocated road expenditure minimising under and over-recovery.
The major factors and constraints that influence heavy vehicle charges are summarised in
Figure 3. For each heavy vehicle type an allocated cost is derived which consists of both
an attributable and non-attributable or common cost. That allocated cost is recouped
through both the fuel charge and the registration charge which consists of both a vehicle
and trailer component.
In past Determinations the registration charge on the truck or prime mover was a residual
that resulted from subtracting from allocated cost an independently set fuel charge and
trailer axle charge. However, various constraints applied such as minimum access and
prime mover charges and rules that maintained an appropriate relativity between vehicles
of gradually higher mass and a general rule that no charges were allowed to fall below
current levels. In addition B-doubles were given a subsidy which resulted in over recovery
in aggregate in the 2nd and 3rd Determination with rigid trucks and buses over recovering
and B-doubles under recovering.
In the current Determination some of these constraints have been removed such as the
inability to decrease registration charges whilst other have been added such as all vehicle
types must at least cover their attributable costs and there must be zero over recovery in
aggregate (see the constraints listed in Figure 20). In addition the fuel charge is now
dynamically established within the model but does not change radically from current levels
due to the past structure of charges which has resulted in roughly a third of allocated cost
being distributed to registration and two thirds to fuel. Also, the introduction of
differential trailer charges rather than the same per axle charge for all trailer types has
added a new dimension of flexibility to establishing the best charge mix which covers
attributable costs for all heavy vehicle types.
The fuel charge goes through two main iterations in the first run of the charging model a
fuel charge is derived based on all of the constraints except for the constraint to heave zero
over recovery in aggregate. This provides a fuel charge very close to the final result. Then
a goal seek function is used to achieve zero over recovery which provides the final fuel
charge and registration charges.
Figure 20. Charge modal flow chart
Charging Model Dynamics
Registration Charge
Total
Allocated Trailer charges (by trailer
Costs type and number axles)
Total
Revenue Truck & Prime Mover charges
(Registration
+ Fuel
Attributable Charge) Fuel Charge
Costs
Fuel charge (cents per litre)
CONSTRAINTS
General Registration
· To ensure no cross- · Ensures no cross-subsidisation & relativity
subsidisation each vehicle must · Trucks & prime mover have a min. registration charge of $380
at least recover its attributable
costs (i.e. Total Revenue · Prime Mover charges have a min.registration charge of $1,000
>Attributable Costs) · Some similar vehicle classes have the same truck or prime mover charge
· The over-recovery of total e.g. B-doubles and road trains
allocated costs is set ro zero
ANNUAL ADJUSTMENT
Current annual adjustment methodology
Annual adjustment Options 1 and 2 involve using the current annual adjustment
mechanism (as per the Automatic Annual Procedure for Heavy Vehicle Charges
Regulatory Impact Statement, September 2001). This mechanism adjusts annual charges in
accordance with the main influences on the level of charges, namely: changes in road
expenditure and expected changes in road use (via the number of heavy vehicles and
expected change in their use (VKT)).
This process can be summarised as:
The Annual Adjustment (%) = Road Expenditure Factor + Road Use Factor
The road expenditure factor is the impact on total heavy vehicle cost/vehicle due to a
change in the four different types of road expenditure (arterial urban and rural; and local
urban and rural) whilst the road use factor is the impact on total heavy vehicle
cost/vehicle due to a change in road use. The second part of this equation has traditionally
been represented as "minus the road use factor", in which the road use factor is a positive
value. This is consistent with the equation above since the calculation of the "road use
factor" itself will be a negative number.
The change in road expenditure (%) refers to the change in seven year moving average
road expenditure while "road use" refers to the change in vehicle kilometres travelled and
vehicle numbers.
The annual adjustment calculation relies on having an understanding of the sensitivity of
heavy vehicle cost/vehicle to changes in each of the four types of road expenditure and
also road use.
Therefore, based on the cost allocation model, sensitivity factors are established based on
the impact on heavy vehicle costs of a 1% change in each of these variables - "A" Factors
for the road expenditure types and "B" Factors for road use.
Road Expenditure "A" Factors
Rural Arterial (A1 Factor)
Rural Local (A2 Factor)
Urban Arterial (A3 Factor)
Urban Local (A4 Factor)
Road Use "B" Factors - Vehicle Kilometres Travelled (VKT)
Light Vehicle Km Travelled (B1 Factor)
Heavy Vehicle Km Travelled (B2 Factor)
Road Use "C" Factor - Number of Vehicles
C is set at -1 since a 1% increase in the number of vehicles decreases
the ratio (cost/vehicle) by 1%.
Subsequently, a more detailed outline of the process is outlined below:
Figure 21. Current annual adjustment methodology (developed in 2001)
Road Expenditure Road Use
- Rural (Arterial & Local) - Vehicle Km's Travelled (VKT)
- Urban (Arterial & Local) - Number of vehicles
- Ave km per vehicle
1% Change in 1% Change in
Road Road Use
Expenditure
Impact on Heavy Vehicle (HV) Cost
A "Sensitivity" B "Sensitivity"
Factors Factors
Road Expenditure Factor (REF) Road Use Factor (RUF)
= A1 x Change in Rural = B1 x Expected Change in Light
Arterial Expenditure (%) Vehicle Km Travelled
(VKT) (%) ("D1")
+ A2 x Change in Urban
Arterial Expenditure (%) + B2 x Expected Change in
Heavy Vehicle Km
+ A3 x Change in Rural
Travelled (VKT) (%) ("D2")
Local Expenditure (%)
+ C1 x Expected Change in Number
+ A4 x Change in Urban of Heavy Vehicles (%) ("D3")
Local Expenditure (%)
= Change in HV Cost/Vehicle (%) = Change in HV Cost/Vehicle (%)
From Change in Road Expenditure From Change in Road Use
Annual Adjustment (%)
= REF + RUF = Total Change in HV Cost/Vehicle (%)
The D Factors (D1, D2 and D3) from this annual adjustment equation refer to the expected
change in light and heavy vehicle kilometres travelled and the expected change in the
number of heavy vehicles. The current values for the A and B Factors (as established in the
2001 Determination process) are outlined below:
Figure 22. Current sensitivity factor values
Road Expenditure Factor
A1 Rural Arterial 0.60
A2 Urban Arterial 0.21
A3 Rural Local 0.17
A4 Urban Local 0.02
Road Use Factor
B1 Light Vehicle VKT -0.21
B2 Heavy Vehicle VKT 0.22
In the 2001 Annual Adjustment Procedure, the expected change in Vehicle Kilometres
Travelled and Number of Vehicles was set at:
Light Vehicle VKT Growth
= 70% of GDP = 2.1% p.a. = D1 in Figure Above
Heavy Vehicle VKT Growth
= 80% of GDP = 2.4% p.a. = D2 in Figure Above
Number of Heavy Vehicles Growth
= 1% slower than HV VKT = 1.4% = D3 in Figure Above
GDP = 3.0% p.a.
Updated components using 2007 Determination costing model
New A and B Factors have been generated using the 2007 Determination cost allocation
model by analysing the sensitivity of total allocated costs to changes in road expenditure
and vehicle kilometres travelled (VKT). The C Factor remains equal to -1.
D Factors (D1, D2 and D3) rely on the relationships between:
The growth rate of light and heavy vehicle VKT and the growth rate of GDP.
The number of heavy vehicles growth rate and the growth rate of heavy
vehicles VKT.
Based on historical data for VKT, number of vehicles (sourced from ABS Survey of Motor
Vehicles Use - SMVU) and Gross Domestic Product (GDP), cumulative average growth
rates (CAGR) values have been generated for the period 1998-2005 (refer to Table 37).
GDP refers to GDP chain volume, which is the ABS method of establishing real GDP
(sourced from ABS National Accounts). Cumulative Average Growth Rate (CAGR) is the
underlying annual compound growth rate over this period based on the starting and ending
values of these variables. The period (1998-2005) was chosen since 1998 is the start of the
new SMVU methodology based on annual surveys.
Table 37. Cumulative average annual growth rates to generate D factors
CAGR
Cumulative Annual
Growth Rate (1998-
2005)
Light Vehicles VKT 3.03%
Heavy Vehicles VKT 2.48%
Number of Heavy Vehicles 0.80%
GDP Chain Volume (Seasonally Adjusted) 3.35%
New values for D1 and D2 have been calculated based on this table:
D1 = (CAGR for Light Vehicle VKT)/(CAGR for GDP)
= 3.03%/3.35% = 90% (rounded)
D2 = (CAGR for Heavy Vehicle VKT)/(CAGR for GDP)
= 2.48%/3.35% = 74% (rounded)
D3 = (CAGR for Number of Heavy Vehicles)/( CAGR for Heavy Vehicle VKT)
= 0.8%/2.48% = 32% (rounded)
A comparison of the "Old Values" for D1, D2 and D3, which were developed part of the
2001 Annual Adjustment Procedure, to the new values, as calculated above, can be seen
below:
Figure 23. Comparison of old and new D values
Old Values New Values
Q Light Vehicle VTK Growth as % of GDP 70% 90%
R Heavy Vehicle VTK Growth as % of GDP 80% 74%
S GDP Growth 3% 3.35%
T=QxS D1 Light Vehicle VTK Growth 2.1% 3.0%
U=RxS D2 Heavy Vehicle VTK Growth 2.4% 2.5%
V Number of Heavy Vehicles Growth as % of VTK Growth 32%
W Number of Heavy Vehicle Growth % Slower than VTK Growth 1%
D3 Growth in Number of Heavy Vehicles 1.4% 0.8%
Old Values = U - W
New Values = U x V
The results of these new A, B and D Factors is summarised below. The Road Use Factor
becomes set equal to -1.0% based on the new values for D1, D2 and D3.
Figure 24. New annual adjustment formula
Road Expenditure Factor (REF) Road Use Factor (RUF)
= 0.454 x Change in Rural = - 0.32 x 3.0% Expected Change
(A1) Arterial Expenditure (%) (B1) (D1) in Light Vehicle Km
Travelled (VKT) (%)
+ 0.362 x Change in Urban
(A2) Arterial Expenditure (%)
+ 0.32 x 2.5% Expected Change in
(B1) (D2) Heavy Vehicle Km
+ 0.119 x Change in Rural Travelled (VKT) (%)
(A3) Local Expenditure (%)
+ - 1.0 x 0.8% Expected Change in
+ 0.064 x Change in Urban (C1) (D3) Number of Heavy
(A4) Local Expenditure (%) Vehicles (%)
= Change in HV Cost/Vehicle (%) = -1.0% = Change in HV
From Change in Road Expenditure Cost/Vehicle (%)
Annual Adjustment (%)
= REF + RUF = Total Change in HV Cost/Vehicle (%)
Note: C1 is set = -1% since number of vehicles is on the denominator of HV Cost/Vehicle
Note that the A Factors have been set based on three decimal places since this is required
to ensure that the sum of the A Factors adds up exactly equal to 1 (which is not the case at
two decimal places).
Therefore, the new formula can be simplified to:
Figure 25. New simplified annual adjustment formula
Annual Adjustment
= 0.454 x Change in Rural
Arterial Expenditure (%)
+ 0.362 x Change in Urban
Arterial Expenditure (%) Road
Expenditure
+ 0.119 x Change in Rural Factor
Local Expenditure (%)
+ 0.064 x Change in Urban
Local Expenditure (%)
Road Use
- 1.0% Factor
A comparison of the "old" (2001 Determination) and new A Factors and Road Use Factor
is outlined below:
Figure 26. Comparison of old and new adjustment factors
Old Values New Values Change
Road Expenditure Factor (REF)
A1 Rural Arterial 0.60 0.454 -0.15
A2 Urban Arterial 0.21 0.362 0.15
A3 Rural Local 0.17 0.119 -0.05
A4 Urban Local 0.02 0.064 0.04
Road Use Factor (RUF) -1.5% -1.0% 0.5%
Finally, it is important to clarify the distinction of rural arterial compared to urban arterial
expenditure. This is relevant to two types of expenditure data:
1. Enforcement expenditure
2. Other non-allocated expenditure
In terms of enforcement expenditure, the recommended option in the 2007 determination is
to use partial enforcement. In this circumstance, the following adjustments will need to be
made to allocate total enforcement expenditure into rural arterial versus urban arterial
expenditure categories (if jurisdictional data has not already done so):
a. A revised or partial enforcement cost is determined by multiplying the total
enforcement cost by 59.5%. This proportional adjustment of 59.5% is equal to the
2007 determination proportion of partial enforcement ($66m) to total enforcement
($111m).
b. The revised or partial enforcement cost is then allocated on the basis of 53% rural
arterial and 47% urban arterial. This proportional allocation is based on the 2007
determination split of $35m rural arterial and $31m urban arterial.
In terms of non-enforcement expenditure that has not been allocated by jurisdictions to
rural arterial versus urban arterial, the allocation of this expenditure will be made on the
basis of 50% rural arterial and 50% urban arterial. These proportions are consistent with
those used in the 2007 determination for expenditure that has not been allocated by
jurisdictions.
COST BASE FOR THE ANNUAL ADJUSTMENT
As explained in Appendix C, the annual adjustment formula includes the impact of
changes in seven year moving average road expenditure (%) by expenditure type (arterial
urban and rural; and local urban and rural). This means that changes in road expenditure
are measured as percentage changes between the average of the seven most recent years of
expenditure compared to the equivalent period one year later.
Therefore, as an example, the change in road expenditure (%) for each expenditure type for
2008/09 would equal the following:
Change in 7 Year Average of Road Expenditure from 2001/02 to 2007/08 (A)
Road = - 1 X 100
Expenditure (%) 7 Year Average of Road Expenditure from 2000/01 to 2006/07 (B)
This assumes for the 2008/09 annual adjustment that only road expenditure data up to
2007/08 is available (for all types of road expenditure).
Seven versus three year average of road expenditure
The annual adjustment formula has traditionally been calculated using a three year average
of expenditure. The move to a seven year average is because the NTC costing model under
the 2007 Determination will also be based on a seven year average. This should lead to a
less volatile change from year to year in terms of charges. This is especially the case, under
the three year average, since there has been a large increase in arterial expenditure over the
last three years which would have led to large increases in charges in the short term.
Real versus nominal road expenditure
The annual adjustment formula has traditionally been calculated using an average of
nominal expenditure. However, in order to be consistent with the PAYGO approach to
calculating the cost base, based on a seven year average of real expenditure, and the
COAG directive to fully recover costs in aggregate the most appropriate approach is to use
an average of real expenditure. The real expenditure approach involves establishing the
base year of the real expenditure series to be the most recent year of the seven year average
(an example is outlined below).
There is a noticeable difference between using either a seven year average of nominal
expenditure compared to real expenditure. An example of this can be seen by calculating
the 2008/09 adjustment for rural arterial expenditure under the following assumptions:
The most recent available year of road expenditure data is 2007/08.
Nominal rural arterial road expenditure grows by 5% from 2006/07 to 2007/08.
RMCPI (which is used to create real expenditure) increases by 0.82 times the
road expenditure growth of 5% (which is consistent with historical cumulative
average growth rates across all road types).
This scenario results in a change in arterial rural expenditure of 4.9% using a seven year
average of nominal expenditure compared to 4.0% using a seven year average of real
expenditure (see below). Note that under the real expenditure approach the first series (row
A) is based on 2006/07 dollars and the second series (row B) is based on 2007/08 dollars.
Calculation of change in rural arterial expenditure %
USING NOMINAL EXPENDITURE
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Average
1 2 3 4 5 6 7
2,632 2,634 2,433 2,600 3,028 2,950 3,436 2,816 B
1 2 3 4 5 6 7
2,634 2,433 2,600 3,028 2,950 3,436 3,608 2,955 A
% Change = 4.9% (A/B-1)
USING REAL EXPENDITURE
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Average
1 2 3 4 5 6 7
3,483 3,409 2,988 3,053 3,337 3,040 3,436 3,249 B
1 2 3 4 5 6 7
3,549 3,111 3,179 3,474 3,165 3,577 3,608 3,380 A
% Change = 4.0% (A/B-1)
ANNUAL ADJUSTMENT - MONITORING OF CHANGES IN KEY VARIABLES
This section outlines the types of measures that should be monitored as part of the annual
review process.
The monitoring process has two broad objectives:
1. Objective 1: To highlight when a vehicle class is no longer recovering its
attributable costs. In this circumstance, the vehicle class is being cross-subsidised
by other vehicles.
2. Objective 2: The ongoing validity of the assumed values for the "D" road use
factors which relate to growth in light and heavy vehicle VKT and growth in heavy
vehicle numbers. The costing model uses 7 year trend road use data to establish
data on VKT and vehicle numbers. This may diverge over time from the assumed
"D" road use factors.
It is important to note that this analysis is intended to highlight some of the estimated
impacts of different variables on charges under certain scenarios and it should be
recognised that the costing and charging models are dynamic in nature with many different
variables interacting with each other to produce an outcome. Therefore, the sensitivity
analysis in the following sections is intended to be indicative of the likely impact on
charges of changes in key variables.
A more detailed discussion of the types of analysis involved as part of achieving objective
1 will be analysed in more detail in the following section.
Key variables
Three key variables have been identified to be monitored. These variables are:
Road expenditure
Vehicle kilometres travelled (VKT)
heavy vehicles
light vehicles
The number of heavy vehicles
Variations in average gross mass (AGM) and fuel consumption have been excluded from
this list since they are not considered to have a substantial impact on of heavy vehicle
charges as the cumulative average growth rate of these variables is typically less than 1%
in magnitude.
Recovery of attributable costs
If the key variables vary by a certain amount this may result in a vehicle class is no longer
recovering its attributable costs. In order to determine the likelihood of this occurrence, it
is necessary to display to the over-recovery above the attributable cost based on the
proposed registration and fuel charges. Table 38 illustrates that some vehicles, such as B-
doubles are just recovering their attributable costs (0.1% above the attributable cost for B-
doubles). This table highlights those vehicles that contribute 80% of the total VKT of all
vehicle classes, accounting for the top nine vehicle classes.
Most of the other top nine vehicles have a reasonable distance between the attributable cost
and total revenue from registration and fuel charges. For example, single axle articulated
trucks have a total revenue for fuel and registration that is 10.9% above the attributable
cost.
Table 38. Over-recovery of attributable costs
2007 Determination
Vehicle Classification Over-recovery of VKT - Cumul-
Attributable Cost Distance ative %
Travelled
('000)
1 Articulated trucks: single trailer: 6 axle rig 15.0% 3,110,748 22.6%
2 Rigid trucks: 2 axle: no trailer: GVM 7.0 - 12.0 tonne 88.7% 1,949,291 36.8%
3 Articulated trucks: B-double: 9+ axle rig 0.1% 1,407,240 47.0%
4 Rigid trucks: 3 axle: no trailer: GVM over 18.0 tonne 20.4% 1,160,611 55.5%
5 Rigid trucks: 2 axle: no trailer: GVM over 12.0 tonne 26.2% 968,177 62.5%
6 Buses: 2 axle: GVM over 10.0 tonne 49.2% 812,349 68.4%
7 Rigid trucks: 2 axle: no trailer: GVM 4.5 to 7.0 tonne 155.0% 725,115 73.7%
8 Rigid trucks: Heavy Truck/Trailer Combination 12.0% 533,244 77.6%
9 Articulated trucks: Road train: 2 trailers 12.2% 414,314 80.6%
TOP 9 (80% of total VKT) 11,081,088
Based on Table 38, of the top nine vehicle classes, the B-double is most susceptible to
changes in the key variables impacting the ability of this vehicle class to recover
attributable costs. With this in mind, the sensitivity of over-recovery for a B-double vehicle
has been analysed based on changes in its VKT and number of vehicles at varying levels of
road expenditure.
Two different types of scenarios have been undertaken:
· Scenario 1: The VKT and number of vehicles varies by the same percentage for all
vehicles at different levels of variation in road expenditure.
· Scenario 2: Only B-Double VKT and number of vehicles is varied (with road
expenditure held constant), assuming all other vehicles have constant VKT and
number of vehicles.
Scenario 1: Constant changes across the vehicle fleet
This scenario explores the impact of the same change in the key variables across all vehicle
classes. In particular, this scenario assumes that all vehicles experience the same
proportional change in VKT and number of vehicles at differing levels of change in road
expenditure. The results of this scenario are outlined in Table 17. For example, if there is a:
5% increase in heavy vehicle VKT (same change for all vehicles)
5% increase in light vehicle VKT
5% increase in number of vehicles
10% increase in road expenditure
the impact of these changes is to increase B-double over-recovery from 0.1% to 4.1%. The
reason for the increase in over-recovery is as follows:
Total revenue from fuel and registration charges per vehicle increases
as a result of an annual adjustment of 9% (that is, (10%-1%) as per
due to changes in road expenditure.
Attributable costs increase by approximately 4.8%. This is roughly the
difference between the increase in road expenditure (10%) and the
increase in number of vehicles (5%).
Therefore, the difference between the increase in total revenue (9%)
and attributable costs (4.8%) is approximately equal to the increase in
over-recovery of around 4%.
Therefore, in summary, positive percentage figures in Table 39 indicate that there is over-
recovery of attributable costs for B-doubles. This table highlights some interesting results
for the annual monitoring review:
Higher levels of VKT for all vehicles should result in more over-
recovery for B-doubles but lower VKT should result in under-
recovery of attributable costs.
One factor driving this impact is that the road use factor is set at 1%
(as per figure 4) in the annual adjustment formula based on the
assumption that heavy vehicle VKT increases by 2.5%, light vehicle
VKT increase by 3% and number of vehicles increases by 0.8%.
However, if the light vehicle to heavy vehicles vary in the future a
different proportions to these assumed variations, the impact on over-
recovery will be different. Therefore, the relative change in light to
heavy vehicles should be monitored.
Table 39. Over-recovery of B-double attributable cost with constant
variation in key variables across vehicle classes
Change Change in Road Expenditure
Heavy vehicle Light vehicle No of Vehicles -10% -5% 0% 5% 10%
VKT VKT
-15% 0% 0% -6.6% -6.6% -6.5% -6.5% -6.4%
-10% 0% 0% -4.8% -4.7% -4.7% -4.6% -4.6%
-5% 0% 0% -2.9% -2.9% -2.8% -2.8% -2.7%
A 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 0% 0% 0.8% 0.9% 0.9% 1.0% 1.0%
10% 0% 0% 2.7% 2.8% 2.8% 2.9% 2.9%
15% 0% 0% 4.6% 4.7% 4.7% 4.8% 4.8%
-15% -15% 0% -9.3% -9.2% -9.2% -9.1% -9.1%
-10% -10% 0% -6.5% -6.5% -6.4% -6.4% -6.3%
-5% -5% 0% -3.8% -3.7% -3.7% -3.6% -3.6%
B 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 5% 0% 1.7% 1.7% 1.8% 1.8% 1.9%
10% 10% 0% 4.4% 4.5% 4.5% 4.6% 4.6%
15% 15% 0% 7.2% 7.2% 7.3% 7.3% 7.4%
-15% -15% -15% -15.9% -15.8% -15.8% -15.8% -15.7%
-10% -10% -10% -11.0% -10.9% -10.9% -10.8% -10.8%
-5% -5% -5% -6.0% -5.9% -5.9% -5.9% -5.8%
C 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 5% 5% 3.9% 4.0% 4.0% 4.1% 4.1%
10% 10% 10% 8.8% 8.9% 9.0% 9.0% 9.1%
15% 15% 15% 13.8% 13.9% 13.9% 14.0% 14.0%
A Variation in Heavy Vehicle VKT with no change in Light Vehicle VKT and number of Vehicles
B Same Variation in Heavy Vehicle and Light Vehicle VKT with no change in number of Vehicles
C Same Variation in Heavy Vehicle and Light Vehicle VKT and number of Vehicles
Scenario 2: Only B-double road use is varied
This scenario explores the impact of a change in road use data for only B-doubles. In
particular, this scenario assumes that only B-Double VKT and number of vehicles is
varied, assuming that VKT and number of vehicles for all other vehicle classes is constant.
The results of this scenario are outlined in Figure 10. For example, if there is a:
40% increase in B-double VKT, and a
40% increase in B-double number of vehicles
No change in road expenditure
No change in road use data (e.g. VKT) for other vehicle classes
the impact of these changes is to increase B-double over-recovery from 0.1% to
approximately 7.8%. The reason for the increase in over-recovery is as follows:
Total revenue from fuel and registration charges per vehicle remains
unchanged (since average kilometres has not changed as VKT and
number of vehicles have increased in the same proportion).
Attributable costs fall by over 7%.
This increase to 7.8% assumes that there is no annual adjustment occurring at the same
time. If we assume that the annual adjustment is 3% the impact on B-double over-recovery
is outlined in Figure 27. The impact of the annual adjustment is to reduce the amount of
over-recovery.
Therefore, if the over-recovery in is negative this indicates under-recovery. This figure
scenario highlights some interesting results for the annual monitoring review:
If B-double VKT is growing but B-double average VKT is increasing
(that is, number of vehicles is constant) it is likely that attributable
costs are increasing for B-doubles and therefore the current charges
will be under-recovering for B-doubles
If B-double VKT is growing but average B-double VKT is constant
(that is, number of vehicles is growing at the same rate as VKT) and
this growth is greater than for other vehicles it is likely that the over-
recovery for B-doubles will be increasing
For monitoring purposes, a vehicle will be considered to be in an under-recovery situation
if the under-recovery is more than 8.5% of attributable costs. The reason for this allowance
is based on the following logic:
Historically, the annual movement in these variables is quite volatile up and
down. This indicates that a one year (trend) decline or increase could be quite
deceptive of the underlying growth, especially since the road use data is
sourced from ABS survey data. Therefore, standard deviation could be used as
an indication of the volatility.
The historical standard deviation of growth in heavy vehicle numbers and VKT
from 1998 to 2005 is 2.5% and 4.4% respectively. Assuming a 95% confidence
interval results in two standard deviations which is equal to 5% and 8.8%
respectively. Therefore, to simplify the analysis if all vehicles (heavy and light)
numbers falls by 5% and VKT falls by 10% this will result in between 6 and
11% under-recovery - the average of which is 8.5%.
Figure 27.Over-recovery of B-double attributable cost with variation in B-
double road use variables
25.0%
Over-recovery of B-double attributable
20.0%
15.0%
10.0%
cost
5.0%
0.0%
-5.0%
-10.0%
Impact with no annual adjustment
Impact assuming annual adjustment of 3%
Change (%)
B-Double VKT -40% -20% 0% 20% 40% 60% 80% 100% -40% -20% 0% 20% 40% 60% 80% 100%
B-Double No of
0% 0% 0% 0% 0% 0% 0% 0% -40% -20% 0% 20% 40% 60% 80% 100%
Vehicles
High productivity vehicles
With the introduction of a revised registration charging schedule, which allows for
modularisation of the trailer component of the registration charge into different
components based on the type and number of axle groups, there is no need for the higher
productivity formula to be used as the basis for establishing a registration charge for new
"higher productivity" vehicle types. Further explanation can be found in section 4.4.4. of
the RIS Volume 1.
However, the higher productivity formula has been used to validate the modular approach
to setting the trailer component of the registration charge, especially for the B-triple
vehicle configuration, which consists of an additional Lead Trailer on a B-Double. In this
context, the higher productivity formula was revised based on feedback received during
public consultations in order to conduct a comparison of the modular approach to the
higher productivity formula approach for the B-triple vehicle.
Therefore, this section outlines the estimation of a registration charge for a B-triple vehicle
under the higher productivity formula taking into account of feedback from the public
consultations, with regard to the input values into the formula (such as annual VKT, ESA
value, PCU value and fuel usage) and other aspects of the formula to ensure that the
registration charge is estimated in a way that is relative to existing vehicle classes whilst at
the same time being simple to calculate.
The allocated cost formula (see below) will still be used as the basis to develop a charge.
However, the following adjustments will be made to address the issue of ensuring that an
appropriate degree of relativity is maintained with existing charges, for similar vehicles
compared to new higher productivity vehicles, and also to ensure than it is relatively
simple to administer:
· The formula inputs relating to AGM tonnes, ESA rate, PCU value and fuel usage
per kilometre will be estimated in a way that ensures an appropriate relativity
with the current charges for a vehicle that is the most similar to the new higher
productivity vehicle and in a way that is simple and precise. The new way of
calculating these input values is outlined below.
· The non-attributable costs for vehicle configurations that have a lead trailer will
be excluded from the higher productivity formula. This is because the current
charges for B-doubles do not include almost all of the non-attributable or
common costs. This adjustment is necessary to ensure that new vehicles that
have a lead trailer (such as a B-triple or a variation of a normal B-double) will
have an estimated registration charge that is appropriately relative to the existing
B-double registration charge.
· The higher productivity formula for new vehicle configurations that have trailer
converter dolly's and consist of two or more trailers will be adjusted to allow for
the CSO subsidy and unsealed adjustment that is made for double and triple road
trains. These adjustments are outlined below.
Allocated cost formula
The allocated cost formula is outlined below:
Allocated cost = [(AGM unit cost*AGM value)
+ (ESA unit cost* ESA value)
+ (PCU unit cost*PCU value)
+ (VKT unit cost)
+ (non attributable unit cost)]
* annual VKT.
The estimation of the different components of this formula is explained below.
Unit costs
The unit costs have been redefined to be dependent on the type of vehicle configuration
according to the following categories:
1. Vehicles that have no trailers (column A in Table 40)
2. Vehicles that have trailers
a. All vehicles excluding those with a lead trailer (e.g. B-double and B-triple)
and road trains (column B in Table 40)
b. Vehicles with a lead trailer (column C in Table 40)
c. Road trains (column D in Table 40)
Table 40. Unit costs for revised formula
Vehicles with Vehicles with Trailers
No Trailers
A B C D
All Vehicles Vehicles with a Road Trains
(Excluding Lead Trailer
Vehicles with a (e.g B-Doubles
Lead Trailer & and B-Triples)
Road Trains)
AGM unit cost 0.142 0.135 0.131 0.141 cents per tonne km
ESA unit cost 3.684 3.510 3.393 2.696 cents per ESA km
PCU unit cost 0.328 0.310 0.302 0.521 cents per PCU km
VKT unit cost 1.200 1.140 1.105 1.579 cents per km
Non-attributable unit cost 2.414 2.300 2.223 2.486 cents per km
Noting the following:
AGM is average gross mass
ESA is equivalent standard axles
PCU is passenger car unit
VKT is vehicle kilometres travelled
These unit costs are still based on the average unit costs derived from the cost allocation
model.
The reason for different unit costs for different vehicle types is because of the desire to
maintain relativity with existing vehicle classes. There is a need to have different unit costs
for vehicles with trailers compared to vehicles with no trailers because the cost of spare
trailers should not to be included in the calculation of the allocated cost.
Other adjustments to costs
In the costing model an adjustment is made to the allocated cost for road trains to take into
account travel on unsealed roads and a 5% community service obligation. As a result, in
order to retain appropriate relativities between new higher productivity vehicles and
existing vehicle classes the following adjustments are recommended to be made for new
vehicles with two or more trailers and trailer converter dolly's:
· The ESA unit cost for road trains is revised to be equal to :
Revised ESA unit cost = ESA cost x (1-0.3)
· The ESA unit cost for road trains is revised to be equal to :
Revised ESA unit cost = ESA cost x (1-0.35)
· The total allocated cost for double and triple road trains is revised to be equal to:
Revised total allocated cost = Total allocated cost x (1-0.05).
Non-attributable cost
The non-attributable costs for vehicle configurations that have a lead trailer (e.g. B-double
and B-triple vehicles) are excluded from the higher productivity formula.
AGM value
In the draft regulatory impact statement it was stated that the AGM value would be
estimated with reference to both laden and unladen tonnes. The draft RIS outlined a
different approach for average utilisation based on level of PBS access and whether
vehicles operated in mining and remote areas and the degree of backloading. However,
based on the objective of providing a clear, administratively simple and reasonably precise
calculation of each input variable, the formula below has been created to calculate the
AGM value for a new higher productivity vehicle.
AGM value in tonnes = (1-0.62) x (Total permitted mass of vehicle)
+ 0.62 x (Tare mass of vehicle)
The weighting factor of 0.62 is an estimate of the average utilisation of heavy vehicles (in
particular, trucks) in terms of space on the truck that is available to carry freight. The
average utilisation has been estimated through the following formula:
Average utilisation = (Proportion of trips that a truck is laden x Proportion
of truck space taken up when truck is laden)
where Proportion of Trips that a truck is laden = 73%, based on a five year average of
SMVU data for trucks
and Proportion of truck space taken up when truck is laden has been estimated at 85%.
Therefore, 73% multiplied by 85% equals 62%.
ESA value.
In the draft regulatory impact statement it was stated that the equivalent standard axle
(ESA) value of the vehicle would be based on a first principle calculation based on:
· The expected distribution of the load across the axles using the 4th power rule
· The averaging of the ESA's that result from the proportion of travel that is fully
loaded, partly loaded and unloaded.
These general statements are still the chosen approach to estimating the ESA value under
the higher productivity formula. However, based on the revised approach to developing a
charge for higher productivity vehicles, a formula to calculate the ESA value has been
developed ensures an appropriate relativity with the ESA values of the existing vehicle
classes. This approach involves estimating the ESA at maximum mass and tare mass
separately and then estimating the overall ESA by giving an appropriate weighting to each
approach (via the 62% fully loaded, 38% no load assumption). This ESA value is then
adjusted to ensure relativity with the existing ESA values used to determine the registration
charges for existing vehicle classes. This adjustment is necessary since the chosen
approach produces higher ESA values, in general, than the predictive formula approach
used in the current costing model.
An alternative approach is to estimate the ESA based on the average mass of the vehicle,
which would involve determining the average mass by axle group. The chosen approach
has been used since it is relatively simple (compared to the alternative approach) since no
assumptions need to be made regarding the average mass of each axle group. However, it
should be noted that because the approach outlined in this section assumes that for 62% of
distance travelled the vehicle is fully loaded, the chosen or revised approach is most
appropriate for vehicles that are fully loaded one way and empty on return.
Therefore, the ESA of the new vehicle will be estimated through the following formula
ESA value = (New Vehicle ESA using SAR Formula /
Closest Like Vehicle ESA using SAR Formula)
x Closest Like Vehicle Model ESA
The ESA of the new and closest like vehicles using the SAR formula is estimated through
the following process:
1. The ESA is estimated based on the vehicle being full 62% of the time ("fully
loaded") and empty 38% ("tare weight") of the time:
ESA = (FL% x ESA with vehicle fully loaded)
+ ((1-FL%) x ESA with vehicle empty)
where FL% = 0.62
1. ESA with vehicle fully loaded is estimated using the standard axle repetition
formula (SAR) with the load mass carried by each axle grouping equal to the
maximum permitted mass for that axle group.
a. The ESA is estimated) (see below) using these masses.
2. ESA with vehicle empty is estimated through the following process:
a. The front axle grouping (steer axle) will have the mass set at 90% of the
maximum permitted load for the steer axle grouping.
b. the total gross mass of all the axle groups is equal to 65% of the total
vehicle permitted axle loading
c. The mass for each of the remaining axle groupings will equal to:
(total gross mass of all axle groups - front axle group mass)
x (maximum permitted load of the axle group/(total
maximum permitted load of all axle groupings for the
vehicle - maximum permitted load of the steer axle group))
d. The ESA is estimated using the standard axle repetition formula (SAR)
(see below) using these masses.
3. The SAR formula is as follows:
i=m
SAR = (Li / SLi )LDE
i=1
where Li = load carried by axle group type i (kN)
SLi = standard load for axle group type i
LDE = 4 = load damage exponent,
m = number of axle groups
4. The standard loads for each axle type is as follows:
Axle/Tyre Type Load
equivalencies
single axle single tyres SAST 5.40
single axle dual tyres SADT 8.16
tandem axle single tyres - twinsteer
TAST (non load sharing) 9.18
tandem axle single tyres - twinsteer
TAST ( load sharing) 9.18
tandem axle dual tyres TADT 13.77
triaxle dual tyres TRDT 18.46
Quad axle with duel tyres QADT 22.50
The closest like vehicle model ESA is set through the following process:
Determine the closest like vehicle to the new higher productivity vehicle by
finding the existing vehicle class whose AGM value is closest to the AGM of the
new vehicle. The reference table used to find the closest like vehicle will depend
on whether the new vehicle has more than one trailer.
If the new vehicle has one trailer or no trailers the relevant reference
table is matching table 1 in Table 41.
If the new vehicle has more than one trailer and has trailer converter
dolly's the relevant reference table is matching table 3 in Table 41.
For all other new vehicles with more than one trailer the relevant
reference table is matching table 2 in Table 41.
The ESA value for the closest like vehicle is also set out in Table 41.
Table 41. Closest like vehicle matching tables
Matching Table 1
Existing Vehicle Classes AGM ESA
Value Value
Rigid trucks: 2 axle: no trailer: GVM 4.5 to 7.0 tonne 4.3 0.05
Rigid trucks: 2 axle: no trailer: GVM 7.0 to 12.0 tonne 7.0 0.17
Rigid trucks: 2 axle: no trailer: GVM over 12.0 tonne 10.9 0.98
Rigid trucks: 2 axle: with trailer 10.6 0.89
Rigid trucks: 3 axle: no trailer GVM 4.5-18 11.5 0.68
Rigid trucks: 3 axle: no trailer GVM >18 16.2 1.45
Rigid trucks: 3 axle: with trailer >18 26.3 1.17
Rigid trucks: 4 axle: no trailer GVM 4.5-25 19.6 1.28
Rigid trucks: 4 axle: no trailer GVM >25 20.1 1.42
Rigid trucks: 4 axle: with trailer >25 32.3 1.64
Truck trailers 31.5 3.10
Articulated trucks: single trailer: 3 axle rig 15.3 0.68
Articulated trucks: single trailer: 4 axle rig 22.0 1.21
Articulated trucks: single 3 axle trailer: 5 axle rig 28.4 2.27
Articulated trucks: single 2 axle trailer: 5 axle rig 25.9 1.78
Articulated trucks: single trailer: 6 axle rig 33.1 2.29
Articulated trucks: > 6 axle rig (not elsewhere classified) 52.2 2.36
Other trucks 24.5 1.55
Matching Table 2
Existing Vehicle Classes AGM ESA
Value Value
Articulated trucks: B-double: <9 axle rig 44.0 3.27
Articulated trucks: B-double/triple: 9 axle rig & above 51.5 3.55
Matching Table 3
Articulated trucks: Road train: 2 trailers 59.8 4.58
Articulated trucks: Road train: 3 trailers 87.4 5.65
PCU value.
The draft regulatory impact statement defined Passenger Car Unit (PCU) value of the
vehicle as a road capacity measure based on relative length of a heavy vehicle compared to
a medium size passenger car. Based on the objective of establishing a value for PCU that
provides a precise and simple calculation for this value whilst at the same time maintaining
an appropriate degree of relativity with the PCU values for existing vehicles, the PCU
value has been defined as:
PCU = (Actual Vehicle Length/6 metres) x Relative PCU Factor
The relative PCU Factor adjusts the actual PCU value so that it maintains relativity to the
PCU values in the current costing model for the existing vehicle classes (refer to Figure 28
below for relative PCU factor values).
Figure 28. Relative PCU factor
G (=D/E)
Relative
PCU Factor
Rigid 0.990
Articulated (1 trailer) or Rigid(>=3axle)/Truck & Trailer 1.003
B-Double 1.089
Double Road Train 0.963
Triple Road Train 1.018
Annual VKT
In the draft regulatory impact statement it was stated that annual VKT was to be equal to
the expected annual travel or vehicle kilometres travelled of the vehicle concerned. This
approach to estimating annual VKT is an individualised approach and could result in a
high charge relative to existing vehicle classes if the expected annual VKT of the new
vehicle is quite high compared to average VKT used to generate registration charges for
existing vehicle classes. As a result, the revised approach seeks to maintain an appropriate
degree of relativity between the new vehicles and existing vehicle classes.
Therefore, the annual VKT calculation has been revised to be based on a regression
equation which links VKT to the AGM of a vehicle. A plot of average VKT against AGM
for existing vehicle classes is shown in Figure 29.
Figure 29. Regression of average VKT against AGM
Regression of Average VKT against AGM
250,000
200,000
Average VKT
150,000
100,000
50,000
0
0 20 40 60 80 100 120
AGM (tonnes)
Regression Line
Average VKT and Average Gross Mass (AGM) for Different Vehicle Classes
The regression equation of VKT against AGM for existing truck vehicle classes (excluding
buses) provides the following result:
VKT = - 484.0 + (2132.5 x AGM)
However, as can be seen in the plot of VKT against AGM graph, the regression line is not
a good fit for B-doubles (which are the two dots well above the line) and the triple road
train (which is the road train dot that is well below the line), although reasonably good for
other vehicles.
Therefore, if this regression equation is used to estimate VKT for each new vehicle,
adjustments should be made to allow for the fact that the equation is not a good predictor
of B-double and road train VKT. In this context, the estimated VKT's for B-double and
road trains are based on the current average VKT for their respective vehicle class with an
adjustment up or down depending on whether a particular vehicle is at the average mass
for the vehicle class:
(1) use the regression equation for all vehicles other than vehicles that have either
a lead trailer configuration (which takes into account B-double and B-triples)
and road train configurations, and
(2) adjustments will be made for lead trailer and road train configurations:
a. the annual VKT for vehicles with one lead trailer (which is the front
trailer in a B-double) will be equal to:
i. B-double (>= 9 axle): 178,988 + 2,384.4 x (AGM-44.0).
ii. B-Double (< 9 axle): 164,307 + 2,384.4 x (AGM-51.5).
iii. The figure of 178,988 is the average kilometres travelled in the
cost allocation model for B-doubles (>= 9 axle) and 164,307 is
figure for B-doubles (<9 axle).
iv. The figure of 51.5 is the average gross mass in the cost allocation
model for B-doubles (>= 9 axle) and 44.0 is the figure for B-
doubles (<9 axle).
b. the annual VKT for road trains will be equal to:
i. Double Road Train (>= 9 axle): 133,750 + 2,384.4 x (AGM-
59.8).
ii. Triple Road Train (< 9 axle): 133,750 + 2,384.4 x (AGM-87.4).
iii. The figure of 133,750 is the average kilometres travelled in the
cost allocation model for both double and triple road trains.
iv. The figure of 59.8 is the average gross mass in the cost allocation
model for double road trains and 87.4 is the figure for triple road
trains.
c. The annual VKT for a vehicle with more than one lead trailer (e.g. B-
triple) will set equal to 178,922 since this vehicle will be treated as a
substitution for B-double.
d. The annual VKT for a vehicle with more than three trailers as part of a
road train configuration will set equal to 133,750 since this vehicle will
be treated as a substitution for B-double.
Fuel use
In the draft regulatory impact statement, it was not specifically outlined how fuel usage
(litres per 100 km) of the vehicle per annum was to be estimated. Based on the objective of
establishing a value for fuel usage that provides a precise and simple calculation for this
value whilst at the same time maintaining an appropriate degree of relativity with the fuel
usage values for existing vehicles, it is recommended that the fuel usage value is estimated
through a regression equation which links fuel usage to AGM.
A plot of fuel usage against AGM for existing vehicle classes is shown in Figure 30.
Figure 30. Regression of fuel use against AGM
Regression of Fuel Use against AGM
100
Fuel Use (litres per
80
100km)
60
40
20
0
0 20 40 60 80 100 120
AGM (tonnes)
Regression Line NTC Model Fuel Use
The regression equation of fuel usage against AGM for existing truck vehicle classes
(excluding buses) provides the following result:
Fuel Use = 25.7 + (0.688 x AGM)
This regression equation is a reasonably good fit of ABS SMVU data of fuel use plotted
against AGM. Note that buses have not been used to derive this equation.
B-triple example calculation
This section provides a comparison of the higher productivity calculation for the B-Double
compared to a B-triple. Note that the B-Double and B-triple excludes non-attributable costs
are per the revised higher productivity formula. The difference in the registration charge
between the two calculations is around $5,500 (refer to Figure 31), reflecting the greater
impact on road wear caused by the B-triple, longer length and greater average mass.
Figure 31. B-Double and B-triple example calculation
Standard B- B-Triple
Double
Vehicle Characteristics
Annual VKT km 178,918 178,988
Average Gross Mass (AGM) tonnes 51.47 67.70
Equivalent Standard Axles (ESA) Units 3.55 4.43
Passenger Car Unit (PCU) Units 4.00 5.13
Fuel Charge c/l 21.0 21.0
Fuel Usage per Km l/100km 60.8 72.1
Fully Loaded % of travel 62% 62%
Unit Costs
AGM unit cost cents per tonne km 0.131 0.131
ESA unit cost cents per ESA km 3.393 3.393
PCU unit cost cents per PCU km 0.302 0.302
VKT unit cost cents per km 1.105 1.105
Non-attributable unit cost cents per km 2.223 2.223
Proposed B-Triple Registration Charge
= AGM unit cost * AGM in tonnes* annual VKT $12,064 $15,874
+ ESA unit cost * ESA rate* annual VKT $21,544 $26,903
+ PCU unit cost * PCU value* annual VKT $2,161 $2,773
+ VKT unit cost * annual VKT $1,977 $1,978
+ non-attributable unit cost * annual VKT $0 $0
A Total Allocated Cost $37,746 $47,528
B Fuel Revenue = Fuel charge * Fuel usage per km $22,833 $27,110
* annual VKT
= A - B Registration Charge $14,913 $20,418
DIFFERENCE $5,505
FULL SCHEDULE OF REGISTRATION CHARGES
Options C1 and C3 in this schedule assume adjusted enforcement costs have been included
in the cost base.
Table 42. Schedule of registration charges for the 2007 Determination
Option C1 Option C3
2007/08 Charges
- from Draft RIS Recommended
Prime Prime Prime
Total Total Total
Mover Mover Mover
($ per ($ per ($ per
($ per ($ per ($ per
vehicle) vehicle) vehicle)
vehicle) vehicle) vehicle)
Rigid trucks
2 axles
No trailer: 4.5-7t 355 355 365 365 380 380
No trailer: 7-12t 355 355 365 365 380 380
No trailer: over 12t 592 592 634 634 652 652
With trailer 651 1,184 634 1,182 652 1,222
3 axles
No trailer: 4.5-18t 710 710 634 634 652 652
No trailer: over 18t 946 946 827 827 859 859
With trailer < 42.5 t 2,365 3,430 827 1,922 859 1,999
4 axles
No trailer: 4.5-25t 1,065 1,065 634 634 652 652
No trailer: over 25t 2,365 2,365 827 827 859 859
With trailer: <42.5t 2,365 3,430 1,534 2,629 1,593 2,733
Heavy truck trailers 4,494 5,737 5,794 7.071 5,828 7,158
Articulated trucks
Single trailer
3 axle rig 1,537 1,892 1,000 1365 1,000 1,380
4 axle rig 1,537 2,247 1,000 1730 1,000 1,760
3 axle trailer: 5 axle rig 1,537 2,602 1,000 2095 1,000 2,290
2 axle trailer: 5 axle rig 4,019 4,729 4,060 4790 3,930 4,690
6 axle rig 4,019 5,084 4,060 5,155 3,930 5,220
B-doubles
<9 axle rig 5,911 7,686 13,796 15,621 7,050 12,140
9 or more axle rig 5,911 8,041 13,796 15,986 7,050 14,340
Road trains
2 trailers 5,911 8,751 7,531 10,451 7,050 10,390
3 trailers 5,911 10,526 8,292 13,037 7,050 12,440
>6 axle rig (NEC) 5,201 6,266 4,440 5,535 4,322 5,612
Other trucks 919 919 952 952 963 963
Buses
2 axle
4.5 to 10.0 t 355 355 365 365 380 380
>10t 592 592 365 365 380 380
3 axles 1,478 1,478 2,024 2,024 2,087 2,087
Articulated 592 592 365 365 380 380
Table 43. Current charges schedule 2007/08
DIVISION 1 - LOAD CARRYING VEHICLES ($)
Vehicle Type 2 axle 3 axle 4 axle 5 axle
Trucks
Truck (type 1) 355 710 1,065 1,065
Truck (type 2) 592 946 2,365 2,365
Short combination truck 651 2,365 2,365 2,365
Medium combination truck 4,494 4,494 4,848 4,848
Long combination truck 6,208 6,208 6,208 6,208
Prime Movers
Short combination prime mover 1,537 4,019 5,201 5,201
B-double prime mover 4,729 5,911 6,503 6,503
Road train prime mover 5,911 5,911 6,503 6,503
DIVISION 2 - LOAD CARRYING TRAILERS
Calculated using the formula: $355 x Number of Axles
DIVISION 3 - BUSES ($)
Bus Type 2 axle 3 axle 4 axle
Bus (type 1) 355
Bus (type 2) 592 1,478 1,478
Articulated bus 592 592
DIVISION 4 - SPECIAL PURPOSE VEHICLES
Special purpose vehicle (type P) No charge
Special purpose vehicle (type T) 237
Special purpose vehicle (type O) Calculated using the formula:
296 + $296 x Number axles over 2
PERMIT FEES
The charge for the grant of permit to operate a vehicle over 125 tonnes carrying an indivisible load is
to be calculated as
: 4 cents x ESA-km
Table 44. Option C3 charges schedule at the end of phase in excluding
annual adjustment
DIVISION 1 - LOAD CARRYING VEHICLES ($) - July 2010
Vehicle Type 2 axle 3 axle 4 axle 5 axle
Trucks
Truck (type 1) 380 652 652 652
Truck (type 2) 652 859 859 859
Short combination truck 652 859 1593 1593
Medium combination truck 5828 5828 6295 6295
Long combination truck 8036 8036 8036 8036
Prime Movers
Short combination prime mover 1000 3930 4322 4322
Multi-combination prime mover 7050 7050 7755 7755
DIVISION 2 - LOAD CARRYING TRAILERS ($)
Axle group type (per axle charge ($))
Single axle Tandem Tri-axle Quad-axle
axle and above
Trailer type
Pig Trailer 380 380 380 380
Dog Trailer 380 380 380 380
Semi Trailer 380 380 430 430
B-Double lead trailer and B-triple lead 1900 1900 2000 2000
and middle trailers
Converter dolly or low loader dolly 380 380 380 380
DIVISION 3 - BUSES ($)
Bus Type 2 axle 3 axle 4 axle
Bus (type 1) 380
Bus (type 2) 380 2087 2087
Articulated bus 380 380
DIVISION 4 - SPECIAL PURPOSE VEHICLES ($)
Special purpose vehicle (type P) No charge
Special purpose vehicle (type T) 248
Special purpose vehicle (type O) Calculated using the formula:
310 + (310 x Number axles over 2)
PERMIT FEES
The charge for the grant of permit to operate a vehicle over 125 tonnes carrying an indivisible load is
to be calculated as
: 4 cents x ESA-km
Table 45. Mapping vehicle categories to the charging schedule
Operational Vehicle Classes Charging Schedule Classes
Rigid trucks
2 axles, 4.5 - 7.0t 2 2 axle Truck (type 1) IR2
2 axles, 7.0 - 12.0t
2 axles, over 12.0t 2 axle Truck (type 2) 2R2
2 axles: with trailer 2 axle Short combination truck SR2 or MR2
3 axles no trailer 4.5 - 18t 3 axle Truck (type 1)IR3
3 axles no trailer over 18t 3 axle Truck (type 2) 2R3
3 axles with trailer < 42.5t 3 axle: Short combination truck SR3 or MR3
4 axles no trailer: 4.5t-25t 4 axle truck (type 1) 1R4
4 axles no trailer , over 25t 4 axle truck (type 2) 2R4
4 axles with trailer < 42.5t Short combination truck SR4
Medium combination truck GVM over 42.5
Heavy truck trailers
tonnes MR3 or MR4
Articulated Trucks
Single trailer 3 axle rig
Short combination prime mover with 2 axles
Single trailer 4 axle rig SP2
5 axles (2-axle prime mover)
Short combination prime mover with 3 axles
5 axles (3-axle prime mover) SP3
6 axles (3-axle prime mover)
More than 6 axles (not Short combination prime mover with 4 axles
otherwise classified) SP4
Operational Vehicle Classes Charging Schedule Classes
B-doubles
Less than 9 axles
9 axles New multi-combination prime
mover class - former medium
combination prime mover MP3 or
MP2 and Road Train prime mover
1LP2 to 1LP5
Road trains
2 trailers
3 trailers
Special Purpose Vehicles
Other trucks PSV / OSV
Buses
2 axles, 4.5 - 10.0 t 2 axle bus (type 1) 1B2
2 axles, more than 10.0 t 2 axle bus (type 2) 2B2
3 axles, rigid 3 axle bus (type 2) 2B3
Articulated Articulated AB3
IMPACTS ON STATE/TERRITORY REVENUES
Registration revenue implications of recommended option
The following tables are all based on the preferred NTC 2007 Determination charge option
which includes budgeted 2007/08 arterial road expenditure and partial enforcement
expenditure. All tables exclude post 2007/08 annual adjustment impacts and assume
constant usage figures.
Table 46. Registration revenue by jurisdiction ($000)
Change in
Current Proposed Proposed Proposed revenue
2007/08 Revenue Revenue Revenue 2009/10
Revenue 2008/09 2009/10 2009/10 compared to
State/Territory 2007/08
NSW 150,313 150,144 159,228 166,778 11.0%
Vic 171,433 172,147 185,841 197,894 15.4%
Qld 146,881 149,445 160,107 169,816 15.6%
SA 57,859 58,750 64,478 69,982 21.0%
WA 86,169 87,452 90,940 94,113 9.2%
Tas 14,940 14,864 15,726 16,503 10.5%
NT 7,972 8,421 8,651 8,858 11.1%
ACT 2,860 2,806 2,961 3,084 7.8%
Total 638,428 644,030 687,933 727,028 13.9%
Table 47. All jurisdiction registration revenue by vehicle class ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 219,384 216,664 -1.2%
Articulated Trucks 252,589 257,538 2.0%
B-Doubles 85,489 164,540 92.5%
Road Trains 50,336 59,709 18.6%
Special Purpose Trucks 11,325 11,862 4.7%
Buses 19,305 16,715 -13.4%
Total 638,428 727,028 13.9%
Table 48. NSW revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 58,812 59,112 0.5%
Articulated Trucks 64,008 65,498 2.3%
B-Doubles 17,080 32,297 89.1%
Road Trains 1,796 2,134 18.9%
Special Purpose Trucks 2,061 2,159 4.7%
Buses 6,556 5,578 -14.9%
Total 150,313 166,778 11.0%
Table 49. Vic revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 58,307 58,063 -0.4%
Articulated Trucks 74,238 74,829 0.8%
B-Doubles 30,398 56,715 86.6%
Road Trains 954 1,135 18.9%
Special Purpose Trucks 3,499 3,665 4.7%
Buses 4,037 3,488 -13.6%
Total 171,433 197,894 15.4%
Table 50. Qld revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 48,949 48,425 -1.1%
Articulated Trucks 57,183 59,086 3.3%
B-Doubles 18,800 37,618 100.1%
Road Trains 16,188 19,200 18.6%
Special Purpose Trucks 2,222 2,327 4.7%
Buses 3,540 3,159 -10.8%
Total 146,881 169,816 15.6%
Table 51. SA revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 17,150 16,284 -5.0%
Articulated Trucks 22,138 22,715 2.6%
B-Doubles 11,989 23,757 98.2%
Road Trains 3,962 4,702 18.7%
Special Purpose Trucks 1,106 1,158 4.7%
Buses 1,515 1,367 -9.8%
Total 57,859 69,982 21.0%
Table 52. WA revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 27,765 26,422 -4.8%
Articulated Trucks 25,435 25,564 0.5%
B-Doubles 5,231 10,257 96.1%
Road Trains 23,818 28,256 18.6%
Special Purpose Trucks 1,605 1,681 4.7%
Buses 2,315 1,933 -16.5%
Total 86,169 94,113 9.2%
Table 53. Tasmania revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 5,311 5,236 -1.4%
Articulated Trucks 6,970 7,201 3.3%
B-Doubles 1,490 2,965 99.0%
Road Trains 0 0
Special Purpose Trucks 576 603 4.7%
Buses 594 498 -16.1%
Total 14,940 16,503 10.5%
Table 54. NT revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 1,807 1,841 1.9%
Articulated Trucks 1,762 1,787 1.4%
B-Doubles 156 311 100.0%
Road Trains 3,599 4,259 18.4%
Special Purpose Trucks 190 200 4.7%
Buses 458 460 0.4%
Total 7,972 8,858 11.1%
Table 55. ACT revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 1,283 1,281 -0.1%
Articulated Trucks 856 859 0.3%
B-Doubles 346 620 79.2%
Road Trains 19 23 18.9%
Special Purpose Trucks 67 70 4.7%
Buses 289 232 -19.9%
Total 2,860 3,084 7.8%
PRIMARY PRODUCER CONCESSIONS
Table 56. Primary producer heavy vehicle registration concessions
Heavy vehicles which do
General rate of
Jurisdiction Other concession rates not qualify for a
concession
concession
Vic 80% for most heavy 50% for 2 or 3 axle rigid None.
vehicles types. trucks with no trailers and
all 2 axle short
combination trucks.
55.56% for 4 axle rigid
trucks with no trailer.
NSW Pay the lower of the If the NSW determined
national heavy vehicle motor vehicle registration
charge or the NSW fee is higher than the
determined motor applicable national heavy
vehicle registration. charge.
This would appear to This would appear to
benefit larger truck provide no concession to
trailer combinations and smaller rigid truck types
prime movers. without trailers.
Qld Rates of 25% to 50% 50% applies to all 2 and 3 Prime movers or rigid
apply to all heavy axle rigid trucks without trucks with a Gross
vehicles which have a trailers, all 2 axle trucks Vehicle Mass less than 6
Gross Vehicle Mass of 6 with trailers, and all 2 tonnes.
tonnes or more and to all axle prime movers except
trailers with an Average long combinations and all
Gross Mass of 4.5 1 axle trailers.
tonnes. 25% applies to all rigid
trucks with 4 or more
axles, all 2 axle long
combination prime
movers, all prime movers
with 3 or more axles and
all special purpose
vehicles.
35% applies to all 2 axle
trailers.
30% applies to all 3 or
more axle trailers.
SA 40% for most heavy All rigid trucks with no
vehicle types. trailers and all special
vehicles.
WA 50% for all heavy All multiple trailer
vehicle types plus up to combinations after the first
one trailer. trailer.
Tas 40% for all heavy None.
vehicle types.
NT 50% for all heavy None.
vehicle types.
ACT 0% All.
NON PRIMARY PRODUCER REGISTRATION CONCESSIONS
General rate of
Jurisdiction Concession type
concession
NSW Pensioner concession for rigid heavy vehicles up to 16t 100%
GVM (not prime movers).
Qld Concessions apply for heavy vehicles and trailers which
are classified as:
· Pensioner, Seniors Card & Veteran Affairs benefit 25 to 50%
recipients
· Local Government , Community Service 25 to 50%
Organisation, Special Purpose
SA A reduction in the registration fees is available to heavy 40%
vehicles (other than Type 1 & Type 2 trucks) that are kept
in Outer Areas
outer area means--
(a) the whole of Kangaroo Island; or
(ab) the area of the District Council of Coober Pedy; or
(ac) the area of the District Council of Roxby Downs; or
(b) all other parts of the State that are not within a
municipality, a district council area or Iron Knob.
WA Interchangeable trailers - A rebate is granted for goods 75%
carrying semi trailers where the number trailers exceeds
the number of prime movers registered in an operators
name.
Trailers used outside the Southwest Land Division 50%
A 50% concession may be granted to a vehicle which is 50%
used during the currency of the licence SOLELY for the
carriage of stock.
Tas Interchangeable trailers - A rebate is granted for goods 40%
carrying semi trailers where the number trailers exceeds
the number of prime movers registered in an operators
name. An interchangeable trailer cannot travel any more
than 20,000 kilometres in a 12 month period.
Three axle buses - a rebate is offered to three axle buses 60%
exceeding 12 tonne GVM that travel no more than 60,000
kilometres in a 12 month period. The rebate means that
these buses pay the same charge as a 2 axle bus that
exceeds 12 tonne.
Trailers with a GVM greater than 4.5 tonnes but no greater Minimum of 57%
than 9.0 tonnes - These trailers pay a flat rate charge.
Presently $154.00 instead of the per axle charge
ACT None
VIC and NT Information requested but not provided
2007 HEAVY VEHICLE CHARGES
DETERMINATION
REGULATORY IMPACT
STATEMENT VOLUME 2
APPENDICES
December 2007
Prepared by
National Transport Commission
National Transport Commission
2007 Heavy Vehicle Charges Determination: Regulatory Impact Statement
Appendices
Report Prepared by: National Transport Commission
ISBN: 1 921168 72 2
REPORT OUTLINE
Date: December 2007
ISBN: 1 921168 72 2
Title: 2007 Heavy Vehicle Charges Determination
Regulatory Impact Statement Volume 2 Appendices
Address: National Transport Commission
Level 15/628 Bourke Street
MELBOURNE VIC 3000
E-mail: ntc@ntc.gov.au
Website: www.ntc.gov.au
Type of report: Regulatory Impact Statement
Objectives: To improve transport efficiency, productivity and
equity, reduce administration costs, improve road
safety, and promote nationally consistent regulatory
reform
NTC Programs: Pricing
Purpose: Appendices to Regulatory Impact Statement
CONTENTS
A. PAYGO COST BASE............................................................................................5
A.1 The PAYGO approach to determining the cost base................................................. 5
A.2 Deriving allocated road expenditure from reported road expenditure........................ 5
A.3 Updated components using 2007 Determination costing model................................ 6
A.3.1 Arterial road expenditure ............................................................................................... 6
A.3.2 Local road expenditure.................................................................................................. 7
A.4 Summary of allocable expenditures........................................................................... 9
A.5 Impact of seven versus three year averaging .......................................................... 10
A.6 Estimating road use ................................................................................................. 12
A.7 Road use changes since the Second Determination ............................................... 12
A.7.1 B-doubles .................................................................................................................... 12
A.7.2 Road train vkt modification and its impacts ................................................................. 12
A.7.3 Special purpose vehicles............................................................................................. 13
A.7.4 Heavy truck trailer combinations ................................................................................. 13
B. COST ALLOCATION ..........................................................................................16
B.1 Local road use ......................................................................................................... 16
B.2 Update of ESA relationships .................................................................................... 16
B.3 Cost allocation rules ................................................................................................ 17
B.4 Cost allocation results before road train adjustment................................................ 18
B.4 Cost allocation results after road train adjustment................................................... 19
B.4.1 Adjustment for road train travel on unsealed roads ........................................ 19
B.4.2 Road train community service obligation........................................................ 20
B.4.2 Adjustments made to allocated cost due to road train factors ........................ 20
B.4.3 Allocated cost by road type ............................................................................ 22
B.4.4 Allocated cost changes since the Second Determination............................... 22
C. METHODOLOGY FOR CALCULATING CHARGE RECOVERY .......................25
C.1 Introduction .............................................................................................................. 25
C.2 ATA initial approach to estimating heavy vehicle charge revenue........................... 26
C.2.1 Revenue from fuel ....................................................................................................... 26
C.2.2 Revenue from vehicle registrations ............................................................................. 26
C.3 ATA submission approach of estimating heavy vehicle charge revenue................. 27
C.4 Comparison of methods........................................................................................... 27
C.5 Critique .................................................................................................................... 28
C.5.1 Inclusion of low sulphur diesel cost recovery charge .................................................. 28
C.5.2 Treatment of petrol fuelled heavy vehicles and metropolitan heavy
vehicles less than 20 tonnes ....................................................................................... 30
C.5.3 Indexation of fuel charges ........................................................................................... 31
C.5.4 Using the RCMPI as an index ..................................................................................... 31
C.5.5 Using CPI as an index................................................................................................. 32
C.6 Conclusion ............................................................................................................... 32
D. THE NTC CHARGING MODAL ..........................................................................33
D.1 Current structure of charges .................................................................................... 33
D.2 Major factors that determine heavy vehicle charges within the NTC
charge modal ........................................................................................................... 33
E. ANNUAL ADJUSTMENT ....................................................................................35
E.1 Current annual adjustment methodology ................................................................. 35
E.2 Updated components using 2007 Determination costing model.............................. 37
F. COST BASE FOR THE ANNUAL ADJUSTMENT .............................................41
F.1 Seven versus three year average of road expenditure ............................................ 41
F.2 Real versus nominal road expenditure .................................................................... 41
F.3 Calculation of change in rural arterial expenditure % .............................................. 42
G. ANNUAL ADJUSTMENT - MONITORING OF CHANGES IN KEY
VARIABLES ....................................................................................................... 43
G.1 Key variables ............................................................................................................43
G.2 Recovery of attributable costs ..................................................................................43
Scenario 1: Constant changes across the vehicle fleet........................................................ 44
Scenario 2: Only B-double road use is varied ...................................................................... 46
H. High productivity vehicles ............................................................................... 49
H.1 Allocated cost formula ..............................................................................................50
H.1.1 Unit costs..................................................................................................................... 50
H.1.2 Other adjustments to costs.......................................................................................... 51
H.1.3 Non-attributable cost ................................................................................................... 51
H.1.4 AGM value................................................................................................................... 51
H.1.5 ESA value.................................................................................................................... 52
H.1.6 PCU value. .................................................................................................................. 54
H.1.7 Annual VKT ................................................................................................................. 55
H.1.8 Fuel use....................................................................................................................... 56
H.2 B-triple example calculation......................................................................................57
I. FULL SCHEDULE OF REGISTRATION CHARGES ......................................... 59
J. IMPACTS ON STATE/TERRITORY REVENUES .............................................. 64
J.1 Registration revenue implications of recommended option......................................64
K. PRIMARY PRODUCER CONCESSIONS .......................................................... 68
L. NON PRIMARY PRODUCER REGISTRATION CONCESSIONS ................... 69
LIST OF TABLES
Table 1. Arterial road construction and maintenance expenditure including
2007/08 budget data in 2007/08 $m.............................................................. 7
Table 2. Local road construction and maintenance expenditure in 2007/08 $m..... 9
Table 3. Expenditure excluded from allocation process including 2007/08
budget data in 2007/08 $m.......................................................................... 10
Table 4. Total road expenditure, three year versus seven year averaging
($2007/08 m) .................................................................................................. 11
Table 5. Changes in rigid truck trailer combination usage since the Second
Determination ............................................................................................... 13
Table 6. Road use data by vehicle type .................................................................... 14
Table 7. Allocation of attributable costs to measures of road use ........................ 18
Table 8. Unit costs for heavy vehicles by road type including 2007/08 budget
data ................................................................................................................ 19
Table 9. Costs allocated to each vehicle class after road train adjustments $m.. 21
Table 10. Costs allocated by road type: attributable and non-attributable costs
after road train adjustments in 2007/08 $m............................................... 22
Table 11. Heavy vehicle allocated cost per vehicle - changes since the Second
Determination ............................................................................................... 23
Table 12. Summary of heavy vehicle allocated cost changes since the Second
Determination ............................................................................................... 24
Table 13. Key changes in proportions of costs allocated since the Second
Determination ............................................................................................... 24
Table 14. Calculation of the value of sulphur emissions .......................................... 29
Table 15. Cumulative average annual growth rates to generate D factors.............. 37
Table 16. Over-recovery of attributable costs ............................................................ 44
Table 17. Over-recovery of B-double attributable cost with constant variation in
key variables across vehicle classes ......................................................... 46
Table 18. Unit costs for revised formula..................................................................... 50
Table 19. Closest like vehicle matching tables .......................................................... 54
Table 20. Schedule of registration charges for the 2007 Determination ................. 59
Table 21. Current charges schedule 2007/08 ............................................................. 60
Table 22. Option C3 charges schedule at the end of phase in excluding annual
adjustment .................................................................................................... 61
Table 23. Mapping vehicle categories to the charging schedule ............................. 62
Table 24. Registration revenue by jurisdiction ($000) ............................................... 64
Table 25. All jurisdiction registration revenue by vehicle class ($000) ................... 64
Table 26. NSW revenue from registration charges ($000)......................................... 65
Table 27. Vic revenue from registration charges ($000) ........................................... 65
Table 28. Qld revenue from registration charges ($000) ........................................... 65
Table 29. SA revenue from registration charges ($000) ............................................ 66
Table 30. WA revenue from registration charges ($000) ........................................... 66
Table 31. Tasmania revenue from registration charges ($000) ................................ 66
Table 32. NT revenue from registration charges ($000) ............................................ 67
Table 33. ACT revenue from registration charges ($000).......................................... 67
Table 34. Primary producer heavy vehicle registration concessions...................... 68
LIST OF FIGURES
Figure 1. Figure 1 NTC approach contrasted with ATA initial approach .................27
Figure 2. NTC approach contrasted with ATA submission approach......................28
Figure 3. Charge modal flow chart ..............................................................................34
Figure 4. Current annual adjustment methodology (developed in 2001).................36
Figure 5. Current sensitivity factor values .................................................................36
Figure 6. Comparison of old and new D values .........................................................38
Figure 7. New annual adjustment formula ..................................................................39
Figure 8. New simplified annual adjustment formula ................................................39
Figure 9. Comparison of old and new adjustment factors .......................................40
Figure 10. Over-recovery of B-double attributable cost with variation in B-double
road use variables.........................................................................................48
Figure 11. Relative PCU factor.......................................................................................55
Figure 12. Regression of average VKT against AGM...................................................55
Figure 13. Regression of fuel use against AGM...........................................................57
Figure 14. B-Double and B-triple example calculation ................................................58
PAYGO COST BASE
NTC's costing methodology consists of Pay-As-You-Go (PAYGO) cost estimates and a
cost allocation model which allocates costs on the basis of vehicle characteristics and
usage. The model works on an aggregate basis and is reliant on a system of averaging. It
does not address the considerable diversity in fleet, usage and network. These
characteristics of the model and the data collected also make it difficult to accurately
disaggregate specific jurisdictional and Auslink heavy vehicle expenditure.
The Productivity Commission supported the continual use of PAYGO in the short term
until a more appropriate alternative is developed. As part of its assessment, the
Productivity Commission validated the current cost allocation methodology, although
noted it was conservative in nature. Therefore the NTC's models have adopted (for the
most part) the same PAYGO cost estimation and cost allocation methodology as applied in
the Third Determination.
The PAYGO approach to determining the cost base
PAYGO is based on the idea that all expenditure, including capital expenditure, is fully
recovered in the year it is incurred.
The current road network is the result of construction activity that occurred previously
when traffic levels were lower. The amount spent now is based on expected traffic levels
over the coming fifteen to thirty years, which can be expected to be higher - that is, it
provides for both current and future traffic. Consequently, construction costs in the current
year might be higher than those that are rightly the share of the current traffic.
The amount currently spent on maintenance is the result of accumulations in pavement and
bridge wear over the past twelve months to twenty years, caused by past traffic which was
less than at current levels. Consequently, maintenance costs attributed to the current year
might be expected to be smaller than the true share of maintenance costs (which are yet to
be incurred) resulting from the current traffic.
These two effects are taken to negate each other under the PAYGO approach, so that the
amount spent in the current year approximates the true share of costs associated with the
current traffic.
The PAYGO cost base is derived from reported road expenditure, which includes both
arterial and local roads. Expenditure deemed not to be relevant to road use or which is
recovered from other fees is first excluded from the cost base. Adjustments are also made
to remove any double counting that may occur through the reporting process.
Deriving allocated road expenditure from reported road expenditure
The NTC uses two separate sources of road expenditure data. Arterial road expenditure is
obtained directly from jurisdictions on an annual basis. The expenditure is reported in the
format of a template developed by the NTC, which categorises expenditure specifically for
the purposes of cost allocation modelling. The categories are shown in Table 1 (apart from
categories G3 to G5 which are not included in NTC cost allocation). This data has been
collected since the early 1990s and is the best series available on arterial road expenditure
in Australia.
For the heavy vehicle charges determinations to date, the NTC has used three year
averages of road expenditure in calculating the allocable cost base. The data is converted
to real terms using BTRE Road Construction and Maintenance Price Index. The arterial
road expenditure data comprises an average of the two latest completed financial years as
well as the latest budget year. For local road expenditure there are lags in the availability of
data, such that the most recent year for which data are available is 2004/05. The NTC is
now proposing to use an average of seven years' worth of data as supported by the
Productivity Commission in its Final Report on Road and Rail Freight Infrastructure
Pricing, PC (2006). Consequently, the arterial road expenditure data relates to the years
from 2001/02 to 2007/08, while the local road expenditure data relates to the years from
1998/99 to 2004/05.
Updated components using 2007 Determination costing model
Arterial road expenditure
From the arterial road expenditure collected by the NTC from jurisdictions, the amounts
reported in categories G3 to G5 are excluded. Vehicle registration (G3) and driver
licensing (G4) are excluded because administrative fees are already charged for these
services. As such, including them could result in double counting. Including loan servicing
expenditure (G5) would violate the PAYGO principle that all capital is recovered in the
year it is incurred. Accordingly it is also excluded from the allocable cost base, see NTC
(2005d) Section 3.3 for further detail on unallocated expenditure.
In the past the NTC has not included expenditure relating to heavy vehicle enforcement.
However, in keeping with the findings of the Productivity Commission and a request from
the ATC to review the appropriateness of recovering this cost the NTC has included this
expenditure on an adjusted basis so that the proportion of the national total does not exceed
that of a jurisdiction's proportion of heavy vehicle kilometres travelled. A more complete
discussion of the principles for inclusion of this costs is in section 2.3.1 of Volume 1.
To estimate a common minimum level of enforcement the NTC has used a proxy for mass
related enforcement and as NSW has a disproportionately large share of the national
enforcement cost, this approach in effect reduces its enforcement expenditure from $66.4
million to $21.5 million. Total allocable enforcement expenditure is reduced from $110
million to $66 million (a reduction of $44 million).
Allocable arterial road expenditure can therefore be expressed as the reported expenditure
of $7,210 million less the sum of categories G3 to G5 of $709 million less $44 million of
category G2 for heavy vehicle enforcement expenditure, leaving $6,457 million.
Table 1 below shows how arterial expenditure has moved over time since the second and
third determinations. This table demonstrates that growth in expenditure between
categories is not uniform across time. The rate of growth in total arterial expenditure
masks a lot of variation between expenditure categories. This has implications for the
amount of the expenditure that is allocated to the heavy vehicle fleet, since the cost
allocation rules dictate that certain categories should be more attributable to heavy vehicle
use than others.
Table 57. Arterial road construction and maintenance expenditure
including 2007/08 budget data in 2007/08 $m
nd
2 2007 Det. Change 2007
Det. Det./2nd Det.
Expenditure Category
A Servicing and operating 450 711 58%
B Road pavement and shoulder construction
B1 Routine maintenance 386 425 10%
B2 Periodic surface maintenance 362 330 -9%
C Bridge maintenance/ rehabilitation 141 172 22%
D Road rehabilitation 750 477 -36%
E Low-cost safety/traffic 291 383 32%
F Asset extension/improvements
F1 Pavement improvements 821 1,130 38%
F2 Bridge improvements 359 426 19%
F3 Land acquisition, earthworks/other 1,562 2,084 33%
G Other miscellaneous activities
G1 Corporate services 260 252 -3%
G2 Enforcement of heavy vehicle regulations 110 110 0%
Totals 5,492 6,501 18%
A.3.2 Local road expenditure
Local road expenditure data is obtained from the Australian Bureau of Statistics. It is the
best available local road expenditure data available at present; however it is not reported in
the categories required by the NTC for the purposes of cost allocation modelling. Rather,
it is broken down by state and also capital/current expenditure. It is therefore necessary for
the NTC to estimate the proportion of the expenditure in each of its categories. This is
done by using the same proportions as for arterial road expenditure. The capital
component of the reported local expenditure is apportioned on the basis of expenditure
category F. The current component of the expenditure is apportioned based on expenditure
categories A-E.
The NTC acknowledges the limitations of this method of disaggregating the expenditure.
A project is currently being undertaken in conjunction with Austroads to obtain survey
evidence from local councils of the true breakdown of their expenditure in the NTC
classes. Unfortunately the results will not be available in time for use in the 2007
Determination.
A further adjustment that must be made to the local road expenditure relates to the
elimination of double counting of inter-governmental grants. The ABS Government
Financial Statistics reports expenditure by local councils on all roads, as opposed to all
expenditures on local roads themselves.
It is therefore necessary for the NTC to make adjustments to the ABS data to account for:
· financial assistance to councils from state governments for work on council
managed arterials;
· payments to councils from state governments for contract work on state managed
roads;
· spending by state governments on local access roads in unincorporated areas;
· direct spending by state governments on council managed local access roads; and
· any other direct state spending on local access roads.
Estimates of these expenditure totals are provided by the states as part of the NTC's data
collection process. Expenditure on the first two categories is included in the arterial
categories A-G, however it is also separately identified so that it can be subtracted from
total expenditure on roads by local governments which will assist in determining local road
expenditure. Accordingly, the adjustment to the ABS data is done by subtracting the sum
of the first two items and adding the final three.
The net effect of adjusting for these funding arrangements is that the reported local
government expenditure estimate from the ABS is normally reduced by about $300 million
per annum.
In the case of the current determination, a seven year average of the reported ABS local
government expenditure is $5,440 million in 2007/08 dollars. The adjustment described
above results in a reduction of this total by $303 million, giving a revised estimate of
$5,137 million. This is made up of $3,060 million in urban local road expenditure and
$2,076 million in rural local road expenditure.
Table 2 shows how local road expenditure has moved over time since the second and third
determinations. As with arterial expenditure, the rate of growth in the total masks a lot of
variation between expenditure categories. However, given that a significant proportion of
this expenditure is excluded from the allocable cost base (see below), the impact on the
heavy vehicle allocation is somewhat muted in comparison to that of arterial expenditure.
Table 58. Local road construction and maintenance expenditure in
2007/08 $m
nd
2 2007 Det. Change 2007
Det. Det./2nd Det.
Expenditure Category
A Servicing and operating 264 968 266%
B Road pavement and shoulder
construction
B1 Routine maintenance 245 501 104%
B2 Periodic surface maintenance 230 392 70%
C Bridge maintenance/ rehabilitation 88 221 152%
D Road rehabilitation 450 593 32%
E Low-cost safety/traffic 168 458 173%
F Asset extension/improvements
F1 Pavement improvements 833 585 -30%
F2 Bridge improvements 165 242 47%
F3 Land acquisition, earthworks/other 843 1,178 40%
Totals 3,286 5,137 56%
As in the Second Determination, the NTC has assumed (based on a survey of local
government road engineers) that 75% of urban local road expenditure and 50% of rural
local road expenditure exists solely to provide access, amenity, or provide for non-
motorised road users. In addition, much of this expenditure is likely to be recovered by
other fees such as council rates. Therefore allocable local road expenditure is expressed as
25% of urban local road expenditure, being $765 million, and 50% of rural local road
expenditure, being $1,038 million. Total allocable local road expenditure is therefore
equal to $1,803 million. It is not considered necessary to deduct any expenditure from the
arterial allocable cost base on these grounds. Arterial roads by definition do not serve
functions of purely providing access to individual properties. They are defined as roads
that link communities or other roads.
Summary of allocable expenditures
Combining the allocable local road expenditure (of $1,803 million) with the allocable
arterial road expenditure (of $6,457 million) as determined above, total allocated road
expenditure is therefore $8,260 million.
Table 3 summarises the process whereby the amount of expenditure considered to be
allocable for the purposes of heavy vehicle charging is derived from the data as it is
collected.
Table 59. Expenditure excluded from allocation process including 2007/08
budget data in 2007/08 $m
Arterial Local Total
Expenditure Type Roads Roads
Total road agency expenditure 7,210 5,137 12,347
Deductions
Expenditure recovered through other fees
Administration of vehicle registration 344 344
Administration of licensing 209 209
Loan interest 156 156
Council expenditure providing for all-weather 3,334 3,334
access, amenity and non-motorised road users
Part of enforcement expenditure not included 44 44
Total deductions 753 3,334 4,087
Total allocated 6,457 1,803 8,260
Impact of seven versus three year averaging
As discussed, road expenditures have been taken as an average over seven years for this
charges determination. For the purposes of comparison, the following table shows what
the road expenditure figures would be if averaged over the most recent three years instead.
This shows that using seven year averaging road expenditure is around 6% lower than if
the traditional three year averaging in used. The lower road expenditure estimate under
seven year averaging reduces the impact of the sharp increase that has occurred in recent
years in arterial road expenditure since the Federal Auslink road funding program has
come into effect. The Auslink program in particular has boosted capital expenditure in the
F1 to F3 expenditure categories whuch is reflected by the much higher road expenditure
estimates in the 3 year averaging data compared to the 7 year averaging.
Table 60. Total road expenditure, three year versus seven year averaging
($2007/08 m)
3 year 7 year Change 7
year/3 year
Expenditure Category
A Servicing and operating 1,631 1,678 2.9%
B Road pavement and shoulder
construction
B1 Routine maintenance 852 926 8.7%
B2 Periodic surface maintenance 676 721 6.7%
C Bridge maintenance/ rehabilitation 372 394 5.9%
D Road rehabilitation 990 1,070 8.1%
E Low-cost safety/traffic 872 841 -3.6%
F Asset extension/improvements
F1 Pavement improvements 2,074 1,715 -17.3%
F2 Bridge improvements 735 668 -9.1%
F3 Land acquisition, earthworks/other 3,849 3,262 -15.3%
G Other miscellaneous activities
G1 Corporate services 251 252 0.4%
G2 Enforcement of heavy vehicle 111 110 -0.9%
regulations
Totals 12,413 11,637 -6.3%
Estimating road use
Road use estimates for the cost allocation process are derived from ABS Survey of Motor
Vehicle Use (SMVU) statistics. This data provides estimates of:
· numbers of vehicles;
· total and average travel (Vehicle Kilometres Travelled);
· average gross mass-km (gross tonne-km), including the weight of the truck itself;
· the loads it carries and the amount of travel empty and laden, and average gross mass
per km (tonnes/km); and
· total fuel consumed (litres) and the rate of fuel consumed per 100 km (litres/100 km).
As with previous Determinations, trends in vehicle kilometres travelled, gross-tonne
kilometres, numbers of vehicles and fuel consumed were estimated for each vehicle
category. This determination incorporates an additional two year's SMVU data (compared
to the Third Determination), meaning the trends are based on the years 1999 to 2005
(trends were estimated using linear least squares regressions). Using a trend allows
fluctuations between individual years resulting from the survey sampling process to be
minimised. Based on these trends, an estimate was made of road use in 2005. This was
used in preference to the raw data for 2005 as there can be greater confidence that it
reflects actual levels of use.
Road use changes since the Second Determination
The similarity of this process to that of the Second and Third Determination means that
there have been few significant shifts in vehicle utilisation patterns. There are however, a
couple of exceptions.
B-doubles
B-doubles have continued the strong growth rates evidenced since the Second
Determination. For example 9 axle B-doubles have experienced a decline in average
distance traveled and average gross mass of 12% and 9% respectively as these vehicles
have now changed from long haul vehicle to now widespread use in both rural and urban
areas.
Road train vkt modification and its impacts
Concerns were raised during the consultation process with the extent of the difference
recorded for average distance traveled for double road trains versus triple road trains based
on the results of the ABS Survey of Motor Vehicle Usage. As allocated cost per heavy
vehicle type is very sensitive to the estimate of average VKT the NTC looked more closely
at the SMVU data. The industry view was that in practice these two heavy vehicle types
have similar annual average VKT.
The NTC investigation of the data found that there is small sample size used for vehicles in
these two classes and the confidence levels in the survey data based on a 95% confidence
interval resulted ion an overlapping of the top end of the double road train annual average
vkt and the lower end of the triple road train annual average VKT. Based on these findings
the NTC concluded that it was reasonable to use a weighted average VKT for both of these
heavy vehicle classes such that both the double and triple road train vehicle types are
modelled on having the same annual average VKT. The impact of this is to increase the
allocated cost for double road trains and decrease the allocated cost for triple road trains
due to the higher number of recorded double road trains relative to triple road trains.
Special purpose vehicles
Special purpose vehicles appear to have declined in most aspects of their utilisation.
However they represent a very small proportion of the fleet and accordingly this does not
strongly influence the overall distribution that much.
Heavy truck trailer combinations
It is noteworthy that the treatment of the heavy truck trailer category within the SMVU has
resulted in some changes to the relative usage of those vehicles and the smaller rigid truck-
trailer combinations. Previously there was no separate SMVU category for the heavy truck
trailers, and numbers had to be estimated based on estimated proportions of the lighter
rigid truck-trailers.
Now that this separate category is available, it seems that these trucks are utilised more
widely than was indicated by the previous estimation methods. Therefore lighter truck
trailer combinations are less prevalent. The flow-on effects of these parameter changes are
not straightforward, since there is an interaction of these effects (as well as the changed
expenditure profile). Table 5 illustrates these changes.
Table 61. Changes in rigid truck trailer combination usage since the Second
Determination
Vehicle type Number Total VKT GVM.kms Total Fuel
vehicles Use (litres)
3 axle with trailer < 42.5t -6% -22% -15% -11%
4 axle with trailer <42.5t 59% 54% 67% 57%
Heavy truck trailer 42.5t and over 79% 63% 40% 40%
Table 62. Road use data by vehicle type
Vehicle class Number Distance
Vehicles Travelled Fuel Use PCU-km ESA-km AGM-km
(million (million (million PCU- (million (million
km) litres) km) ESA-km) tonne-km)
Light vehicles
Motor cycles 332,547 1,571 94 1,571
Passenger cars 8,718,103 122,725 13,585 122,725
Passenger vans & light
buses 220,211 3,527 495 3,527
4WDs: passenger 1,578,093 27,869 3,581 27,869
4WDs: light commercial 701,330 12,901 1,689 12,901 566 25,034
Light commercial 1,285,000 23,326 3,114 23,326 958 37,057
Light rigid trucks 77,236 1,649 265 1,649 78 5,526
Rigid trucks
2 axle rigid trucks
No trailer: 4.5-7t 47,443 725 147 1,450 38 3,086
No trailer: 7-12t 85,975 1,949 464 3,899 337 13,591
No trailer: over 12t 44,899 968 281 1,936 951 10,558
With trailer 13,439 318 92 636 282 3,380
3 axle rigid trucks
No trailer:4.5-18t 3,213 60 22 120 41 690
No trailer:over 18t 42,102 1,161 483 2,321 1,683 18,751
With trailer: <42.5t 6,402 307 139 921 361 8,069
4 axle rigid trucks
No trailer:4.5-25t 1,120 13 5 26 16 250
No trailer: over 25t 4,571 151 70 301 213 3,036
With trailer: <42.5t 263 20 11 60 33 650
Heavy truck trailers over
42.5t 7,208 533 268 1,600 1,651 16,817
Articulated trucks
3 axle rig 1,320 23 10 68 15 345
4 axle rig 4,186 182 71 545 219 3,989
3 axle trailer: 5 axle rig 1,541 69 31 207 157 1,959
2 axle trailer: 5 axle rig 4,783 304 151 911 540 7,864
6 axle rig 34,991 3,111 1,593 9,332 7,111 102,883
B-doubles < 9 axle rig 1,702 280 157 1,118 913 12,291
B-doubles 9 axles & > 7,862 1,407 835 5,629 4,994 72,476
Double road trains 3,098 414 279 1,657 1,897 24,793
Triple road trains 1,309 175 140 875 988 15,297
Artics > 6axle NEC 2,075 185 119 554 435 9,643
Special Vehicles 12,323 146 42 292 226 3,577
Buses
2 axle 3.5-4.5t 5,833 126 20 252 6 403
2 axle 4.5-10t 11,847 298 61 595 23 1,607
2 axle over 10t 19,535 812 312 1,625 569 8,123
3 axle 2,215 125 46 375 155 1,899
Articulated 440 17 9 52 13 289
All vehicles 13,284,216 207,447 28,683 230,928 25,470 413,937
Heavy vehicles 365,861 13,752 5,839 37,107 23,862 345,916
Number Number Distance PCU'
Vehicle class Vehicles trailers travelled Fuel Use s ESA's AGM
km/veh l/100km
Light vehicles
Motor cycles 332,547 0 4,725 6.0 1 0.00 0.00
Passenger cars 8,718,103 0 14,077 11.1 1 0.00 0.00
Passenger vans & light
buses 220,211 0 16,018 14.0 1 0.00 0.00
4WDs: passenger 1,578,093 0 17,660 12.9 1 0.00 0.00
4WDs: light commercial 701,330 0 18,395 13.1 1 0.04 1.94
Light commercial 1,285,000 0 18,152 13.3 1 0.04 1.59
Light rigid trucks 77,236 0 21,354 16.1 1 0.05 3.35
Rigid trucks
2 axle rigid trucks
No trailer: 4.5-7t 47,443 0 15,284 20.3 2 0.052 4.26
No trailer: 7-12t 85,975 0 22,673 23.8 2 0.173 6.97
No trailer: over 12t 44,899 0 21,563 29.1 2 0.982 10.91
With trailer 13,439 20,158 23,676 29.0 2 0.887 10.62
3 axle rigid trucks
No trailer:4.5-18t 3,213 0 18,743 37.1 2 0.685 11.46
No trailer:over 18t 42,102 0 27,567 41.6 2 1.450 16.16
With trailer: <42.5t 6,402 9,603 47,964 45.2 3 1.174 26.28
4 axle rigid truck
No trailer:4.5-25t 1,120 0 11,400 40.4 2 1.277 19.56
No trailer: over 25t 4,571 0 32,971 46.7 2 1.416 20.15
With trailer: <42.5t 263 394 76,626 54.2 3 1.637 32.29
Heavy truck trailers over
42.5t 7,208 10,811 73,983 50.3 3 3.096 31.54
Articulated trucks
3 axle rig 1,320 1,981 17,074 43.5 3 0.676 15.32
4 axle rig 4,186 6,279 43,358 39.0 3 1.205 21.97
3 axle trailer: 5 axle rig 1,541 2,312 44,848 44.7 3 2.271 28.35
2 axle trailer: 5 axle rig 4,783 7,174 63,509 49.7 3 1.776 25.89
6 axle rig 34,991 52,487 88,900 51.2 3 2.286 33.07
B-doubles < 9 axle rig 1,702 5,105 164,307 56.2 4 3.265 43.96
B-doubles 9 axles & > 7,862 23,587 178,988 59.4 4 3.549 51.50
Double road trains 3,098 13,940 133,750 67.3 4 4.578 59.84
Triple road trains 1,309 9,814 133,750 80.0 5 5.647 87.41
Artics > 6axle NEC 2,075 3,112 89,038 64.4 3 2.357 52.21
Special Vehicles 12,323 0 11,850 28.4 2 1.546 24.50
Buses
2 axle
3.5-4.5t (light vehicle) 5,833 0 21,598 15.5 2 0.05 3.20
4.5-10t 11,847 0 25,119 20.5 2 0.077 5.40
over 10t 19,535 0 41,585 38.4 2 0.701 10.00
3 axle 2,215 0 56,398 37.1 3 1.239 15.20
Articulated 440 0 39,553 51.9 3 0.746 16.60
All vehicles 13,284,216
Heavy vehicles 365,861 166,757
COST ALLOCATION
The initial approach taken in establishing options for the 2007 Determination has been to
largely adopt the Third Determination methodology.
B.1 Local road use
Local road use estimates have historically been one of the weakest areas of research for the
estimation of heavy vehicle cost responsibilities, but as part of the Third Determination, a
major study was undertaken which has provided far more defensible data.
The key finding from this study on local road use (NTC 2005b) is that there is a much
higher percentage of travel on local roads than was previously assumed.
· Light vehicles undertake 37% of their travel on local roads, compared with the Second
Determination estimate of 35%.
· Rigid trucks and buses travel 30% on local roads compared with a Second
Determination average of 25%.
· Heavy vehicles travel 16% on local roads compared with an average of 5% in the
Second Determination.
These estimates provide a useful indication of the proportion of travel on local and arterial
roads for different vehicle classes, which is vital in apportioning road expenditure to each
vehicle class.
Some commentators believe that the approach used, while a significant improvement on
the previous estimates, will systematically over-estimate use of the larger heavy vehicles
on local roads. This is because the selection of traffic count sites is believed to be likely to
be biased towards sites where there are more of the larger vehicles. Consequently the cost
base used in this determination uses a lower estimate of local road use for the larger
vehicles of 10%.
The NTC has completed a program of work to verify the findings of the study through a
larger survey. The results of this work verified the earlier study's results. However, the
methodology for capturing survey results was still subject to the same over-estimation bias
and the 10% share used in the Third Determination has continued to be used in this
Determination.
B.2 Update of ESA relationships
Measures of deep pavement wear are determined using the Equivalent Standard Axle
(ESA) measure. Average ESA's for the heavy vehicle charging categories used in the
charges determination are calculated using a series of predictive equations developed
through regression analysis relating gross vehicle mass and weigh in motion (WIM) data.
The equations used in the Second Determination were based on the best available
information at the time. However this was considered to be far less comprehensive and
statistically reliable compared to the updated analysis conducted for use in the Third
Determination.
While some stakeholders have outlined how this analysis could be improved, it is still
thought that these results are the most robust available. Accordingly, the NTC proposes to
continue to use the ESA equations used in the Third Determination. More detailed
discussion on the ESA work commissioned by the NTC during the Third Determination
and the results are provided in the following NTC reports: (2005b), (2005d) Appendix E
and (2006a) Section 6.3.
B.3 Cost allocation rules
Heavy vehicle cost allocations are derived through a series of rules. These describe the
basis upon which each of the expenditure categories should be distributed across vehicle
classes. The rules are based on the best available scientific information on the
relationships between road use and road expenditure needs. In a number of cases, these
relationships are not well understood. Nevertheless, compared to other countries, Australia
has gone to some effort to attempt to establish well-founded relationships on which to base
its cost allocation rules.
In addition, some expenditure categories, or proportions thereof, are not considered to be
directly related to vehicle use. However it is thought that they should be recoverable on
the grounds that they are common, fixed or non-attributable costs.
The cost allocation rules are based on the following measurements of vehicle use, which
are either provided by or derived though the SMVU data series discussed in Appendix B:
· VKT: vehicle kilometres travelled;
· ESA-kms: Equivalent Standard Axle kilometres travelled, which is a measure of deep
pavement wear;
· PCU-kms: Passenger Car Unit kilometres travelled, which is a measure of relative
road space requirements based on the size of the vehicle;
· AGM-kms: Average Gross Mass kilometres travelled, which is a measure of the mass
impacts on the road pavement in general.
· HV VKT: Heavy vehicle kilometres travelled, which is a measure of the relative
amount of heavy vehicle travel.
A summary of how these vehicle use parameters inform the cost allocation rules is
provided in Table 7.
In general, road expenditure categories that are highly relevant to heavy vehicle use are
allocated on the basis of ESA-km, AGM-km, PCU-km or HV VKT. Where expenditure is
allocated on the basis of VKT, the light vehicles fleet will absorb most of the apportioned
expenditure since it represents the bulk of total kilometres travelled.
Table 63. Allocation of attributable costs to measures of road use
Percentage of cost that varies with:
Attributable costs
Non-
AGM-
Heavy attrib.
Vehicle (VKT)
Expenditure Category km
VKT PCU-km ESA-km VKT
A Servicing and operating
100 0 0 0 0 0
expenses
B Road pavement and
shoulder maintenance
B1 Routine maintenance 0 38 0 38 0 24
B2 Periodic maintenance 0 10 0 60 0 30
C Bridge maintenance and
rehabilitation 0 0 0 33 0 67
D Road rehabilitation 0 0 45 0 0 55
E Low cost safety/traffic
improvements 80 20 0 0 0 0
F Asset extension/
improvements
F1 Pavement components 0 0 45 0 0 55
F2 Bridges 0 15 0 0 0 85
F3 Land acquisition,
earthworks, other
0 10 0 0 0 90
extension improvement
expenditure
G Other miscellaneous
activities
G1 Corporate services 0 0 0 0 0 100
G2 Enforcement of heavy
0 0 0 0 100 0
vehicle regulations
While there remains some debate on the finer points of these cost allocation rules, the NTC
considers that its judgements on the application of the research outcomes underpinning
them represent the most defensible approach to cost allocation. The Productivity
Commission has acknowledged the acceptability of these judgements, noting that they fall
at the conservative end of the acceptable range. Given this endorsement and the COAG
timetable of delivery of this Determination the NTC proposes to continue with these cost
allocation parameters. Further detail on cost allocation by the NTC is provided the
following Third Determination publications: NTC (2005d) Chapter 5 and NTC (2006a)
Chapter 6.
B.4 Cost allocation results before road train adjustment
The result of this cost allocation process is that total allocated costs come to $8,260 million
with $1,977 million allocated to heavy vehicles and $6,283 million to light vehicles.
From this process unit cost rates for the two measured road types can be calculated as
shown in Table 8. These are calculated by taking the expenditure allocated using each
measure of road use and dividing it by the total amount of road use, based on that measure.
For example, arterial road expenditure allocated using distance travelled (i.e. VKT) on
arterial roads is divided by the total VKT on arterial roads. This gives the cost per
kilometre travelled for arterial roads. The same process was used to calculate unit rates for
other cost allocation parameters, for each of arterial roads, local roads and the total.
It is clear from these results that the expenditure allocated per ESA-km and AGM-km is
greater on local roads than on arterial roads, but expenditure allocated per kilometre
travelled and per PCU-kilometre is lower on local roads than on arterial roads. This is
because some types of vehicles spend more time on local roads than others. Consequently,
the share of total ESA-km, AGM-km, VKT and PCU-km for each vehicle type varies
between local roads and arterial roads. Although the proportion of expenditure allocated
using each parameter is the same on each road type, these shares are allocated between
vehicle types differently because of the difference in local road use.
Table 64. Unit costs for heavy vehicles by road type including 2007/08
budget data
Unit Parameter Arterial Local Total
Vehicle Kilometres Travelled (c/km) 1.39 0.58 1.22
Passenger Car Units (c/PCU-km) 0.37 0.23 0.34
Equivalent Standard Axles (c/ESA-km) 3.41 4.50 3.58
Average Gross Mass (c/tonne-km) 0.12 0.31 0.14
Non-attributable costs (c/km) 2.80 1.10 2.44
B.4 Cost allocation results after road train adjustment
The allocated cost results above are modified marginally to accommodate some special
circumstances concerning road trains which are explained in detail below. The net result is
that there is re-distribution of total allocated costs with heavy vehicle allocated cost falling
by $24 million to $1,953 million and light vehicle allocated cost increasing by $24 million
to $6,307 million.
B.4.1 Adjustment for road train travel on unsealed roads
The $1,977 million of allocable heavy vehicle expenditure is adjusted to take account of
road train travel on unsealed roads. The aggregate model used to allocate costs to vehicle
classes has two limitations that are problematic for road train costs, but are not a significant
factor for other vehicle types. The model treats all roads the same - it does not reflect the
differing factors impacting on costs on unsealed roads; and it does not take account of the
fact that some arterial road expenditure is not warranted by traffic levels but is necessary to
support remote or small regional communities.
The cost allocation process assumes that all roads deteriorate or wear out in the same way
as sealed roads, and that the contribution of different vehicles to this wear is measured by
equivalent standard axles (ESAs). However, unsealed roads deteriorate with the effects of
rainfall, wind, wheel passes and to some extent the tonnes carried. Allocating pavement
wear costs to road trains using ESA-km that include their use of unsealed roads will
therefore overestimate their share of costs.
Road train operators have indicated that a significant amount of their travel is on unsealed
roads. The NTC undertook a process of gathering information from operators and
associations on the extent to which this is so, see NTC (2006a) Appendix F for further
detail on the results of this survey. The values tend to be focused around 30-35%, with
double road trains falling towards the lower end of this estimate, and triple road trains
toward the higher. Therefore, respective reductions of 30 and 35% were made to the costs
allocated to double and triple road trains based on their ESA-km. This expenditure was re-
allocated to the fleet on the basis of vehicle kilometres travelled (VKT). This is consistent
with treating the expenditure that was inappropriately allocated to road trains as either a
servicing and operating cost for the network or as a non-attributable cost. Since light
vehicles travel significantly greater distances in total than heavy vehicles, this re-allocation
resulted in proportionately more costs being allocated to light vehicles than heavy vehicles.
The net result is that heavy vehicle allocated costs are reduced from $1,977 million to
$1,953 million.
In the absence of any better information, the NTC has applied these assumptions in the
development of options for the 2007 Determination.
B.4.2 Road train community service obligation
The issue of dealing with road expenditure in remote areas based on community needs was
raised in the Third Determination consultation process. The NTC sought responses from
road authorities regarding the level of road expenditure that falls into this category. Road
authorities were unable to provide an accurate estimate of this expenditure due to
definitional issues, but available estimates were generally in the range of 2 to 7%. The
NTC used an estimate of 5%to be used in the absence of any firmer indication of the size
of this factor. This was applied as a way of reducing the recoverable allocated costs of
road trains, since these are the only vehicles whose access is restricted such that they travel
exclusively in these areas. This amounts to $7.6 million across the road train vehicle
classes.
Typically, the decision to grant Community Service Obligations is made by central
agencies in light of full information of funding arrangements. Since it is not the role of the
NTC to make funding decisions, it has determined that this $7.6 million should be
recoverable by other vehicles within the fleet, and as such has no impact on the total heavy
vehicle allocated cost.
B.4.2 Adjustments made to allocated cost due to road train factors
The impact of the road train adjustments are to modify attributable costs as shown in Table
9
Table 65. Costs allocated to each vehicle class after road train
adjustments $m
New Total
Old New Non- Allocated
Attributable attributable attributable Cost
Motor cycles 15.7 15.9 33.9 49.7
Passenger cars 1225.1 1240.4 2644.4 3884.8
Passenger vans & Light buses 35.2 35.7 76.0 111.7
4WDs: passenger 278.2 281.7 600.5 882.2
4WDs: light commercial 192.2 193.8 278.0 471.8
Light commercials & Other 331.4 334.3 502.6 836.9
Light rigid trucks 28.6 28.8 35.5 64.4
Rigid trucks
2 axle no trailer: 4.5-7t 19.1 19.2 16.5 35.7
2 axle no trailer: 7-12t 68.6 68.9 44.3 113.2
2 axle no trailer: over 12t 69.9 70.0 22.0 92.0
2 axle with trailer 21.7 21.7 7.2 29.0
3 axle no trailer: 4.5-18t 3.7 3.7 1.4 5.1
3 axle no trailer: over 18t 114.1 114.3 26.4 140.7
3 axle with trailer < 42.5 t 32.8 32.9 7.0 39.9
4 axle no trailer: 4.5-25t 1.2 1.2 0.3 1.5
4 axle no trailer: over 25t 15.6 15.6 3.4 19.0
4 axle with trailer: < 42.5t 2.7 2.7 0.5 3.2
Heavy truck trailers over 42.5t 100.5 100.6 12.1 112.7
Articulated trucks
3 axle rig 1.5 1.5 0.6 2.1
4 axle rig 17.5 17.5 4.7 22.3
3 axle trailer: 5 axle rig 9.9 9.9 1.8 11.7
2 axle trailer: 5 axle rig 37.2 37.3 7.9 45.2
6 axle rig 468.8 469.2 81.1 550.4
B-doubles < 9 axle rig 57.1 57.2 7.3 64.5
B-doubles 9 axles & > 316.4 316.6 36.7 353.3
Double road trains 107.1 90.6 10.8 101.4
Triple road trains 57.4 48.0 4.6 52.6
Artics > 6axle NEC 33.1 33.1 4.8 37.9
Special Purpose 17.7 17.8 2.8 20.6
Buses 2 axle 3.5 to <4.5t 2.5 2.6 2.9 5.4
Buses 2 axle 4.5 to 10.0 t 8.7 8.7 6.8 15.5
Buses 2 axle >10t 48.8 48.9 18.5 67.4
Buses 3 axles 11.1 11.1 3.3 14.3
Articulated 1.3 1.3 0.5 1.7
All Vehicles 3752.7 3752.7 4506.9 8259.6
Heavy Vehicles Only 1643.6 1619.5 333.2 1952.7
B.4.3 Allocated cost by road type
Table 10 shows the breakdown of allocated cost by road type and split between attributable
and non attributable costs.
Table 66. Costs allocated by road type: attributable and non-attributable
costs after road train adjustments in 2007/08 $m
Road Type
Vehicle Type Arterial Local Total
Allocated Expenditure
Light vehicles 4,866 1,441 6,307
Heavy vehicles 1,590 362 1,953
All vehicles 6,456 1,803 8,260
Non-Attributable
Light vehicles 3,389 785 4,174
Heavy vehicles 301 33 333
All vehicles 3,690 817 4,507
Attributable
Light vehicles 1,477 656 2,133
Heavy vehicles 1,289 331 1,620
All vehicles 2,766 987 3,753
B.4.4 Allocated cost changes since the Second Determination
Since the Second Determination there has been considerable change in heavy vehicle
allocated by vehicle type both in nominal and real terms, with most heavy vehicle types
experiencing a real fall in allocated cost, see Table 11.
However, despite most heavy vehicle types having a lower real allocated cost in aggregate
heavy vehicle allocated cost has risen marginally by 3% in real terms, see Table 12. The
reason for this is that where real increases have occurred they have tended to be in vehicle
categories with a relatively large number of vehicles. In particular the overall result is
influenced by the 53% real increase in allocated cost for the 2 axle no trailer rigid truck in
the 7 to 12 tonne GVM range which has by far the largest number of heavy vehicles
accounting for 23% of the total.
The differing movements between categories are due to various factors in particular
movements in annual average VKT, with the increase in annual average VKT of 52% for
the 2 axle no trailer rigid truck 7 to 12 tonne vehicle types, the main factor in the 53%
increase in allocated cost in real terms.
Table 67. Heavy vehicle allocated cost per vehicle - changes since the
Second Determination
Vehicle Class 2007 Det/2nd 2007 Det/2nd
2nd Det. 2007 Det Det Det
$/vehicle
$/vehicle Nominal
real $/vehicle Real change
nominal change
2007/08
Rigid trucks
2 axles
No trailer: 4.5-7t 540 802 751 39% -6%
No trailer: 7-12t 580 861 1,316 127% 53%
No trailer: over 12t 1,540 2,287 2,050 33% -10%
With trailer 1,070 1,589 2,155 101% 36%
3 axles
No trailer: 4.5-18t 1,060 1,574 1,586 50% 1%
No trailer: over 18t 2,470 3,668 3,341 35% -9%
With trailer < 42.5t 5,630 8,361 6,226 11% -26%
4 axles
No trailer: 4.5-25t 2,190 3,252 1,368 -38% -58%
No trailer: over 25t 3,390 5,034 4,162 23% -17%
With trailer: <42.5t 8,490 12,608 12,025 42% -5%
Heavy truck trailers over
42.5t 9,660 14,345 15,634 62% 9%
Articulated trucks
3 axle rig 2,910 4,321 1,614 -45% -63%
4 axle rig 5,160 7,663 5,322 3% -31%
3 axle trailer: 5 axle rig 17,080 25,364 7,624 -55% -70%
2 axle trailer: 5 axle rig 7,970 11,835 9,446 19% -20%
6 axle rig 15,940 23,671 15,729 -1% -34%
B-doubles < 9 axle rig 30,630 45,486 37,883 24% -17%
B-doubles 9 axles & > 36,630 54,396 44,932 23% -17%
Double road trains 32,050 47,594 31,091 -3% -35%
Triple road trains 46,090 68,444 38,192 -17% -44%
Artics > 6axle NEC 18,550 27,547 18,286 -1% -34%
Special Vehicles 2,090 3,104 1,670 -20% -46%
Buses
2 axle
4.5 to 10.0 t 850 1,262 1,304 53% 3%
>10t 2,500 3,713 3,449 38% -65%
3 axles 5,950 8,836 6,476 9% -61%
Articulated 4,620 6,861 3,909 -15% -6%
Table 68. Summary of heavy vehicle allocated cost changes since the
Second Determination
2007
Second Determination Determination Change
($m ($m real
nominal terms ($m) Nominal Real
Costs terms) 07/08
Total Road Agency Expenditure 6,423 9,538 12,347 92% 29%
All Vehicle Allocated Costs 4,570 6,786 8,260 81% 22%
Attributable Costs 1,860 2,762 3,753 102% 36%
Non-Attributable Costs 2,710 4,024 4,507 66% 12%
Heavy Vehicle Allocated Costs 1,283 1,905 1,953 52% 3%
Attributable Costs 1,065 1,582 1,620 52% 2%
Non-Attributable Costs 218 324 333 53% 3%
Table 13 shows the changes in some of the relativities between various aspects of allocated
costs since the Second Determination.
Table 69. Key changes in proportions of costs allocated since the Second
Determination
Second 2007
Determination Determination
All vehicle allocated costs/total road expenditure 71% 67%
All vehicle attributable costs/all vehicle allocated costs 39% 45%
Heavy vehicle allocated costs/all vehicle allocated costs 28% 24%
Heavy vehicle attributable costs/heavy vehicle allocated costs 83% 83%
METHODOLOGY FOR CALCULATING CHARGE RECOVERY
Meyrick and Associates were asked to assess the NTC and ATA methodologies for
calculating heavy vehicle charge revenues. The revenue estimate is compared against the
expenditure estimate to determine whether heavy vehicle charges over or under recover
expenditure. The remainder of this section is the final Meyrick report which NTC in
response to the request.
Introduction
The prime focus of this study is on explaining the differences between the NTC and ATA
approaches to heavy vehicle charge revenue estimates and making an assessment of which
approach is more valid.
The ATA put forward two approaches in response to the NTC Heavy Vehicle Charges
Draft RIS. The discussion of figures and methods outlined in this study relate to these.
The initial approach was provided to the NTC (in the form of a spreadsheet) prior to the
ATA's formal submission. This is referred to as `the initial approach'. The approach
discussed in the formal ATA submission to the NTC of 8 August 2007 is referred to as `the
submission approach'.
In the initial approach and, it is assumed in the submission approach, the ATA uses the
cost allocation base that is the preferred option in the draft RIS. This option includes
adjusted enforcement and has a total heavy vehicle allocated cost of $1,828 million.
However, in the initial approach, the ATA estimates heavy vehicle charge recovery at
$2,118 million compared to the NTC estimate of $1,697 million. This divergence is
reduced in ATA's submission approach to $1,959 million.
As outlined below, the differences are due to the ATA's broader definition of relevant fuel
charge revenues for inclusion, and its methods of indexing charge revenue to put into
2006-07 terms.
This report details:
5. The NTC approach to estimating heavy vehicle charge revenue
6. The ATA approaches to estimating heavy vehicle charge revenue
7. A comparison of the three methods to determine the points at which
divergence in the heavy vehicle charge estimates occur.
8. A critique of the elements of the ATA method which differ from the NTC
method including:
· The inclusion of an estimate of the costs recovered through the now defunct low
sulphur diesel excise in the fuel excise revenue element of the calculation
· The inclusion of petrol excise cost recovery in the fuel excise revenue element of
the calculation
· The inclusion of the metropolitan boundaries excise differential cost recovery in the
fuel excise revenue element of the calculation
· The use of the Road Construction and Maintenance Price Index (RCMPI) or CPI
to index revenue figures.
· NTC approach to estimating heavy vehicle charge revenue
In determining heavy vehicle charge revenue the NTC:
· takes the road usage data for the year that falls in the middle of the cost allocation
period -- in 2007, the arterial road expenditure period was 2000/1 to 2006/07 and
thus the middle year was 2003/04
·
multiplies 2003/04 road usage data by current registration and fuel charges of
19.633 cents per litre28 to determine revenue estimate in 2006/07 prices.
The 2006/07 heavy vehicle charge recovery in total equals $1,697 million, comprised of
$558 million in charges from registration and $1,109 million in fuel charges.
ATA initial approach to estimating heavy vehicle charge revenue
Revenue from fuel
In addition to the diesel excise cost recovery amount (calculated by taking 03/04 vehicle
profile fuel consumption, multiplied by the proportion of heavy vehicles using diesel
(98.25%), multiplied by the diesel excise recovery amount, which is as in NTC method,
19.633 cents per litre (for 2003/04)). the ATA added the following elements to determine a
nominal fuel cost recovery figure for the year ending October 2003/04:
· A petrol excise cost recovery amount (calculated by taking 03/04 vehicle profile
multiplied by the proportion of heavy vehicles using petrol (1.26%), multiplied by
the general excise rate of 38.143 cents/litre)
· A low sulphur diesel excise differential cost recovery (calculated by assuming 50
% of all diesel sold during the period of the differential (July 2003 to June 2006)
in question was low sulphur diesel (year ending 31 October 2005)
· A `metropolitan boundaries excise differential cost recovery' (estimated at $130
million in 06/07) derived from the cost of removing the revenue measure
calculated by the Australian Government.
Revenue from vehicle registrations
To determine heavy vehicle charge revenue, the ATA combined registration revenue for
the year ending October 03/04, and fuel charges for the year ending October 03/04 (as
described above), and indexed this by RCMPI to determine revenue estimate in 2006/07
prices.
Under this method, the 06/07 heavy vehicle charge recovery in total equals $2,118 million
comprised of $662 million in charges from registration and $1,456 million in fuel charges.
28
Since March 2001, the diesel excise cost recovery amount has been the net of the general excise rate of 38.143
cents/litre less the heavy vehicle diesel fuel rebate of 18.51 cents/litre = 19.633 cents/litre.
ATA submission approach of estimating heavy vehicle charge revenue
Following advice from the Allen Consulting Group, the ATA made the following changes
to the initial approach as described above:
· The RCMPI was replaced by the CPI in order to index the year ending October
03/04 usage data
· A `petrol excise cost recovery amount' was incorporated into the $130 million
(2006/07) cost recovery amount for the metropolitan vehicles exempted from the
on-road diesel grant.
This reduces the total 06/07 heavy vehicle charge recovery to $1,959 million, comprised of
$617 million in charges from registration and $1,342 million in fuel charges.
Comparison of methods
Figure 18and Figure 19 illustrate the points in the NTC and ATA approaches where the
value of the revenue estimate differs. Comparing Figure 18 with Figure 19 reveals the
changes between the ATA's initial and submission approaches.
Figure 32. Figure 2 NTC approach contrasted with ATA initial approach
Figure 33. NTC approach contrasted with ATA submission approach
Critique
The ATA approach results in significant divergences between its heavy vehicle charge
recovery figures and those of the NTC. The elements of divergence that demand critical
attention are:
· The inclusion of an estimate of the costs recovered through the now defunct low
sulphur diesel excise in the fuel excise revenue element of the calculation
· The inclusion of petrol excise cost recovery in the fuel excise revenue element of
the calculation
· The inclusion of the metropolitan boundaries excise differential cost recovery in
the fuel excise revenue element of the calculation
· The use of the Road Construction and Maintenance Price Index (RCMPI) and the
CPI to index revenue figures.
Inclusion of low sulphur diesel cost recovery charge
The NTC has sought previous advice regarding this issue (van Geldermalsen, May 2007),
which concludes that the inclusion of the cost is inappropriate and inconsistent with the
objectives of the NTC pricing work because:
3. the objective of the excise differential was to encourage the early production
and consumption take-up of low-sulphur diesel. The government mandated
the use of low sulphur diesel ( sulphur content of 50ppm) for its
environmental benefits over traditional diesel fuel sulphur content standards
(sulphur content of 500ppm). As such the differential supports environmental
objectives and provides support for industry in a transitional phase. In other
words, the differential is not related to recovery of road expenditure. In fact,
in announcing the measure the then Minster for Environment and Heritage Dr
David Kemp noted "This is the first time that government excise credits have
been directly tied to environmental performance," (Federal Minister for the
Environment and Heritage 2004).
4. This was a transitional charge only and was dissolved as of 1 January 2006.
Therefore, using it within a base that determines future charges is
inappropriate.
It is our view that these arguments are both sound.
Furthermore, it would be inappropriate for the 2007 Determination to incorporate into the
revenue base revenue which is related to an environmental externality, given the COAG
road reform plan to review PAYGO and the application of externalities being undertaken
post this Determination (NTC, 2007).
Under the current ATA methodology this charge is only incorporated into the cost
recovery side of the charging equation. If it could be justified that the sulphur diesel cost
recovery charge was related to the provision of infrastructure, and we argue above that it
cannot, and then the argument could follow that the value of sulphur emissions should be
added to the allocated cost base. A first cut estimate is outlined in Table 36. In this
estimate the cost of high sulphur diesel emissions is calculated at approximately $1 million
in the inner areas of larger capital cities (06/07) whilst the use of ultra low sulphur diesel
reduces this figure tenfold to approximately $100,000.
Table 70. Calculation of the value of sulphur emissions
Band 1* Band 2 Band 3 Band 4
06/07 AUD$ per $1,033,665 $397,843 $54,329 $4542
100 million litres of
high sulphur diesel
(500ppm) used
06/07 AUD$ per $103,366 $39,784 $25,433 $454
100 million litres of
ultra low sulphur
diesel (50 ppm)
used
* Inner areas of larger capital cities (Sydney, Melbourne, Brisbane, Adelaide and Perth).
Outer areas of large capital cities.
Other urban areas, including other capital cites (Canberra, Hobart and Darwin) and other urban
areas
Non-urban areas.
Worked example (Band 1 High sulphur diesel $ per 100,000,000)
The worked example below outlines the method used to determine Band 1 $ per hundred million
litres of high sulphur diesel used
Step Assumption Result Numeric
1 Determine pollutants from All pollutant is in the form of SO2
Sulphur
2 Determine sulphur content of 1 Using the atomic weight of 0.5
tonne of pollutant sulphur (32) and molecular weight
of oxygen (32), 0.5 tonne of
sulphur results in 1 tonne of
sulphur dioxide.
3 Determine equivalent tonnage Sulphur content of 500ppm 1000
of fuel for tonnage of Sulphur
4 Determine equivalent cost for a Using banded health costs of 0.01138
kg of fuel Sirikijpanichkul, A, Iyengar, M and
Ferreira L (2006)**
5 Determine cost in 2003 AUD Assume diesel density of 0.835 0.95023 cents per litre
per litre of fuel grams per milliliter as per 03/04 prices
Apelbaum 2005)
6 Index to 2006/07 Use CPI increase in absence of 1.034 cents per litre
further analysis of 06/07 prices
appropriateness of index
7 Convert cents per litre to $ per $1,033,665 Dollars per
hundred million litres 100 million
litres 06/07
prices
**Assumed Unit Health Costs for Pollutant Emissions in 2003 AUS $ per Tonne of SOx from Band 1 $11,380
Sirikijpanichkul, A, Iyengar, M and Ferreira L (2006)
Band 2 $4,380
Band 3 $2,800
Band 4 $50
Even if this method of calculation is considered appropriate, we argue that the temporal
nature of the excise differential (2004-2006) and the fact that the cost of sulphur emissions
has been effectively external to the operational decisions for the history of pricing apart
from 2004-06 results in it being inappropriate to retrospectively implement a value on the
allocated cost base.
Treatment of petrol fuelled heavy vehicles and metropolitan heavy vehicles
less than 20 tonnes
It is our understanding that the ATA initial approach of incorporating the petrol excise cost
recovery differs from the NTC in that it multiplies the petrol driven heavy vehicle fuel
consumption by the general excise rate of 38.143 cents per litre, rather than the NTC
excise cost recovery amount of 19.633 cents per litre. In its working spreadsheet the ATA
notes that this approach is used because `prior to 1 July 2006 petrol (sic) was not eligible
for the on-road diesel grant'.
The ATA has similarly argued that the cost recovery from fuel excise should also
incorporate a particular line to account for the revenue received from metropolitan heavy
vehicles less than 20 tonnes, given that they were not eligible to receive the 18.51 cents per
litre rebate. To estimate this element ATA has utilised a figure of $130 million for the
2006/07 year, a figure sourced from a Federal Government 2004 estimate of the reduction
in Federal Government revenue that would occur by incorporating these vehicles into the
rebate scheme.
Providing or not providing a rebate is a government taxation issue rather than a road
pricing issue per sé. The diesel rebate of 18.51 cents per litre is effectively a rebate of a
tax on diesel fuel to heavy vehicle operations. Whether the government chooses to allow
some vehicles to request a rebate while excluding others, in itself does not change the
agreed element of the fuel cost that is attributable to road costs (i.e., the 20 cents agreed to
as the fuel charge in the Second Determination which, given lack of indexation, has fallen
to the nominal figure 19.633 cents.)
Further to this argument is the fact that, like the sulphur diesel rebate, these rebate
exemptions only applied within the period of the determination. The inclusion of temporal
and historic exemptions does not improve the calculation of future heavy vehicle recovery
levels.
Although the treatment of the petrol excise issue changes in the ATA Submission approach
(whereby they appear to incorporate the petrol excise revenue estimate within the total
estimate of $130 million that they previously had for the metropolitan heavy vehicles) the
arguments above still hold.
Indexation of fuel charges
Although the current annual adjustment process allows for a certain level of indexation of
vehicle registration, the fuel charge has not been revised since agreed to in the second
determination. This charge of 20 cents has decreased in both nominal and real terms since
the second determination. Therefore, it can be argued that determining a fuel charge and
then using a price index to bring it to 2006/07 prices is highly inappropriate.
Using the RCMPI as an index
In its initial approach the ATA argues that the use of the RCMPI to index nominal cost
recovery values for the year ending October 2004 into 2006-07 prices is appropriate, given
that this index is utilised in the road expenditure side of the pricing determination.
Therefore, it argues, road costs and heavy vehicle revenue ought to be indexed using the
same approach.
It is our view that the use of the RCMPI to index any of the revenue elements is
inappropriate. The RCMPI does not reflect the change in the real value of money, nor is it
an index that tracks actual change in the cost of fuel or vehicle registration costs vis-à-vis
the other costs incurred by heavy vehicle transport operators.
A comparison of using the RCMPI's predecessor, the Road Construction Price Index
(RCPI), to adjust heavy vehicle registration charges, was undertaken in the development of
the Annual Adjustment process. It was found that of six options considered (including the
current `Adjustment formal approach') it was the least favourable across a number of
equity and efficiency objectives (NRTC, 2001).
The NTC method of indexation of vehicle registration charges through the annual
adjustment process is capped at the rate of CPI (and has a floor of current nominal
registration charges for each vehicle type). This method is considered more appropriate
and was endorsed at the meeting of the Australian Transport Council in May 2001, where
it was agreed that heavy vehicle registration charges would be adjusted annually by a
formula based on changes in road expenditure, modified to reflect changes in road use by
heavy vehicles.
Using CPI as an index
In the ATA submission approach the RCMPI is replaced with the CPI as index method for
both vehicle registration and fuel excise revenue. In calculations undertaken by the NTC it
was found that this indexing method yields over-estimates of the 2006/07 revenue for both
fuel excise and vehicle registration costs. In terms of fuel, the ATA submission approach
yields a road user charge of 21.143 cents. This is not in line with the actual value of 19.633
cents. As discussed in section 0, the application of any index on such a real value figure is
economically inappropriate and, in this case inflates the charge recovery levels
significantly above those in the NTC Method.
In terms of the vehicle registration the application of the CPI index on 2003/04 figures
outstrips the pace of the real increase in registration under the annual adjustment formula.
Conclusion
In critiquing the ATA approaches to estimating heavy vehicle charge recovery this paper
finds that:
· It is inappropriate to incorporate an estimate of the costs recovered through the
now defunct low sulphur diesel excise in the fuel excise revenue element of the
calculation, given the temporal nature of the element, the fact that it is not related
to road construction or maintenance and the COAG direction that this
determination should not incorporate externality costs.
· The ATA approach of incorporating revenue from the metropolitan boundaries
excise and the petrol excise cost recovery in the fuel revenue element is not
justified, given that the agreed to element of the fuel revenue that is related to the
cost of road provision is 19.633 cents.
· The ATA use of the Road Construction and Maintenance Price Index (RCMPI) or
CPI to index either the vehicle registration or fuel revenue does not result in a
more accurate representation of the actual revenue accrued from these charges
than the NTC approach. This is particularly the case with fuel revenue which has
not been inflated with price movements over the period of the determination.
THE NTC CHARGING MODAL
D.1 Current structure of charges
The current charging system comprises:
3. a fuel charge levied by the Australian Government through fuel excise (with the diesel
fuel rebate set so that the effective level of excise paid by heavy vehicles matches the
fuel charge agreed through the NTC's processes by the ATC); and
4. annual registration charges that vary by vehicle size (Gross Vehicle Mass), number of
axles and trailer configuration and which are levied by State and Territory governments.
D.2 Major factors that determine heavy vehicle charges within the NTC
charge modal
The pricing principles require that the combination of the fuel charge and annual
registration charges are set so that, on average, each class of heavy vehicle pays its share of
allocated road expenditure minimising under and over-recovery.
The major factors and constraints that influence heavy vehicle charges are summarised in
Figure 3. For each heavy vehicle type an allocated cost is derived which consists of both
an attributable and non-attributable or common cost. That allocated cost is recouped
through both the fuel charge and the registration charge which consists of both a vehicle
and trailer component.
In past Determinations the registration charge on the truck or prime mover was a residual
that resulted from subtracting from allocated cost an independently set fuel charge and
trailer axle charge. However, various constraints applied such as minimum access and
prime mover charges and rules that maintained an appropriate relativity between vehicles
of gradually higher mass and a general rule that no charges were allowed to fall below
current levels. In addition B-doubles were given a subsidy which resulted in over recovery
in aggregate in the 2nd and 3rd Determination with rigid trucks and buses over recovering
and B-doubles under recovering.
In the current Determination some of these constraints have been removed such as the
inability to decrease registration charges whilst other have been added such as all vehicle
types must at least cover their attributable costs and there must be zero over recovery in
aggregate (see the constraints listed in Figure 20). In addition the fuel charge is now
dynamically established within the model but does not change radically from current levels
due to the past structure of charges which has resulted in roughly a third of allocated cost
being distributed to registration and two thirds to fuel. Also, the introduction of
differential trailer charges rather than the same per axle charge for all trailer types has
added a new dimension of flexibility to establishing the best charge mix which covers
attributable costs for all heavy vehicle types.
The fuel charge goes through two main iterations in the first run of the charging model a
fuel charge is derived based on all of the constraints except for the constraint to heave zero
over recovery in aggregate. This provides a fuel charge very close to the final result. Then
a goal seek function is used to achieve zero over recovery which provides the final fuel
charge and registration charges.
Figure 34. Charge modal flow chart
Charging Model Dynamics
Registration Charge
Total
Allocated Trailer charges (by trailer
Costs type and number axles)
Total
Revenue Truck & Prime Mover charges
(Registration
+ Fuel
Attributable Charge) Fuel Charge
Costs
Fuel charge (cents per litre)
CONSTRAINTS
General Registration
· To ensure no cross- · Ensures no cross-subsidisation & relativity
subsidisation each vehicle must · Trucks & prime mover have a min. registration charge of $380
at least recover its attributable
costs (i.e. Total Revenue · Prime Mover charges have a min.registration charge of $1,000
>Attributable Costs) · Some similar vehicle classes have the same truck or prime mover charge
· The over-recovery of total e.g. B-doubles and road trains
allocated costs is set ro zero
ANNUAL ADJUSTMENT
Current annual adjustment methodology
Annual adjustment Options 1 and 2 involve using the current annual adjustment
mechanism (as per the Automatic Annual Procedure for Heavy Vehicle Charges
Regulatory Impact Statement, September 2001). This mechanism adjusts annual charges in
accordance with the main influences on the level of charges, namely: changes in road
expenditure and expected changes in road use (via the number of heavy vehicles and
expected change in their use (VKT)).
This process can be summarised as:
The Annual Adjustment (%) = Road Expenditure Factor + Road Use Factor
The road expenditure factor is the impact on total heavy vehicle cost/vehicle due to a
change in the four different types of road expenditure (arterial urban and rural; and local
urban and rural) whilst the road use factor is the impact on total heavy vehicle
cost/vehicle due to a change in road use. The second part of this equation has traditionally
been represented as "minus the road use factor", in which the road use factor is a positive
value. This is consistent with the equation above since the calculation of the "road use
factor" itself will be a negative number.
The change in road expenditure (%) refers to the change in seven year moving average
road expenditure while "road use" refers to the change in vehicle kilometres travelled and
vehicle numbers.
The annual adjustment calculation relies on having an understanding of the sensitivity of
heavy vehicle cost/vehicle to changes in each of the four types of road expenditure and
also road use.
Therefore, based on the cost allocation model, sensitivity factors are established based on
the impact on heavy vehicle costs of a 1% change in each of these variables - "A" Factors
for the road expenditure types and "B" Factors for road use.
Road Expenditure "A" Factors
Rural Arterial (A1 Factor)
Rural Local (A2 Factor)
Urban Arterial (A3 Factor)
Urban Local (A4 Factor)
Road Use "B" Factors - Vehicle Kilometres Travelled (VKT)
Light Vehicle Km Travelled (B1 Factor)
Heavy Vehicle Km Travelled (B2 Factor)
Road Use "C" Factor - Number of Vehicles
C is set at -1 since a 1% increase in the number of vehicles decreases
the ratio (cost/vehicle) by 1%.
Subsequently, a more detailed outline of the process is outlined below:
Figure 35. Current annual adjustment methodology (developed in 2001)
Road Expenditure Road Use
- Rural (Arterial & Local) - Vehicle Km's Travelled (VKT)
- Urban (Arterial & Local) - Number of vehicles
- Ave km per vehicle
1% Change in 1% Change in
Road Road Use
Expenditure
Impact on Heavy Vehicle (HV) Cost
A "Sensitivity" B "Sensitivity"
Factors Factors
Road Expenditure Factor (REF) Road Use Factor (RUF)
= A1 x Change in Rural = B1 x Expected Change in Light
Arterial Expenditure (%) Vehicle Km Travelled
(VKT) (%) ("D1")
+ A2 x Change in Urban
Arterial Expenditure (%) + B2 x Expected Change in
Heavy Vehicle Km
+ A3 x Change in Rural
Travelled (VKT) (%) ("D2")
Local Expenditure (%)
+ C1 x Expected Change in Number
+ A4 x Change in Urban of Heavy Vehicles (%) ("D3")
Local Expenditure (%)
= Change in HV Cost/Vehicle (%) = Change in HV Cost/Vehicle (%)
From Change in Road Expenditure From Change in Road Use
Annual Adjustment (%)
= REF + RUF = Total Change in HV Cost/Vehicle (%)
The D Factors (D1, D2 and D3) from this annual adjustment equation refer to the expected
change in light and heavy vehicle kilometres travelled and the expected change in the
number of heavy vehicles. The current values for the A and B Factors (as established in the
2001 Determination process) are outlined below:
Figure 36. Current sensitivity factor values
Road Expenditure Factor
A1 Rural Arterial 0.60
A2 Urban Arterial 0.21
A3 Rural Local 0.17
A4 Urban Local 0.02
Road Use Factor
B1 Light Vehicle VKT -0.21
B2 Heavy Vehicle VKT 0.22
In the 2001 Annual Adjustment Procedure, the expected change in Vehicle Kilometres
Travelled and Number of Vehicles was set at:
Light Vehicle VKT Growth
= 70% of GDP = 2.1% p.a. = D1 in Figure Above
Heavy Vehicle VKT Growth
= 80% of GDP = 2.4% p.a. = D2 in Figure Above
Number of Heavy Vehicles Growth
= 1% slower than HV VKT = 1.4% = D3 in Figure Above
GDP = 3.0% p.a.
Updated components using 2007 Determination costing model
New A and B Factors have been generated using the 2007 Determination cost allocation
model by analysing the sensitivity of total allocated costs to changes in road expenditure
and vehicle kilometres travelled (VKT). The C Factor remains equal to -1.
D Factors (D1, D2 and D3) rely on the relationships between:
The growth rate of light and heavy vehicle VKT and the growth rate of GDP.
The number of heavy vehicles growth rate and the growth rate of heavy
vehicles VKT.
Based on historical data for VKT, number of vehicles (sourced from ABS Survey of Motor
Vehicles Use - SMVU) and Gross Domestic Product (GDP), cumulative average growth
rates (CAGR) values have been generated for the period 1998-2005 (refer to Table 37).
GDP refers to GDP chain volume, which is the ABS method of establishing real GDP
(sourced from ABS National Accounts). Cumulative Average Growth Rate (CAGR) is the
underlying annual compound growth rate over this period based on the starting and ending
values of these variables. The period (1998-2005) was chosen since 1998 is the start of the
new SMVU methodology based on annual surveys.
Table 71. Cumulative average annual growth rates to generate D factors
CAGR
Cumulative Annual
Growth Rate (1998-
2005)
Light Vehicles VKT 3.03%
Heavy Vehicles VKT 2.48%
Number of Heavy Vehicles 0.80%
GDP Chain Volume (Seasonally Adjusted) 3.35%
New values for D1 and D2 have been calculated based on this table:
D1 = (CAGR for Light Vehicle VKT)/(CAGR for GDP)
= 3.03%/3.35% = 90% (rounded)
D2 = (CAGR for Heavy Vehicle VKT)/(CAGR for GDP)
= 2.48%/3.35% = 74% (rounded)
D3 = (CAGR for Number of Heavy Vehicles)/( CAGR for Heavy Vehicle VKT)
= 0.8%/2.48% = 32% (rounded)
A comparison of the "Old Values" for D1, D2 and D3, which were developed part of the
2001 Annual Adjustment Procedure, to the new values, as calculated above, can be seen
below:
Figure 37. Comparison of old and new D values
Old Values New Values
Q Light Vehicle VTK Growth as % of GDP 70% 90%
R Heavy Vehicle VTK Growth as % of GDP 80% 74%
S GDP Growth 3% 3.35%
T=QxS D1 Light Vehicle VTK Growth 2.1% 3.0%
U=RxS D2 Heavy Vehicle VTK Growth 2.4% 2.5%
V Number of Heavy Vehicles Growth as % of VTK Growth 32%
W Number of Heavy Vehicle Growth % Slower than VTK Growth 1%
D3 Growth in Number of Heavy Vehicles 1.4% 0.8%
Old Values = U - W
New Values = U x V
The results of these new A, B and D Factors is summarised below. The Road Use Factor
becomes set equal to -1.0% based on the new values for D1, D2 and D3.
Figure 38. New annual adjustment formula
Road Expenditure Factor (REF) Road Use Factor (RUF)
= 0.454 x Change in Rural = - 0.32 x 3.0% Expected Change
(A1) Arterial Expenditure (%) (B1) (D1) in Light Vehicle Km
Travelled (VKT) (%)
+ 0.362 x Change in Urban
(A2) Arterial Expenditure (%)
+ 0.32 x 2.5% Expected Change in
(B1) (D2) Heavy Vehicle Km
+ 0.119 x Change in Rural Travelled (VKT) (%)
(A3) Local Expenditure (%)
+ - 1.0 x 0.8% Expected Change in
+ 0.064 x Change in Urban (C1) (D3) Number of Heavy
(A4) Local Expenditure (%) Vehicles (%)
= Change in HV Cost/Vehicle (%) = -1.0% = Change in HV
From Change in Road Expenditure Cost/Vehicle (%)
Annual Adjustment (%)
= REF + RUF = Total Change in HV Cost/Vehicle (%)
Note: C1 is set = -1% since number of vehicles is on the denominator of HV Cost/Vehicle
Note that the A Factors have been set based on three decimal places since this is required
to ensure that the sum of the A Factors adds up exactly equal to 1 (which is not the case at
two decimal places).
Therefore, the new formula can be simplified to:
Figure 39. New simplified annual adjustment formula
Annual Adjustment
= 0.454 x Change in Rural
Arterial Expenditure (%)
+ 0.362 x Change in Urban
Arterial Expenditure (%) Road
Expenditure
+ 0.119 x Change in Rural Factor
Local Expenditure (%)
+ 0.064 x Change in Urban
Local Expenditure (%)
Road Use
- 1.0% Factor
A comparison of the "old" (2001 Determination) and new A Factors and Road Use Factor
is outlined below:
Figure 40. Comparison of old and new adjustment factors
Old Values New Values Change
Road Expenditure Factor (REF)
A1 Rural Arterial 0.60 0.454 -0.15
A2 Urban Arterial 0.21 0.362 0.15
A3 Rural Local 0.17 0.119 -0.05
A4 Urban Local 0.02 0.064 0.04
Road Use Factor (RUF) -1.5% -1.0% 0.5%
Finally, it is important to clarify the distinction of rural arterial compared to urban arterial
expenditure. This is relevant to two types of expenditure data:
3. Enforcement expenditure
4. Other non-allocated expenditure
In terms of enforcement expenditure, the recommended option in the 2007 determination is
to use partial enforcement. In this circumstance, the following adjustments will need to be
made to allocate total enforcement expenditure into rural arterial versus urban arterial
expenditure categories (if jurisdictional data has not already done so):
c. A revised or partial enforcement cost is determined by multiplying the total
enforcement cost by 59.5%. This proportional adjustment of 59.5% is equal to the
2007 determination proportion of partial enforcement ($66m) to total enforcement
($111m).
d. The revised or partial enforcement cost is then allocated on the basis of 53% rural
arterial and 47% urban arterial. This proportional allocation is based on the 2007
determination split of $35m rural arterial and $31m urban arterial.
In terms of non-enforcement expenditure that has not been allocated by jurisdictions to
rural arterial versus urban arterial, the allocation of this expenditure will be made on the
basis of 50% rural arterial and 50% urban arterial. These proportions are consistent with
those used in the 2007 determination for expenditure that has not been allocated by
jurisdictions.
COST BASE FOR THE ANNUAL ADJUSTMENT
As explained in Appendix C, the annual adjustment formula includes the impact of
changes in seven year moving average road expenditure (%) by expenditure type (arterial
urban and rural; and local urban and rural). This means that changes in road expenditure
are measured as percentage changes between the average of the seven most recent years of
expenditure compared to the equivalent period one year later.
Therefore, as an example, the change in road expenditure (%) for each expenditure type for
2008/09 would equal the following:
Change in 7 Year Average of Road Expenditure from 2001/02 to 2007/08 (A)
Road = - 1 X 100
Expenditure (%) 7 Year Average of Road Expenditure from 2000/01 to 2006/07 (B)
This assumes for the 2008/09 annual adjustment that only road expenditure data up to
2007/08 is available (for all types of road expenditure).
Seven versus three year average of road expenditure
The annual adjustment formula has traditionally been calculated using a three year average
of expenditure. The move to a seven year average is because the NTC costing model under
the 2007 Determination will also be based on a seven year average. This should lead to a
less volatile change from year to year in terms of charges. This is especially the case, under
the three year average, since there has been a large increase in arterial expenditure over the
last three years which would have led to large increases in charges in the short term.
Real versus nominal road expenditure
The annual adjustment formula has traditionally been calculated using an average of
nominal expenditure. However, in order to be consistent with the PAYGO approach to
calculating the cost base, based on a seven year average of real expenditure, and the
COAG directive to fully recover costs in aggregate the most appropriate approach is to use
an average of real expenditure. The real expenditure approach involves establishing the
base year of the real expenditure series to be the most recent year of the seven year average
(an example is outlined below).
There is a noticeable difference between using either a seven year average of nominal
expenditure compared to real expenditure. An example of this can be seen by calculating
the 2008/09 adjustment for rural arterial expenditure under the following assumptions:
The most recent available year of road expenditure data is 2007/08.
Nominal rural arterial road expenditure grows by 5% from 2006/07 to 2007/08.
RMCPI (which is used to create real expenditure) increases by 0.82 times the
road expenditure growth of 5% (which is consistent with historical cumulative
average growth rates across all road types).
This scenario results in a change in arterial rural expenditure of 4.9% using a seven year
average of nominal expenditure compared to 4.0% using a seven year average of real
expenditure (see below). Note that under the real expenditure approach the first series (row
A) is based on 2006/07 dollars and the second series (row B) is based on 2007/08 dollars.
Calculation of change in rural arterial expenditure %
USING NOMINAL EXPENDITURE
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Average
1 2 3 4 5 6 7
2,632 2,634 2,433 2,600 3,028 2,950 3,436 2,816 B
1 2 3 4 5 6 7
2,634 2,433 2,600 3,028 2,950 3,436 3,608 2,955 A
% Change = 4.9% (A/B-1)
USING REAL EXPENDITURE
2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 Average
1 2 3 4 5 6 7
3,483 3,409 2,988 3,053 3,337 3,040 3,436 3,249 B
1 2 3 4 5 6 7
3,549 3,111 3,179 3,474 3,165 3,577 3,608 3,380 A
% Change = 4.0% (A/B-1)
ANNUAL ADJUSTMENT - MONITORING OF CHANGES IN KEY VARIABLES
This section outlines the types of measures that should be monitored as part of the annual
review process.
The monitoring process has two broad objectives:
3. Objective 1: To highlight when a vehicle class is no longer recovering its
attributable costs. In this circumstance, the vehicle class is being cross-subsidised
by other vehicles.
4. Objective 2: The ongoing validity of the assumed values for the "D" road use
factors which relate to growth in light and heavy vehicle VKT and growth in heavy
vehicle numbers. The costing model uses 7 year trend road use data to establish
data on VKT and vehicle numbers. This may diverge over time from the assumed
"D" road use factors.
It is important to note that this analysis is intended to highlight some of the estimated
impacts of different variables on charges under certain scenarios and it should be
recognised that the costing and charging models are dynamic in nature with many different
variables interacting with each other to produce an outcome. Therefore, the sensitivity
analysis in the following sections is intended to be indicative of the likely impact on
charges of changes in key variables.
A more detailed discussion of the types of analysis involved as part of achieving objective
1 will be analysed in more detail in the following section.
Key variables
Three key variables have been identified to be monitored. These variables are:
Road expenditure
Vehicle kilometres travelled (VKT)
heavy vehicles
light vehicles
The number of heavy vehicles
Variations in average gross mass (AGM) and fuel consumption have been excluded from
this list since they are not considered to have a substantial impact on of heavy vehicle
charges as the cumulative average growth rate of these variables is typically less than 1%
in magnitude.
Recovery of attributable costs
If the key variables vary by a certain amount this may result in a vehicle class is no longer
recovering its attributable costs. In order to determine the likelihood of this occurrence, it
is necessary to display to the over-recovery above the attributable cost based on the
proposed registration and fuel charges. Table 38 illustrates that some vehicles, such as B-
doubles are just recovering their attributable costs (0.1% above the attributable cost for B-
doubles). This table highlights those vehicles that contribute 80% of the total VKT of all
vehicle classes, accounting for the top nine vehicle classes.
Most of the other top nine vehicles have a reasonable distance between the attributable cost
and total revenue from registration and fuel charges. For example, single axle articulated
trucks have a total revenue for fuel and registration that is 10.9% above the attributable
cost.
Table 72. Over-recovery of attributable costs
2007 Determination
Vehicle Classification Over-recovery of VKT - Cumul-
Attributable Cost Distance ative %
Travelled
('000)
1 Articulated trucks: single trailer: 6 axle rig 15.0% 3,110,748 22.6%
2 Rigid trucks: 2 axle: no trailer: GVM 7.0 - 12.0 tonne 88.7% 1,949,291 36.8%
3 Articulated trucks: B-double: 9+ axle rig 0.1% 1,407,240 47.0%
4 Rigid trucks: 3 axle: no trailer: GVM over 18.0 tonne 20.4% 1,160,611 55.5%
5 Rigid trucks: 2 axle: no trailer: GVM over 12.0 tonne 26.2% 968,177 62.5%
6 Buses: 2 axle: GVM over 10.0 tonne 49.2% 812,349 68.4%
7 Rigid trucks: 2 axle: no trailer: GVM 4.5 to 7.0 tonne 155.0% 725,115 73.7%
8 Rigid trucks: Heavy Truck/Trailer Combination 12.0% 533,244 77.6%
9 Articulated trucks: Road train: 2 trailers 12.2% 414,314 80.6%
TOP 9 (80% of total VKT) 11,081,088
Based on Table 38, of the top nine vehicle classes, the B-double is most susceptible to
changes in the key variables impacting the ability of this vehicle class to recover
attributable costs. With this in mind, the sensitivity of over-recovery for a B-double vehicle
has been analysed based on changes in its VKT and number of vehicles at varying levels of
road expenditure.
Two different types of scenarios have been undertaken:
· Scenario 1: The VKT and number of vehicles varies by the same percentage for all
vehicles at different levels of variation in road expenditure.
· Scenario 2: Only B-Double VKT and number of vehicles is varied (with road
expenditure held constant), assuming all other vehicles have constant VKT and
number of vehicles.
Scenario 1: Constant changes across the vehicle fleet
This scenario explores the impact of the same change in the key variables across all vehicle
classes. In particular, this scenario assumes that all vehicles experience the same
proportional change in VKT and number of vehicles at differing levels of change in road
expenditure. The results of this scenario are outlined in Table 17. For example, if there is a:
5% increase in heavy vehicle VKT (same change for all vehicles)
5% increase in light vehicle VKT
5% increase in number of vehicles
10% increase in road expenditure
the impact of these changes is to increase B-double over-recovery from 0.1% to 4.1%. The
reason for the increase in over-recovery is as follows:
Total revenue from fuel and registration charges per vehicle increases
as a result of an annual adjustment of 9% (that is, (10%-1%) as per
due to changes in road expenditure.
Attributable costs increase by approximately 4.8%. This is roughly the
difference between the increase in road expenditure (10%) and the
increase in number of vehicles (5%).
Therefore, the difference between the increase in total revenue (9%)
and attributable costs (4.8%) is approximately equal to the increase in
over-recovery of around 4%.
Therefore, in summary, positive percentage figures in Table 39 indicate that there is over-
recovery of attributable costs for B-doubles. This table highlights some interesting results
for the annual monitoring review:
Higher levels of VKT for all vehicles should result in more over-
recovery for B-doubles but lower VKT should result in under-
recovery of attributable costs.
One factor driving this impact is that the road use factor is set at 1%
(as per figure 4) in the annual adjustment formula based on the
assumption that heavy vehicle VKT increases by 2.5%, light vehicle
VKT increase by 3% and number of vehicles increases by 0.8%.
However, if the light vehicle to heavy vehicles vary in the future a
different proportions to these assumed variations, the impact on over-
recovery will be different. Therefore, the relative change in light to
heavy vehicles should be monitored.
Table 73. Over-recovery of B-double attributable cost with constant
variation in key variables across vehicle classes
Change Change in Road Expenditure
Heavy vehicle Light vehicle No of Vehicles -10% -5% 0% 5% 10%
VKT VKT
-15% 0% 0% -6.6% -6.6% -6.5% -6.5% -6.4%
-10% 0% 0% -4.8% -4.7% -4.7% -4.6% -4.6%
-5% 0% 0% -2.9% -2.9% -2.8% -2.8% -2.7%
A 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 0% 0% 0.8% 0.9% 0.9% 1.0% 1.0%
10% 0% 0% 2.7% 2.8% 2.8% 2.9% 2.9%
15% 0% 0% 4.6% 4.7% 4.7% 4.8% 4.8%
-15% -15% 0% -9.3% -9.2% -9.2% -9.1% -9.1%
-10% -10% 0% -6.5% -6.5% -6.4% -6.4% -6.3%
-5% -5% 0% -3.8% -3.7% -3.7% -3.6% -3.6%
B 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 5% 0% 1.7% 1.7% 1.8% 1.8% 1.9%
10% 10% 0% 4.4% 4.5% 4.5% 4.6% 4.6%
15% 15% 0% 7.2% 7.2% 7.3% 7.3% 7.4%
-15% -15% -15% -15.9% -15.8% -15.8% -15.8% -15.7%
-10% -10% -10% -11.0% -10.9% -10.9% -10.8% -10.8%
-5% -5% -5% -6.0% -5.9% -5.9% -5.9% -5.8%
C 0% 0% 0% -1.1% -1.0% -0.9% -0.9% -0.9%
5% 5% 5% 3.9% 4.0% 4.0% 4.1% 4.1%
10% 10% 10% 8.8% 8.9% 9.0% 9.0% 9.1%
15% 15% 15% 13.8% 13.9% 13.9% 14.0% 14.0%
A Variation in Heavy Vehicle VKT with no change in Light Vehicle VKT and number of Vehicles
B Same Variation in Heavy Vehicle and Light Vehicle VKT with no change in number of Vehicles
C Same Variation in Heavy Vehicle and Light Vehicle VKT and number of Vehicles
Scenario 2: Only B-double road use is varied
This scenario explores the impact of a change in road use data for only B-doubles. In
particular, this scenario assumes that only B-Double VKT and number of vehicles is
varied, assuming that VKT and number of vehicles for all other vehicle classes is constant.
The results of this scenario are outlined in Figure 10. For example, if there is a:
40% increase in B-double VKT, and a
40% increase in B-double number of vehicles
No change in road expenditure
No change in road use data (e.g. VKT) for other vehicle classes
the impact of these changes is to increase B-double over-recovery from 0.1% to
approximately 7.8%. The reason for the increase in over-recovery is as follows:
Total revenue from fuel and registration charges per vehicle remains
unchanged (since average kilometres has not changed as VKT and
number of vehicles have increased in the same proportion).
Attributable costs fall by over 7%.
This increase to 7.8% assumes that there is no annual adjustment occurring at the same
time. If we assume that the annual adjustment is 3% the impact on B-double over-recovery
is outlined in Figure 27. The impact of the annual adjustment is to reduce the amount of
over-recovery.
Therefore, if the over-recovery in is negative this indicates under-recovery. This figure
scenario highlights some interesting results for the annual monitoring review:
If B-double VKT is growing but B-double average VKT is increasing
(that is, number of vehicles is constant) it is likely that attributable
costs are increasing for B-doubles and therefore the current charges
will be under-recovering for B-doubles
If B-double VKT is growing but average B-double VKT is constant
(that is, number of vehicles is growing at the same rate as VKT) and
this growth is greater than for other vehicles it is likely that the over-
recovery for B-doubles will be increasing
For monitoring purposes, a vehicle will be considered to be in an under-recovery situation
if the under-recovery is more than 8.5% of attributable costs. The reason for this allowance
is based on the following logic:
Historically, the annual movement in these variables is quite volatile up and
down. This indicates that a one year (trend) decline or increase could be quite
deceptive of the underlying growth, especially since the road use data is
sourced from ABS survey data. Therefore, standard deviation could be used as
an indication of the volatility.
The historical standard deviation of growth in heavy vehicle numbers and VKT
from 1998 to 2005 is 2.5% and 4.4% respectively. Assuming a 95% confidence
interval results in two standard deviations which is equal to 5% and 8.8%
respectively. Therefore, to simplify the analysis if all vehicles (heavy and light)
numbers falls by 5% and VKT falls by 10% this will result in between 6 and
11% under-recovery - the average of which is 8.5%.
Figure 41.Over-recovery of B-double attributable cost with variation in B-
double road use variables
25.0%
Over-recovery of B-double attributable
20.0%
15.0%
10.0%
cost
5.0%
0.0%
-5.0%
-10.0%
Impact with no annual adjustment
Impact assuming annual adjustment of 3%
Change (%)
B-Double VKT -40% -20% 0% 20% 40% 60% 80% 100% -40% -20% 0% 20% 40% 60% 80% 100%
B-Double No of
0% 0% 0% 0% 0% 0% 0% 0% -40% -20% 0% 20% 40% 60% 80% 100%
Vehicles
High productivity vehicles
With the introduction of a revised registration charging schedule, which allows for
modularisation of the trailer component of the registration charge into different
components based on the type and number of axle groups, there is no need for the higher
productivity formula to be used as the basis for establishing a registration charge for new
"higher productivity" vehicle types. Further explanation can be found in section 4.4.4. of
the RIS Volume 1.
However, the higher productivity formula has been used to validate the modular approach
to setting the trailer component of the registration charge, especially for the B-triple
vehicle configuration, which consists of an additional Lead Trailer on a B-Double. In this
context, the higher productivity formula was revised based on feedback received during
public consultations in order to conduct a comparison of the modular approach to the
higher productivity formula approach for the B-triple vehicle.
Therefore, this section outlines the estimation of a registration charge for a B-triple vehicle
under the higher productivity formula taking into account of feedback from the public
consultations, with regard to the input values into the formula (such as annual VKT, ESA
value, PCU value and fuel usage) and other aspects of the formula to ensure that the
registration charge is estimated in a way that is relative to existing vehicle classes whilst at
the same time being simple to calculate.
The allocated cost formula (see below) will still be used as the basis to develop a charge.
However, the following adjustments will be made to address the issue of ensuring that an
appropriate degree of relativity is maintained with existing charges, for similar vehicles
compared to new higher productivity vehicles, and also to ensure than it is relatively
simple to administer:
· The formula inputs relating to AGM tonnes, ESA rate, PCU value and fuel usage
per kilometre will be estimated in a way that ensures an appropriate relativity
with the current charges for a vehicle that is the most similar to the new higher
productivity vehicle and in a way that is simple and precise. The new way of
calculating these input values is outlined below.
· The non-attributable costs for vehicle configurations that have a lead trailer will
be excluded from the higher productivity formula. This is because the current
charges for B-doubles do not include almost all of the non-attributable or
common costs. This adjustment is necessary to ensure that new vehicles that
have a lead trailer (such as a B-triple or a variation of a normal B-double) will
have an estimated registration charge that is appropriately relative to the existing
B-double registration charge.
· The higher productivity formula for new vehicle configurations that have trailer
converter dolly's and consist of two or more trailers will be adjusted to allow for
the CSO subsidy and unsealed adjustment that is made for double and triple road
trains. These adjustments are outlined below.
Allocated cost formula
The allocated cost formula is outlined below:
Allocated cost = [(AGM unit cost*AGM value)
+ (ESA unit cost* ESA value)
+ (PCU unit cost*PCU value)
+ (VKT unit cost)
+ (non attributable unit cost)]
* annual VKT.
The estimation of the different components of this formula is explained below.
Unit costs
The unit costs have been redefined to be dependent on the type of vehicle configuration
according to the following categories:
3. Vehicles that have no trailers (column A in Table 40)
4. Vehicles that have trailers
a. All vehicles excluding those with a lead trailer (e.g. B-double and B-triple)
and road trains (column B in Table 40)
b. Vehicles with a lead trailer (column C in Table 40)
c. Road trains (column D in Table 40)
Table 74. Unit costs for revised formula
Vehicles with Vehicles with Trailers
No Trailers
A B C D
All Vehicles Vehicles with a Road Trains
(Excluding Lead Trailer
Vehicles with a (e.g B-Doubles
Lead Trailer & and B-Triples)
Road Trains)
AGM unit cost 0.142 0.135 0.131 0.141 cents per tonne km
ESA unit cost 3.684 3.510 3.393 2.696 cents per ESA km
PCU unit cost 0.328 0.310 0.302 0.521 cents per PCU km
VKT unit cost 1.200 1.140 1.105 1.579 cents per km
Non-attributable unit cost 2.414 2.300 2.223 2.486 cents per km
Noting the following:
AGM is average gross mass
ESA is equivalent standard axles
PCU is passenger car unit
VKT is vehicle kilometres travelled
These unit costs are still based on the average unit costs derived from the cost allocation
model.
The reason for different unit costs for different vehicle types is because of the desire to
maintain relativity with existing vehicle classes. There is a need to have different unit costs
for vehicles with trailers compared to vehicles with no trailers because the cost of spare
trailers should not to be included in the calculation of the allocated cost.
Other adjustments to costs
In the costing model an adjustment is made to the allocated cost for road trains to take into
account travel on unsealed roads and a 5% community service obligation. As a result, in
order to retain appropriate relativities between new higher productivity vehicles and
existing vehicle classes the following adjustments are recommended to be made for new
vehicles with two or more trailers and trailer converter dolly's:
· The ESA unit cost for road trains is revised to be equal to :
Revised ESA unit cost = ESA cost x (1-0.3)
· The ESA unit cost for road trains is revised to be equal to :
Revised ESA unit cost = ESA cost x (1-0.35)
· The total allocated cost for double and triple road trains is revised to be equal to:
Revised total allocated cost = Total allocated cost x (1-0.05).
Non-attributable cost
The non-attributable costs for vehicle configurations that have a lead trailer (e.g. B-double
and B-triple vehicles) are excluded from the higher productivity formula.
AGM value
In the draft regulatory impact statement it was stated that the AGM value would be
estimated with reference to both laden and unladen tonnes. The draft RIS outlined a
different approach for average utilisation based on level of PBS access and whether
vehicles operated in mining and remote areas and the degree of backloading. However,
based on the objective of providing a clear, administratively simple and reasonably precise
calculation of each input variable, the formula below has been created to calculate the
AGM value for a new higher productivity vehicle.
AGM value in tonnes = (1-0.62) x (Total permitted mass of vehicle)
+ 0.62 x (Tare mass of vehicle)
The weighting factor of 0.62 is an estimate of the average utilisation of heavy vehicles (in
particular, trucks) in terms of space on the truck that is available to carry freight. The
average utilisation has been estimated through the following formula:
Average utilisation = (Proportion of trips that a truck is laden x Proportion
of truck space taken up when truck is laden)
where Proportion of Trips that a truck is laden = 73%, based on a five year average of
SMVU data for trucks
and Proportion of truck space taken up when truck is laden has been estimated at 85%.
Therefore, 73% multiplied by 85% equals 62%.
ESA value.
In the draft regulatory impact statement it was stated that the equivalent standard axle
(ESA) value of the vehicle would be based on a first principle calculation based on:
· The expected distribution of the load across the axles using the 4th power rule
· The averaging of the ESA's that result from the proportion of travel that is fully
loaded, partly loaded and unloaded.
These general statements are still the chosen approach to estimating the ESA value under
the higher productivity formula. However, based on the revised approach to developing a
charge for higher productivity vehicles, a formula to calculate the ESA value has been
developed ensures an appropriate relativity with the ESA values of the existing vehicle
classes. This approach involves estimating the ESA at maximum mass and tare mass
separately and then estimating the overall ESA by giving an appropriate weighting to each
approach (via the 62% fully loaded, 38% no load assumption). This ESA value is then
adjusted to ensure relativity with the existing ESA values used to determine the registration
charges for existing vehicle classes. This adjustment is necessary since the chosen
approach produces higher ESA values, in general, than the predictive formula approach
used in the current costing model.
An alternative approach is to estimate the ESA based on the average mass of the vehicle,
which would involve determining the average mass by axle group. The chosen approach
has been used since it is relatively simple (compared to the alternative approach) since no
assumptions need to be made regarding the average mass of each axle group. However, it
should be noted that because the approach outlined in this section assumes that for 62% of
distance travelled the vehicle is fully loaded, the chosen or revised approach is most
appropriate for vehicles that are fully loaded one way and empty on return.
Therefore, the ESA of the new vehicle will be estimated through the following formula
ESA value = (New Vehicle ESA using SAR Formula /
Closest Like Vehicle ESA using SAR Formula)
x Closest Like Vehicle Model ESA
The ESA of the new and closest like vehicles using the SAR formula is estimated through
the following process:
2. The ESA is estimated based on the vehicle being full 62% of the time ("fully
loaded") and empty 38% ("tare weight") of the time:
ESA = (FL% x ESA with vehicle fully loaded)
+ ((1-FL%) x ESA with vehicle empty)
where FL% = 0.62
5. ESA with vehicle fully loaded is estimated using the standard axle repetition
formula (SAR) with the load mass carried by each axle grouping equal to the
maximum permitted mass for that axle group.
a. The ESA is estimated) (see below) using these masses.
6. ESA with vehicle empty is estimated through the following process:
a. The front axle grouping (steer axle) will have the mass set at 90% of the
maximum permitted load for the steer axle grouping.
b. the total gross mass of all the axle groups is equal to 65% of the total
vehicle permitted axle loading
c. The mass for each of the remaining axle groupings will equal to:
(total gross mass of all axle groups - front axle group mass)
x (maximum permitted load of the axle group/(total
maximum permitted load of all axle groupings for the
vehicle - maximum permitted load of the steer axle group))
d. The ESA is estimated using the standard axle repetition formula (SAR)
(see below) using these masses.
7. The SAR formula is as follows:
i=m
SAR = (Li / SLi )LDE
i=1
where Li = load carried by axle group type i (kN)
SLi = standard load for axle group type i
LDE = 4 = load damage exponent,
m = number of axle groups
8. The standard loads for each axle type is as follows:
Axle/Tyre Type Load
equivalencies
single axle single tyres SAST 5.40
single axle dual tyres SADT 8.16
tandem axle single tyres - twinsteer
TAST (non load sharing) 9.18
tandem axle single tyres - twinsteer
TAST ( load sharing) 9.18
tandem axle dual tyres TADT 13.77
triaxle dual tyres TRDT 18.46
Quad axle with duel tyres QADT 22.50
The closest like vehicle model ESA is set through the following process:
Determine the closest like vehicle to the new higher productivity vehicle by
finding the existing vehicle class whose AGM value is closest to the AGM of the
new vehicle. The reference table used to find the closest like vehicle will depend
on whether the new vehicle has more than one trailer.
If the new vehicle has one trailer or no trailers the relevant reference
table is matching table 1 in Table 41.
If the new vehicle has more than one trailer and has trailer converter
dolly's the relevant reference table is matching table 3 in Table 41.
For all other new vehicles with more than one trailer the relevant
reference table is matching table 2 in Table 41.
The ESA value for the closest like vehicle is also set out in Table 41.
Table 75. Closest like vehicle matching tables
Matching Table 1
Existing Vehicle Classes AGM ESA
Value Value
Rigid trucks: 2 axle: no trailer: GVM 4.5 to 7.0 tonne 4.3 0.05
Rigid trucks: 2 axle: no trailer: GVM 7.0 to 12.0 tonne 7.0 0.17
Rigid trucks: 2 axle: no trailer: GVM over 12.0 tonne 10.9 0.98
Rigid trucks: 2 axle: with trailer 10.6 0.89
Rigid trucks: 3 axle: no trailer GVM 4.5-18 11.5 0.68
Rigid trucks: 3 axle: no trailer GVM >18 16.2 1.45
Rigid trucks: 3 axle: with trailer >18 26.3 1.17
Rigid trucks: 4 axle: no trailer GVM 4.5-25 19.6 1.28
Rigid trucks: 4 axle: no trailer GVM >25 20.1 1.42
Rigid trucks: 4 axle: with trailer >25 32.3 1.64
Truck trailers 31.5 3.10
Articulated trucks: single trailer: 3 axle rig 15.3 0.68
Articulated trucks: single trailer: 4 axle rig 22.0 1.21
Articulated trucks: single 3 axle trailer: 5 axle rig 28.4 2.27
Articulated trucks: single 2 axle trailer: 5 axle rig 25.9 1.78
Articulated trucks: single trailer: 6 axle rig 33.1 2.29
Articulated trucks: > 6 axle rig (not elsewhere classified) 52.2 2.36
Other trucks 24.5 1.55
Matching Table 2
Existing Vehicle Classes AGM ESA
Value Value
Articulated trucks: B-double: <9 axle rig 44.0 3.27
Articulated trucks: B-double/triple: 9 axle rig & above 51.5 3.55
Matching Table 3
Articulated trucks: Road train: 2 trailers 59.8 4.58
Articulated trucks: Road train: 3 trailers 87.4 5.65
PCU value.
The draft regulatory impact statement defined Passenger Car Unit (PCU) value of the
vehicle as a road capacity measure based on relative length of a heavy vehicle compared to
a medium size passenger car. Based on the objective of establishing a value for PCU that
provides a precise and simple calculation for this value whilst at the same time maintaining
an appropriate degree of relativity with the PCU values for existing vehicles, the PCU
value has been defined as:
PCU = (Actual Vehicle Length/6 metres) x Relative PCU Factor
The relative PCU Factor adjusts the actual PCU value so that it maintains relativity to the
PCU values in the current costing model for the existing vehicle classes (refer to Figure 28
below for relative PCU factor values).
Figure 42. Relative PCU factor
G (=D/E)
Relative
PCU Factor
Rigid 0.990
Articulated (1 trailer) or Rigid(>=3axle)/Truck & Trailer 1.003
B-Double 1.089
Double Road Train 0.963
Triple Road Train 1.018
Annual VKT
In the draft regulatory impact statement it was stated that annual VKT was to be equal to
the expected annual travel or vehicle kilometres travelled of the vehicle concerned. This
approach to estimating annual VKT is an individualised approach and could result in a
high charge relative to existing vehicle classes if the expected annual VKT of the new
vehicle is quite high compared to average VKT used to generate registration charges for
existing vehicle classes. As a result, the revised approach seeks to maintain an appropriate
degree of relativity between the new vehicles and existing vehicle classes.
Therefore, the annual VKT calculation has been revised to be based on a regression
equation which links VKT to the AGM of a vehicle. A plot of average VKT against AGM
for existing vehicle classes is shown in Figure 29.
Figure 43. Regression of average VKT against AGM
Regression of Average VKT against AGM
250,000
200,000
Average VKT
150,000
100,000
50,000
0
0 20 40 60 80 100 120
AGM (tonnes)
Regression Line
Average VKT and Average Gross Mass (AGM) for Different Vehicle Classes
The regression equation of VKT against AGM for existing truck vehicle classes (excluding
buses) provides the following result:
VKT = - 484.0 + (2132.5 x AGM)
However, as can be seen in the plot of VKT against AGM graph, the regression line is not
a good fit for B-doubles (which are the two dots well above the line) and the triple road
train (which is the road train dot that is well below the line), although reasonably good for
other vehicles.
Therefore, if this regression equation is used to estimate VKT for each new vehicle,
adjustments should be made to allow for the fact that the equation is not a good predictor
of B-double and road train VKT. In this context, the estimated VKT's for B-double and
road trains are based on the current average VKT for their respective vehicle class with an
adjustment up or down depending on whether a particular vehicle is at the average mass
for the vehicle class:
(3) use the regression equation for all vehicles other than vehicles that have either
a lead trailer configuration (which takes into account B-double and B-triples)
and road train configurations, and
(4) adjustments will be made for lead trailer and road train configurations:
a. the annual VKT for vehicles with one lead trailer (which is the front
trailer in a B-double) will be equal to:
i. B-double (>= 9 axle): 178,988 + 2,384.4 x (AGM-44.0).
ii. B-Double (< 9 axle): 164,307 + 2,384.4 x (AGM-51.5).
iii. The figure of 178,988 is the average kilometres travelled in the
cost allocation model for B-doubles (>= 9 axle) and 164,307 is
figure for B-doubles (<9 axle).
iv. The figure of 51.5 is the average gross mass in the cost allocation
model for B-doubles (>= 9 axle) and 44.0 is the figure for B-
doubles (<9 axle).
b. the annual VKT for road trains will be equal to:
i. Double Road Train (>= 9 axle): 133,750 + 2,384.4 x (AGM-
59.8).
ii. Triple Road Train (< 9 axle): 133,750 + 2,384.4 x (AGM-87.4).
iii. The figure of 133,750 is the average kilometres travelled in the
cost allocation model for both double and triple road trains.
iv. The figure of 59.8 is the average gross mass in the cost allocation
model for double road trains and 87.4 is the figure for triple road
trains.
c. The annual VKT for a vehicle with more than one lead trailer (e.g. B-
triple) will set equal to 178,922 since this vehicle will be treated as a
substitution for B-double.
d. The annual VKT for a vehicle with more than three trailers as part of a
road train configuration will set equal to 133,750 since this vehicle will
be treated as a substitution for B-double.
Fuel use
In the draft regulatory impact statement, it was not specifically outlined how fuel usage
(litres per 100 km) of the vehicle per annum was to be estimated. Based on the objective of
establishing a value for fuel usage that provides a precise and simple calculation for this
value whilst at the same time maintaining an appropriate degree of relativity with the fuel
usage values for existing vehicles, it is recommended that the fuel usage value is estimated
through a regression equation which links fuel usage to AGM.
A plot of fuel usage against AGM for existing vehicle classes is shown in Figure 30.
Figure 44. Regression of fuel use against AGM
Regression of Fuel Use against AGM
100
Fuel Use (litres per
80
100km)
60
40
20
0
0 20 40 60 80 100 120
AGM (tonnes)
Regression Line NTC Model Fuel Use
The regression equation of fuel usage against AGM for existing truck vehicle classes
(excluding buses) provides the following result:
Fuel Use = 25.7 + (0.688 x AGM)
This regression equation is a reasonably good fit of ABS SMVU data of fuel use plotted
against AGM. Note that buses have not been used to derive this equation.
B-triple example calculation
This section provides a comparison of the higher productivity calculation for the B-Double
compared to a B-triple. Note that the B-Double and B-triple excludes non-attributable costs
are per the revised higher productivity formula. The difference in the registration charge
between the two calculations is around $5,500 (refer to Figure 31), reflecting the greater
impact on road wear caused by the B-triple, longer length and greater average mass.
Figure 45. B-Double and B-triple example calculation
Standard B- B-Triple
Double
Vehicle Characteristics
Annual VKT km 178,918 178,988
Average Gross Mass (AGM) tonnes 51.47 67.70
Equivalent Standard Axles (ESA) Units 3.55 4.43
Passenger Car Unit (PCU) Units 4.00 5.13
Fuel Charge c/l 21.0 21.0
Fuel Usage per Km l/100km 60.8 72.1
Fully Loaded % of travel 62% 62%
Unit Costs
AGM unit cost cents per tonne km 0.131 0.131
ESA unit cost cents per ESA km 3.393 3.393
PCU unit cost cents per PCU km 0.302 0.302
VKT unit cost cents per km 1.105 1.105
Non-attributable unit cost cents per km 2.223 2.223
Proposed B-Triple Registration Charge
= AGM unit cost * AGM in tonnes* annual VKT $12,064 $15,874
+ ESA unit cost * ESA rate* annual VKT $21,544 $26,903
+ PCU unit cost * PCU value* annual VKT $2,161 $2,773
+ VKT unit cost * annual VKT $1,977 $1,978
+ non-attributable unit cost * annual VKT $0 $0
A Total Allocated Cost $37,746 $47,528
B Fuel Revenue = Fuel charge * Fuel usage per km $22,833 $27,110
* annual VKT
= A - B Registration Charge $14,913 $20,418
DIFFERENCE $5,505
FULL SCHEDULE OF REGISTRATION CHARGES
Options C1 and C3 in this schedule assume adjusted enforcement costs have been included
in the cost base.
Table 76. Schedule of registration charges for the 2007 Determination
Option C1 Option C3
2007/08 Charges
- from Draft RIS Recommended
Prime Prime Prime
Total Total Total
Mover Mover Mover
($ per ($ per ($ per
($ per ($ per ($ per
vehicle) vehicle) vehicle)
vehicle) vehicle) vehicle)
Rigid trucks
2 axles
No trailer: 4.5-7t 355 355 365 365 380 380
No trailer: 7-12t 355 355 365 365 380 380
No trailer: over 12t 592 592 634 634 652 652
With trailer 651 1,184 634 1,182 652 1,222
3 axles
No trailer: 4.5-18t 710 710 634 634 652 652
No trailer: over 18t 946 946 827 827 859 859
With trailer < 42.5 t 2,365 3,430 827 1,922 859 1,999
4 axles
No trailer: 4.5-25t 1,065 1,065 634 634 652 652
No trailer: over 25t 2,365 2,365 827 827 859 859
With trailer: <42.5t 2,365 3,430 1,534 2,629 1,593 2,733
Heavy truck trailers 4,494 5,737 5,794 7.071 5,828 7,158
Articulated trucks
Single trailer
3 axle rig 1,537 1,892 1,000 1365 1,000 1,380
4 axle rig 1,537 2,247 1,000 1730 1,000 1,760
3 axle trailer: 5 axle rig 1,537 2,602 1,000 2095 1,000 2,290
2 axle trailer: 5 axle rig 4,019 4,729 4,060 4790 3,930 4,690
6 axle rig 4,019 5,084 4,060 5,155 3,930 5,220
B-doubles
<9 axle rig 5,911 7,686 13,796 15,621 7,050 12,140
9 or more axle rig 5,911 8,041 13,796 15,986 7,050 14,340
Road trains
2 trailers 5,911 8,751 7,531 10,451 7,050 10,390
3 trailers 5,911 10,526 8,292 13,037 7,050 12,440
>6 axle rig (NEC) 5,201 6,266 4,440 5,535 4,322 5,612
Other trucks 919 919 952 952 963 963
Buses
2 axle
4.5 to 10.0 t 355 355 365 365 380 380
>10t 592 592 365 365 380 380
3 axles 1,478 1,478 2,024 2,024 2,087 2,087
Articulated 592 592 365 365 380 380
Table 77. Current charges schedule 2007/08
DIVISION 1 - LOAD CARRYING VEHICLES ($)
Vehicle Type 2 axle 3 axle 4 axle 5 axle
Trucks
Truck (type 1) 355 710 1,065 1,065
Truck (type 2) 592 946 2,365 2,365
Short combination truck 651 2,365 2,365 2,365
Medium combination truck 4,494 4,494 4,848 4,848
Long combination truck 6,208 6,208 6,208 6,208
Prime Movers
Short combination prime mover 1,537 4,019 5,201 5,201
B-double prime mover 4,729 5,911 6,503 6,503
Road train prime mover 5,911 5,911 6,503 6,503
DIVISION 2 - LOAD CARRYING TRAILERS
Calculated using the formula: $355 x Number of Axles
DIVISION 3 - BUSES ($)
Bus Type 2 axle 3 axle 4 axle
Bus (type 1) 355
Bus (type 2) 592 1,478 1,478
Articulated bus 592 592
DIVISION 4 - SPECIAL PURPOSE VEHICLES
Special purpose vehicle (type P) No charge
Special purpose vehicle (type T) 237
Special purpose vehicle (type O) Calculated using the formula:
296 + $296 x Number axles over 2
PERMIT FEES
The charge for the grant of permit to operate a vehicle over 125 tonnes carrying an indivisible load is
to be calculated as
: 4 cents x ESA-km
Table 78. Option C3 charges schedule at the end of phase in excluding
annual adjustment
DIVISION 1 - LOAD CARRYING VEHICLES ($) - July 2010
Vehicle Type 2 axle 3 axle 4 axle 5 axle
Trucks
Truck (type 1) 380 652 652 652
Truck (type 2) 652 859 859 859
Short combination truck 652 859 1593 1593
Medium combination truck 5828 5828 6295 6295
Long combination truck 8036 8036 8036 8036
Prime Movers
Short combination prime mover 1000 3930 4322 4322
Multi-combination prime mover 7050 7050 7755 7755
DIVISION 2 - LOAD CARRYING TRAILERS ($)
Axle group type (per axle charge ($))
Single axle Tandem Tri-axle Quad-axle
axle and above
Trailer type
Pig Trailer 380 380 380 380
Dog Trailer 380 380 380 380
Semi Trailer 380 380 430 430
B-Double lead trailer and B-triple lead 1900 1900 2000 2000
and middle trailers
Converter dolly or low loader dolly 380 380 380 380
DIVISION 3 - BUSES ($)
Bus Type 2 axle 3 axle 4 axle
Bus (type 1) 380
Bus (type 2) 380 2087 2087
Articulated bus 380 380
DIVISION 4 - SPECIAL PURPOSE VEHICLES ($)
Special purpose vehicle (type P) No charge
Special purpose vehicle (type T) 248
Special purpose vehicle (type O) Calculated using the formula:
310 + (310 x Number axles over 2)
PERMIT FEES
The charge for the grant of permit to operate a vehicle over 125 tonnes carrying an indivisible load is
to be calculated as
: 4 cents x ESA-km
Table 79. Mapping vehicle categories to the charging schedule
Operational Vehicle Classes Charging Schedule Classes
Rigid trucks
2 axles, 4.5 - 7.0t 2 2 axle Truck (type 1) IR2
2 axles, 7.0 - 12.0t
2 axles, over 12.0t 2 axle Truck (type 2) 2R2
2 axles: with trailer 2 axle Short combination truck SR2 or MR2
3 axles no trailer 4.5 - 18t 3 axle Truck (type 1)IR3
3 axles no trailer over 18t 3 axle Truck (type 2) 2R3
3 axles with trailer < 42.5t 3 axle: Short combination truck SR3 or MR3
4 axles no trailer: 4.5t-25t 4 axle truck (type 1) 1R4
4 axles no trailer , over 25t 4 axle truck (type 2) 2R4
4 axles with trailer < 42.5t Short combination truck SR4
Medium combination truck GVM over 42.5
Heavy truck trailers
tonnes MR3 or MR4
Articulated Trucks
Single trailer 3 axle rig
Short combination prime mover with 2 axles
Single trailer 4 axle rig SP2
5 axles (2-axle prime mover)
Short combination prime mover with 3 axles
5 axles (3-axle prime mover) SP3
6 axles (3-axle prime mover)
More than 6 axles (not Short combination prime mover with 4 axles
otherwise classified) SP4
Operational Vehicle Classes Charging Schedule Classes
B-doubles
Less than 9 axles
9 axles New multi-combination prime
mover class - former medium
combination prime mover MP3 or
MP2 and Road Train prime mover
1LP2 to 1LP5
Road trains
2 trailers
3 trailers
Special Purpose Vehicles
Other trucks PSV / OSV
Buses
2 axles, 4.5 - 10.0 t 2 axle bus (type 1) 1B2
2 axles, more than 10.0 t 2 axle bus (type 2) 2B2
3 axles, rigid 3 axle bus (type 2) 2B3
Articulated Articulated AB3
IMPACTS ON STATE/TERRITORY REVENUES
Registration revenue implications of recommended option
The following tables are all based on the preferred NTC 2007 Determination charge option
which includes budgeted 2007/08 arterial road expenditure and partial enforcement
expenditure. All tables exclude post 2007/08 annual adjustment impacts and assume
constant usage figures.
Table 80. Registration revenue by jurisdiction ($000)
Change in
Current Proposed Proposed Proposed revenue
2007/08 Revenue Revenue Revenue 2009/10
Revenue 2008/09 2009/10 2009/10 compared to
State/Territory 2007/08
NSW 150,313 150,144 159,228 166,778 11.0%
Vic 171,433 172,147 185,841 197,894 15.4%
Qld 146,881 149,445 160,107 169,816 15.6%
SA 57,859 58,750 64,478 69,982 21.0%
WA 86,169 87,452 90,940 94,113 9.2%
Tas 14,940 14,864 15,726 16,503 10.5%
NT 7,972 8,421 8,651 8,858 11.1%
ACT 2,860 2,806 2,961 3,084 7.8%
Total 638,428 644,030 687,933 727,028 13.9%
Table 81. All jurisdiction registration revenue by vehicle class ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 219,384 216,664 -1.2%
Articulated Trucks 252,589 257,538 2.0%
B-Doubles 85,489 164,540 92.5%
Road Trains 50,336 59,709 18.6%
Special Purpose Trucks 11,325 11,862 4.7%
Buses 19,305 16,715 -13.4%
Total 638,428 727,028 13.9%
Table 82. NSW revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 58,812 59,112 0.5%
Articulated Trucks 64,008 65,498 2.3%
B-Doubles 17,080 32,297 89.1%
Road Trains 1,796 2,134 18.9%
Special Purpose Trucks 2,061 2,159 4.7%
Buses 6,556 5,578 -14.9%
Total 150,313 166,778 11.0%
Table 83. Vic revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 58,307 58,063 -0.4%
Articulated Trucks 74,238 74,829 0.8%
B-Doubles 30,398 56,715 86.6%
Road Trains 954 1,135 18.9%
Special Purpose Trucks 3,499 3,665 4.7%
Buses 4,037 3,488 -13.6%
Total 171,433 197,894 15.4%
Table 84. Qld revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 48,949 48,425 -1.1%
Articulated Trucks 57,183 59,086 3.3%
B-Doubles 18,800 37,618 100.1%
Road Trains 16,188 19,200 18.6%
Special Purpose Trucks 2,222 2,327 4.7%
Buses 3,540 3,159 -10.8%
Total 146,881 169,816 15.6%
Table 85. SA revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 17,150 16,284 -5.0%
Articulated Trucks 22,138 22,715 2.6%
B-Doubles 11,989 23,757 98.2%
Road Trains 3,962 4,702 18.7%
Special Purpose Trucks 1,106 1,158 4.7%
Buses 1,515 1,367 -9.8%
Total 57,859 69,982 21.0%
Table 86. WA revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 27,765 26,422 -4.8%
Articulated Trucks 25,435 25,564 0.5%
B-Doubles 5,231 10,257 96.1%
Road Trains 23,818 28,256 18.6%
Special Purpose Trucks 1,605 1,681 4.7%
Buses 2,315 1,933 -16.5%
Total 86,169 94,113 9.2%
Table 87. Tasmania revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 5,311 5,236 -1.4%
Articulated Trucks 6,970 7,201 3.3%
B-Doubles 1,490 2,965 99.0%
Road Trains 0 0
Special Purpose Trucks 576 603 4.7%
Buses 594 498 -16.1%
Total 14,940 16,503 10.5%
Table 88. NT revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 1,807 1,841 1.9%
Articulated Trucks 1,762 1,787 1.4%
B-Doubles 156 311 100.0%
Road Trains 3,599 4,259 18.4%
Special Purpose Trucks 190 200 4.7%
Buses 458 460 0.4%
Total 7,972 8,858 11.1%
Table 89. ACT revenue from registration charges ($000)
Proposed Revenue
Change in revenue
Current 2007/08 after full
2009/10 compared to
Revenue implementation
2007/08
State/Territory 2009/10
Rigid Trucks 1,283 1,281 -0.1%
Articulated Trucks 856 859 0.3%
B-Doubles 346 620 79.2%
Road Trains 19 23 18.9%
Special Purpose Trucks 67 70 4.7%
Buses 289 232 -19.9%
Total 2,860 3,084 7.8%
PRIMARY PRODUCER CONCESSIONS
Table 90. Primary producer heavy vehicle registration concessions
Heavy vehicles which do
General rate of
Jurisdiction Other concession rates not qualify for a
concession
concession
Vic 80% for most heavy 50% for 2 or 3 axle rigid None.
vehicles types. trucks with no trailers and
all 2 axle short
combination trucks.
55.56% for 4 axle rigid
trucks with no trailer.
NSW Pay the lower of the If the NSW determined
national heavy vehicle motor vehicle registration
charge or the NSW fee is higher than the
determined motor applicable national heavy
vehicle registration. charge.
This would appear to This would appear to
benefit larger truck provide no concession to
trailer combinations and smaller rigid truck types
prime movers. without trailers.
Qld Rates of 25% to 50% 50% applies to all 2 and 3 Prime movers or rigid
apply to all heavy axle rigid trucks without trucks with a Gross
vehicles which have a trailers, all 2 axle trucks Vehicle Mass less than 6
Gross Vehicle Mass of 6 with trailers, and all 2 tonnes.
tonnes or more and to all axle prime movers except
trailers with an Average long combinations and all
Gross Mass of 4.5 1 axle trailers.
tonnes. 25% applies to all rigid
trucks with 4 or more
axles, all 2 axle long
combination prime
movers, all prime movers
with 3 or more axles and
all special purpose
vehicles.
35% applies to all 2 axle
trailers.
30% applies to all 3 or
more axle trailers.
SA 40% for most heavy All rigid trucks with no
vehicle types. trailers and all special
vehicles.
WA 50% for all heavy All multiple trailer
vehicle types plus up to combinations after the first
one trailer. trailer.
Tas 40% for all heavy None.
vehicle types.
NT 50% for all heavy None.
vehicle types.
ACT 0% All.
NON PRIMARY PRODUCER REGISTRATION CONCESSIONS
General rate of
Jurisdiction Concession type
concession
NSW Pensioner concession for rigid heavy vehicles up to 16t 100%
GVM (not prime movers).
Qld Concessions apply for heavy vehicles and trailers which
are classified as:
· Pensioner, Seniors Card & Veteran Affairs benefit 25 to 50%
recipients
· Local Government , Community Service 25 to 50%
Organisation, Special Purpose
SA A reduction in the registration fees is available to heavy 40%
vehicles (other than Type 1 & Type 2 trucks) that are kept
in Outer Areas
outer area means--
(a) the whole of Kangaroo Island; or
(ab) the area of the District Council of Coober Pedy; or
(ac) the area of the District Council of Roxby Downs; or
(b) all other parts of the State that are not within a
municipality, a district council area or Iron Knob.
WA Interchangeable trailers - A rebate is granted for goods 75%
carrying semi trailers where the number trailers exceeds
the number of prime movers registered in an operators
name.
Trailers used outside the Southwest Land Division 50%
A 50% concession may be granted to a vehicle which is 50%
used during the currency of the licence SOLELY for the
carriage of stock.
Tas Interchangeable trailers - A rebate is granted for goods 40%
carrying semi trailers where the number trailers exceeds
the number of prime movers registered in an operators
name. An interchangeable trailer cannot travel any more
than 20,000 kilometres in a 12 month period.
Three axle buses - a rebate is offered to three axle buses 60%
exceeding 12 tonne GVM that travel no more than 60,000
kilometres in a 12 month period. The rebate means that
these buses pay the same charge as a 2 axle bus that
exceeds 12 tonne.
Trailers with a GVM greater than 4.5 tonnes but no greater Minimum of 57%
than 9.0 tonnes - These trailers pay a flat rate charge.
Presently $154.00 instead of the per axle charge
ACT None
VIC and NT Information requested but not provided
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