In this submission, ARTC has sought to provide detail of the Commission of existing competitive framework on the interstate rail network, and ARTC’s current approach to access pricing and asset sustainability on the interstate rail network.
ARTC has identified a number of concerns it has with the current approach to heavy vehicle road user charging, many of which give rise to an inconsistent approach to road and rail infrastructure pricing. ARTC has not suggested that the approach to pricing of rail infrastructure is perfect, but it provides a better framework for the improvement in cost recovery and ultimately full economic cost recovery in the long term.
ARTC considers that two important elements that must be in place in order to establish and efficient and integrated framework for investment in the transport sector are competition and maximisation of cost recovery. To achieve this, ARTC recommends to the Commission the following elements of an efficient and competitively neutral pricing regime:
- There should be a single regulatory objective, ideally efficiency in the use, provision of and investment in, road and rail infrastructure. It is also necessary to have regard to the impacts on competition in the road and rail freight market (between and within markets), when designing a road and rail infrastructure charging regime.
- Full economic cost recovery (including social costs) to underpin investment triple bottom line investment decisions should be the long term goal.
- In the first instance (short term), it is important that pricing of road and rail be based on the same economic criteria.
- Infrastructure investment & planning should be based on economic (triple bottom line) criteria. Investment planning should be carried out on a network/corridor basis (where transport services are provided to a market or markets) vis-à-vis planned on a modal basis. There should be a long term focus on the development and sustainability of transport infrastructure. Investment should be undertaken on an equitable, rigorous and transparent triple-bottom line economic basis. In the long term, both road and rail investment would be underpinned by through economic cost recovery (infrastructure provision would effectively operate as a ‘business’). In the short term, achievement of this outcome is best underpinned by efficient, and competitively neutral, pricing of infrastructure usage. ARTC supports the principles underpinning the AusLink framework as a mechanism to deliver efficient and effective investment solution for the transport industry.
- Cost allocation, pricing and investment process should be underpinned by high quality and specific data collection.
- There should be a national basis for economic and safety regulation for both modes.
ARTC recognises that the achievement of an efficient and competitively neutral infrastructure pricing regime is not a simple exercise and may be a long term development. ARTC recommends that the Commission, in the first instance, should focus on those aspects of road and rail infrastructure where competition exists. The Commission should also not seek to achieve precise accuracy in the first instance. In the long run, technology and market developments could create a natural impetus for expansion to the wider transport network. In particular, ARTC makes the following recommendations in relation to implementation of mechanisms to deliver efficient and competitively neutral infrastructure pricing.
- Technology based mass-distance tracking for road. ARTC believes that there is some potential for the application of technology to deliver mass distance charging by the adoption of a suitable approach in a smaller scale in the first instance. Initial focus to the competitive interstate freight markets limits the extent of the fleet participation to around 4% (road industry estimate of the rail competitive component). Application could also focus on only those elements of the national network defined by AusLink as predominantly serving these markets. It should be noted that the benefits of GPS tracking and vehicle weighing technology extend beyond the improvement of pricing and investment signals, and assisting in the delivery of competitive neutrality between modes. With regard to safety, authorities would be far better placed to ensure vehicle maintenance and operating standards are maintained if vehicle travel patterns could be monitored. Certain parts of the existing road fleet have already invested in GPS tracking technology for fleet and supply chain management.
- Competitively neutral pricing framework and full economic cost recovery. ARTC has proposed that this could be considered to be a long term objective. Moving to pricing of road and rail be based on the same economic criteria in the short term is likely to be more acceptable politically. To this end, ARTC considers it appropriate that the Productivity Commission should undertake estimation of the full economic cost of road and rail provision, using DORC valuation principles. This should focus on the infrastructure used by both modes where in competition. By proper allocation for cost to those vehicles competing with rail, a comparison of the extent of full economic cost recovery could be undertaken.
- Investment and planning. ARTC supports the principles underpinning the AusLink framework as a mechanism to deliver efficient and effective investment solution for the transport industry. This framework can be enhanced by infrastructure pricing that is competitively neutral, maximises the extent of full economic cost recovery, and has full economic cost recovery as the long term objective, and improved agency data collection and reporting.
- Recognition of social cost of infrastructure usage. Significant useful work has been undertaken in recent years (eg BTRE, Victorian Department of Infrastructure, QR and other agencies) sufficient to ascertain at least a nominal initial treatment for both modes that can be improved upon over time. AusLink investment evaluation principles have sought to incorporate quantified environmental impacts and may be useful in this regard. The inclusion of nominal charging for externalities on both modes (net of internalised cost) will create greater awareness and impetus for improved assessment of these costs, through more refined research over time.
- Competitively neutral and consistent regulatory framework. Rail needs to have a single national regulator in respect of economic regulation. It is not necessary that the same regulatory body be used for both modes. It is more important that the regulatory objectives and mechanisms be consistent. In any event, economic regulators need to operate independently from government decision making. ARTC would strongly support a recommendation by the Commission to adopt the ACCC as the single economic regulator for the national rail network. This would deliver the required consistency and independence in access regulation and pricing.
Further detail in relation to these recommendations is provided at Section 9.