Understanding Transport Costs and Charges - Questions and Answers

What is the UTCC report?

The Understanding Transport Costs and Charges report (phase one) was commissioned by the Ministry of Transport to develop a recommended work plan to enable the collection of transport costs and charges information for the domestic road, rail and water transport sector.

The phase one report:

• provides a broad understanding of pricing, charging and funding arrangements in the maritime, road and rail transport modes;
• summarises the gap between costs and charges information requirements and the information that is either currently available or soon become available; and
• provides a recommended work plan for estimating and collecting the relevant costs and charges information.

Hyder Consulting (NZ) Limited, in partnership with Ian Wallis Associates Limited, Murray King and Francis Small Consultancy Limited and IPC & Associates Limited carried out the study.

Phase two will involve work to collect and estimate relevant transport costs and charges information. The Ministry anticipates that phase two will completed by the end of 2010.

What is the purpose of the UTCC project?

The UTCC (phase one) project was undertaken to update knowledge of transport costs and charges for the road and rail sectors and extend it to the maritime sector.

The predecessor of the UTCC study, the Surface Transport Costs and Charges (STCC) (2005) study provided some snapshot estimates of the total, average and marginal costs and charges for 2001-02 for the road and rail networks. 

However, as there have been substantial changes in these sectors since 2001-02, the STCC estimates and the comparisons between modes are largely out of date.

Furthermore, the absence of costs and charges information for the maritime sector made it difficult for industry and policy makers to understand the opportunities for increasing coastal shipping as a means to transport domestic freight.

Once completed, the UTCC project will be a significant resource for transport planners and policy practitioners. It will provide costs and charges information that is required for developing policies that encourage efficient use of the transport system over time.

 Such information will help to gain a better understanding of the full costs of the different modes of transport and will become an important data source that transport industry and decision makers can use to consider various impacts associated with transport activities.

The UTCC will supersede the STCC report as the estimates included in the STCC report are now out of date.

What are the major findings and recommendations of the UTCC Phase 1 report?

The report finds that the differences in the level of commercial and government ownership in each of the maritime, road and rail sectors has led to differences in the level of pricing arrangements, annual government investment, social cost imposed, direct and indirect charges, and operating structures within each of the three transport sectors.

The report recommends that a consistent evaluation framework and methodology for estimating costs and charges information is required before any information can be collected.

The Phase 1 report recommeds that costs and charges information should be collected in the correct sequence so that conclusions can be drawn as early as possible.

Specifically that end user charges should be collected first; maritime transport industry estimates should be completed before other transport modes due to the lack of costs and charges information for this sector, and selected case studies should be completed after the collection of other costs and charges information to understand the marginal costs of transport.

Is there any linkage between the UTCC project, the National Freight Study and the Freight Monitoring Project?

The three projects are interlinked but there are some fundamental differences between the three.

The National Freight Study looks at the current volumes and distributions of import, export and domestic freight movements in NZ (all modes) to help forecast future demand. The Freight Monitoring Project aims to develop a freight monitoring programme that enables ongoing collection of freight volume data by all modes (for domestic & international freight movements). These two projects are similar and they both focus on freight movements and volume. 

The major difference is that the National Freight Study is a one-off study whereas the Freight Monitoring Projects aims to collect similar information on an on-going basis.

On the other hand, the UTCC project aims to establish transport costs and charges for road, rail and maritime transport. It covers not only freight movements but also passenger movements. The UTCC does not have directly links with the former two projects. However, it will utilise the information being collected in the two projects to help estimate the total transport costs and charges.

Who participated in the study?

Representatives from central and local government, other transport agencies and the transport industry contributed to the study. These agencies included:

Central government

• The Treasury
• The Ministry of Transport

Other transport agencies  

• NZ Transport Agency
• Ontrack
• KiwiRail.

Local bodies  

• Auckland Regional Council
• Greater Wellington Regional Council
• Christchurch City Council 

Industry representatives  

• New Zealand Shipping Federation
• New Zealand Automobile Association
• Road Transport Forum
• Ports of Auckland
• Port of Napier

What is the key insight from the stock take of the funding, charging and pricing arrangements?

The differences in the level of commercial and government ownership in each of the maritime, road and rail sectors has led to differences in the level of pricing arrangements, annual government investment, social cost imposed, direct and indirect charges, and operating structures within each of the three transport sectors.

How did the information gaps and priorities arrive?

As part of the process for phase one, a consultation process was carried out to communicate with the key transport policy and industry stakeholders.

The consultation involved discussing the demand for costs and charges information for transport policy stakeholders given the current and forecast work programme. This process resulted in specific costs and charges information around transport infrastructure costs; operator costs and charges; user costs and charges; social and environmental costs and revenue and funding.

By mapping these costs and charges components with overlapping areas of government policy strategies and targets, the information was then synthesised to form the overall priorities for collection.

How will the recommended work plan be incorporated into the process for phase two?

The Ministry endorses the importance of having a comparable consistent evaluation framework for estimating costs and charges information. Therefore our immediate work plan for phase two will begin with the development of a consistent evaluation framework and methodology for estimating costs and charges.

This work stream will include recommendations for the most appropriate methodology or evaluation approach for each of the following areas:

• Methods and approaches for estimating different cost components across the three modes.
• Approach to valuing social and environmental costs of transport use (e.g. valuation for accident costs, congestion and emissions).
• Method for attributing social and environmental costs of transport use between internal and external components. 
• Method and measurement base for estimating transport costs in the three transport modes on a comparable basis (e.g. route, region, vehicle type and time of day).

The Ministry will soon work on the terms of reference for the this work and expect to commence such work by the end of the year.