Rail Infrastructure Charging in the European Union

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• Rail Infrastructure Charging in the European Union

Benedikt Peter bp_at_wip.tu-berlin.de,
http//wip.tu-berlin.de
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Objectives of this Presentation

• Is the EC legislation in line with economic
  theory?
• Structure of EU15-tariff systems
• Recommendations for rail infrastructure tariff
  systems

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EC Policy on Track Charges

• Directive 2001/14/EC
• Charges are to be set at the cost directly
  incurred as a result of operating the train
  service
• Mark-ups can be applied to recover the total
  costs, if the market can bear this
• External costs can be charged for
• Further exemptions for investment projects
• ? Marginal costs with mark-ups

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Objectives of Pricing

• Efficient resource allocation
• Static perspective welfare maximization
• Dynamic perspective incentives for
  dis(investment)
• Cost recovery
• Cost Components of Rail Infrastructure
• C(z,q,v) F1(z) F2(z,v) c(z,v,q)
• q traffic volume
• z characteristics of the infrastructure
• v characteristics of the vehicles
• F1 common fixed costs
• F2 blockwise variable costs
• c variable costs

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Pricing Principles I

• 1. Short Run Marginal Cost Pricing
• Allocative efficiency (static)
• Welfare maximisation, minimal exclusion
• Allocative efficiency (dynamic)
• Only little information about z and v in price
• Cost recovery
• Deficit
• 2. Ramsey Pricing
• Allocative efficiency (static) cost recovery
• Maximization social welfare under the constraint
  of deficit coverage
• Allocative efficiency (dynamic)
• Only little information about z and v in price

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Pricing Principle II

• 3. Fully distributed costs (FDC)-pricing
• Allocative efficiency (static)
• Less than MC- and Ramsey-pricing
• Allocative efficiency (dynamic)
• Only little information about z and v in price
• Cost recovery
• full deficit coverage
• 4. Non-linear tariffs
• Allocative efficiency (static) and cost recovery
• Maximize social welfare under the constraint of
  deficit coverage
• Pareto superior to linear tariffs, if
  cost-coverage ratio is defined
• Allocative efficiency (dynamic)
• Fixed parts, blockwise fixed parts and variable
  part information on z, v, q
• Problem
• Price Distortions on downstream market ? welfare
  loss

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Result 1

• No dominant pricing principle
• FDC can be ruled out
• A pricing system has to be adapted to the
  specific situation of the infrastructure manager
• Directive 2001/14/EC SRMC with mark-ups
• EC legislation in line with economic theory
• non-linear pricing only as an exception?

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Marginal Cost Pricing in the EU I

• Examples Sweden and Finland
• A circulation fee is charged in both countries
• for freight transport in Finland 0.001223 per
  gross tkm, in Sweden 0.0003 per gross tkm
  (Finland additionally 0.19 per ton
  transported)
• for passenger transport in Finland 0.001189
  per gross tkm, in Sweden 0.00093 per gross tkm
  (cf Austria 0.001 per gross tkm for both freight
  and passengers)
• Finland charge for environmental and accidental
  costs
• 0.000182 per gross tkm for electric freight
  transport
• 0.000584 per gross tkm for diesel freight
  transport
• 0.000098 per gross tkm for passenger transport
  
• Sweden
• Diesel charge of 0.036 per litre for old
  passenger and freight vehicles and 0.018 per
  litre for newer vehicles
• Accident charge of 0.118 per train-km for
  passenger transport and 0.059 per train-km for
  freight transport

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Marginal Cost Pricing in the EU II

• Evaluation
• No differences of MC according to infrastructure
  characteristics
• Only rough differentiation according to vehicle
  characteristics
• Differences in the height of the mc per gtkm
  between Finland and Sweden
• Freight Train (690 gt, 342 km)
• Sweden approx 100
• Finland 204

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Linear Tariffs in the EU I
Germany
Source DB Netz
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Linear Tariffs in the EU II

• Evaluation
• Regional passenger trains around 2 10 per
  train-km
• Freight trains (less than 1200 t and less than
  160 km/h) approx. 1 - 4.5 per train-km
• max price for a long-distance passenger train
  path (not from Koeln-Frankfurt) 7.3 per
  train-km
• Freight Train (690 gt, 342 km) 657 - 1469
• Cross-subsidization or demand-based pricing?

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Non-Linear Tariffs in the EU I
Price in   Line Categories Line Categories Line Categories
    B Suburban lines with average traffic C Major intercity lines with average traffic N1 High speed lines with high traffic
Access fee1 (per track-km used and month)   373.124 3.110 4475.912
Reservation fee (per path-km and timetable period) Normal time 1.244 0.082 9.780
Reservation fee (per path-km and timetable period) Peak time 0630-0900, 1700-2000 2.488 0.082 11.544
Reservation fee (per path-km and timetable period) Weak time 0030-0430 0.622 0.000 4.813
Usage fee (passengers) (per train-km) 0.806 0.806 0.806 0.806
Usage fee (freight) (per train-km) 0.235 0.235 0.235 0.235
Example France
Source RFF

• Variation of the access fee (on some line
  categories modulation factor reaches from 0.03
  (for ten paths per months or less) to 1.5 (for
  more than 1000 path per month)
• Freight trains (train-run gt 300 km or average
  speed lt 70 km/h) 60 access fee reduction
• Reduction of access fee for long-term contracts

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Non-Linear Tariffs in the EU II

• Evaluation
• Freight Train (690 gt, 342 km) variable part
  80, reservation fee 0-28, access fee (major
  intercity line) 0-638 per month (incl. 60
  reduction)
• No variation according to train weight
• Access fee per section, not for the network as a
  whole (?? Spain)
• Access fee neutral according to the operators
  choice of route (?? Italy)

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Tariffs in the EU I

• Pricing Principles
• SRMC-pricing Finland, Sweden, Netherlands
• FDC-pricing Portugal, partly in the UK
• Non-linear tariffs UK, France, Italy, Spain,
  Luxembourg, partly in Denmark
• Ramsey-elements in many countries for freight,
  German regions,
• Structure of tariff system stretches from
• One linear price in the Netherlands (passenger
  and freight)
• to
• Self-selecting tariff with peak-load pricing and
  network segmentation in France (approx 200
  different tariffs)
• Height of charges (Freight train, 690 gt, 342 km)
  stretches from
• Approx 100 in Sweden (0.28/km)
• to
• 1980 in Switzerland (5.80/km)

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Tariffs in the EU II
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Tariffs in the EU III
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Tariffs in the EU IV
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Recommendations

• A tariff system should consider the costs of use
  and the demand
• Costs of use
• Short run marginal costs as base price,
  including renewal
• Considering different infrastructure and vehicle
  characteristics
• Demand-based mark-ups
• According to origin and destination
• Considering intermodal competition
• Time-based variation time of day, week, season
• according to train-types and respective
  capacities
• Further research necessary for the charging of
  scarcity

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Elements of Variable Costs

• Internal Costs
• Operating costs, that can be traced to a
  particular train movement, e.g. for personnel and
  signalling,
• Wear and tear costs for maintenance and renewal
  of the infrastructure
• Costs for energy consumption (electricity or
  diesel)
• Additional timetable planning and administration
  costs
• External Costs
• Accidents
• Pollution
• Global warming
• Capacity costs
• Congestion?
• Scarcity