Understanding Transport Costs and Charges - Questions and Answers

What is the purpose of the UTCC project?

The purpose of the UTCC project is 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substantial changes in these sectors since 2001-02, the STCC estimates and the comparisons between modes are largely out of date.

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.

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
• The Ministry for the Environment (Phase two only)

Other transport agencies  

• NZ Transport Agency
• Maritime New Zealand
• KiwiRail Group

 Local bodies  

• Auckland Regional Council (Phase one only)
• Greater Wellington Regional Council (Phase one only)
• Christchurch City Council (Phase one only)

Industry representatives  

• Bus and Coach Association (Phase two only)
• Council of Trade Unions (Phase two only)
• Fonterra Co-operative Group Limited (Phase two only)
• New Zealand Shipping Federation
• New Zealand Automobile Association
• New Zealand Bus (Phase two only)
• New Zealand Forest Owners Association (Phase two only)
• New Zealand Shippers Council (Phase two only)
• Road Transport Forum
• Ports of Auckland
• Port of Napier
• Port representative (Phase two only)
• The Warehouse (Phase two only)
• Veolia Transport (Phase two only)

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

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

The National Freight Demands 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 and 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 Demands Study is a one-off study whereas the Freight Monitoring Project 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 direct links with the National Freight demands Study and the Freight Monitoring Project. However, it will utilise the information being collected in the two projects to help estimate the total transport costs and charges.

What does phase one of the UTCC project cover?

Phase one of the  UTCC  project 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
• provides a recommended work plan for estimating and collecting the relevant costs and charges information.

The phase one report was completed in September 2008 by Hyder Consulting (NZ) Limited, in partnership with Ian Wallis Associates Limited, Murray King and Francis Small Consultancy Limited and IPC & Associates Limited. 

What are the major findings and recommendations of the UTCC phase one 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 these  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.

What is the main conclusion from the stock take (phase one) 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 these sectors.

How were the information gaps and priorities identified?

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 brought together to form overall priorities.

How was the recommended work plan from phase one incorporated into the process for phase two?

The importance of having a comparable consistent evaluation framework for estimating costs and charges information is clear. Therefore our initial work plan for phase two began with a review of the approach to valuing social and environmental costs of transport use (eg valuation for accident costs, congestion and emissions) and investigation into methods for attributing social and environmental costs of transport use between internal and external components. 

Due to changes in government priorities and directions, in July 2009 the Ministry re-prioritised the UTCC project to focus on data that is important for assisting evidence-based decisions, particularly around improving the economic growth and productivity of the transport sector and road safety.

What is the revised work plan for phase two?

The revised phase two work plan contains eight components:

1. Completion of the literature review on methods for estimating social and environmental costs and for attributing their internal and external components
2. Estimation of the costs of road crashes
3. Estimation of the costs of road congestion
4. Estimation of the costs (and benefits) of road vehicle technologies
5. Investigation of the costs of freight transport
6. Investigation of the costs of public passenger transport
7. Investigation of the costs of private passenger transport
8. Estimation of other social and environmental costs

The aim of phase two is to target effort to create data for areas with significant information gaps.

What are the areas with significant information gaps?

For costs of road crashes, the Ministry’s focus is to assess whether the current value of statistical life (established in 1991 and inflation adjusted to current dollars) is appropriate for New Zealand and update the estimate of loss of output and productivity as a result of road injuries.

For costs of congestion, there is a need to update the estimates for the three main urban cities (Auckland, Wellington and Christchurch) for both recurrent and non-recurrent delays.

For costs of freight transport, the Ministry will focus on understanding the true costs of freight transport, the cost barriers to efficiency of freight transport and the relative importance of freight transport cost in freight logistics.

Work associated with the costs and benefits of road vehicle technologies is another aspect of the project. Its major aim is to help understand the costs associated with the uptake of new technologies (whether through the purchase of newer vehicles or retrofitting of new features) relative to savings in vehicle operating and other social and environmental costs to inform policies that aim to improve the road vehicle fleet. To better inform current policy decisions, the Ministry will continue assess other key information gaps throughout the course of the project.

Is phase two finished?

No. Phase two is being carried out in stages. The timeframe for the first four components to be completed is June 2010. The timeframe for the fifth component is December 2010. The timeframe for the remaining components are yet to be determined.