czech tolling system at the age of seven

329 mToll Revenue

€

Czech Tolling System at the Age of Seven

78Thousand Light

Trucks

575Thousand Heavy

Trucks

33Thousand Buses

44%Toll from Foreign

Drivers

Czech Tolling System at the Age of Seven

2 I

Acknowledgement

Authors would like to thank the Road and Motorway Directorate of the Czech Republic for granting of the permission for use of the data from the nationwide truck tolling system. This analysis could not have been created without this data.

I 3

Year EUR/CZK

2007 27.76

2008 24.95

2009 26.45

2010 25.29

2011 24.59

2012 25.14

2013 25.99

Methodological Notices

Monetary values such as system revenues and costs in international compar-isons are converted to Euro using the average exchange rate published by the Czech National Bank for each of the analysed years. Values for particular years are therefore converted using the exchange rates noted in the table below.

4 I

246 m

EUR

Tolled network extension by 178 km of selected national roads, mainly those that replace yet to be built highways

2008tolled network 1,159 km v

avg. revenue 212 ths EUR/km xavg. rate EUR 0.156 v

A global financial crisis affects the Czech economy by drop of toll revenues by 10% associated with 9% decline in traffic performance


avg. revenue 166 ths EUR/km xavg. rate EUR 0.146 x

Extension of the toll duty to light trucks, introduction of higher peak-time Friday’s afternoon tarrif


avg. revenue 193 ths EUR/km vavg. rate EUR 0.139 x

Start of toll collection on 968 km of highways and motorways for 12t+ trucks and buses

2007tolled network 968 km

avg. revenue 215 ths EUR/km

avg. rate EUR 0.150200 m

EUR

209 m

EUR

260 m

EUR

I 5

Second tariff increase by 25%, introduction of toll discounts (10–13% of yearly payment) in November


avg. revenue 250 ths EUR/km vavg. rate EUR 0.174 v

Tolling system operates without major changes, cumulative collection surpasses EUR 1.92 bn in December 2013


avg. revenue 231 ths EUR/km xavg. rate EUR 0.161 x

Increase of toll rates by 25% for all vehicle categories except for Euro V, introduction of special rates for buses in September


avg. revenue 243 ths EUR/km vavg. rate EUR 0.164 v330 m

EUR

345 m

EUR

329m

EUR

6 I

Content

Content

Content I 7

Tolling System Implementation 8 and Evolution since 2007

Growing Importance of Tolling Revenues 18 for Infrastructure Financing

Regulatory Functions in the Tolling System 28

Electronic Tolling in the Central 36 European Region

Electronic Tolling in the European Union 44

Outlook for the Close Future of Toll Collection 50

The Tale of Three Scenarios: 56 Future of the Czech Toll Revenues

8 I

Tolling System Implementation and Evolution since 2007

Tolling System Evolution

Tolling System Evolution I 9

1. Every vehicle that is subject to the toll duty must be equipped with an electronic on board unit. The number of registered vehicles grew from 62 thousand at the system launch to 686 thousand in December 2013. Czech tolled roads are every day used by 46 to 63 thousand tolled vehicles; lower number of 16 to 20 thousand unique vehicles is registered by the system at weekends.

2. Costs between 2007 and 2013 amounted on average 29.5% of revenues, or EUR 565.6 m. The cost/income ratio is influenced not only by costs, but also by revenues that have not been consequently maximized in the Czech Republic.

3. The tolling system itself is owned by the Czech state. When the current operations contract with Kapsch consortium expires by the end of 2016, the system will be handed over to the Czech state and all improvement investments made between 2007 and 2016 can bear revenues well beyond the 2016 milestone.

12 I

The Czech DSRC system serves more than 680 thousand vehicles and is ready to receive data from GNSS units

The system delivered by Kapsch is built upon the microwave DSRC technol-ogy, using gantries for detection of vehicles. All vehicles that are subject to toll duty must be equipped by an on board unit (OBU) that identifies the vehicle in communication with the gantry. The OBU is provided for free, but a deposit of EUR 60 (CZK 1,550) must be paid by the driver and will not be returned in case the OBU was damaged. Each gantry represents an autonomous subsystem ca-pable of transaction generation, i.e. billing based on the vehicle category (truck/bus), emission class, day in a week, time and number of axles.

A new open telematic interface was implemented to the system in 2008. The interface allows external users to draw data on traffic flow generated by the tolling system.

While the Czech system was originally designed as a fully DSRC system, addi-tional features allowing for use of satellite based OBU positioning were imple-mented in 2008 and subsequently tested. The resulting “hybrid” central system is now able to receive transaction data from microwave gantries as well as from satellite GPS/GSM units that position the vehicle using satellite navigation and use cellular data to communicate the positioning and transactional information to the central system. The hybrid system is currently not used in commercial operation and may be used for distance toll extension on a wider network of national roads.

2012

25 595 638

538

75 527

470

2011

513

67 15

2010

57

2009

10

426

436

62

2013

686 33

2008

371

2007 2006

267

78

575

12t+ 3.5t - 12t Bus

Number of registered vehicles in the system (by the end of the year) between 2006 and 2013. Category “bus” was reported in one group with truck until 2010. Exempt vehicles are not included

Source: ESVZ ČR

2012

25 595 638

538

75 527

470

2011

513

67 15

2010

57

2009

10

426

436

62

2013

686 33

2008

371

2007 2006

267

78

575

12t+ 3.5t - 12t Bus

DATA:


60,000

50,000

40,000

30,000

20,000

10,000

0

2013

–12

2013

–06

2013

–01

2012

–12

2012

–06

2012

–01

20

11–1

2

2011

–06

2011

–01

2010

–12

2010

–06

2010

–01

12t+ 3.5t–12t Bus

Ø 56,215

The Czech tolling system witnessed in its short history a significant growth that surpassed expectations as well as assumptions made in the tender documenta-tion. The forecasted number of 70 thousand on board units was almost reached during the pre-sales phase by the end of 2006. The overall number of units has been growing ever since.

Not every registered vehicle uses the Czech roads every day. Mainly foreign ve-hicles visit the Czech Republic only several days a month or irregularly. An av-erage of 56 thousand vehicles a day was operated on tolled roads in 2013. Week-ends see a large drop to 18 thousand unique vehicles.

EUR 1.36 bn for the Czech highway infrastructure

Total gross income (toll collection minus costs of the General supplier) of the tolling system between 2007 and 2013 amounted for EUR 1.36 bn (CZK 34.7 bn). Average yearly gross revenue was EUR 193.7 m with a low of EUR 114.0 m in 2009 (when the payments for delivery of Phases 1 to 4 peaked in the model of deferred payments and the revenue was significantly impacted by the financial crisis).

Average number of unique vehicles that use tolled roads in the Czech Republic on weekdays from 2010 to 2013

Source: ESVZ ČR

data:

14 I

Tolling system is in state ownership and operated under PPP scheme

The tolling system—as any fee collection system or tax collection process—generates apart from its revenues also costs. Costs of the Czech system can be split to (i) delivery of the system and (ii) provision of services necessary for the system operation. The distinction of delivery and operations is reflected in the procurement model as well—the system property rights were transferred to the Czech state after its completion and the General supplier provides oper-ational services. Delivery and operations of the system are broken down into four phases:

Phase 1 – delivery and operation of the system on highways and motorwaysPhase 2 – delivery and operation of the system on selected national roadsPhase 3 – extension of the system to newly built sections of highways (for which the building permit will be issued on December 31st, 2017 at the latest)Phase 4 – extension of the system with additional 250,000 OBUs and introduc-tion of the tolling for light trucks (3.5 t+)

Next two phases extended the system with technologies and services that do not generate any tolling revenue, which sets them apart from Phases 1 to 4:Phase 5a – implementation of an open interface for telematic applicationsPhase 5b – implementation of the traffic management solution on the D1 highwayPhase 6 – implementation of the interface for satellite based OBUs (the “hybrid” system) Additional OBUs and related services (such as OBU refurbishment) were sup-plied outside the scope of the phases.The General supplier receives bonuses for system effectiveness exceeding 95% and reimbursement of fees paid to the issuers of credit cards and fleet cards as well. The effectiveness bonus equals to one half of the toll collection above the 95% threshold. Should the effectiveness decreases below 95%, the General sup-plier is obliged to pay the whole loss to the Czech state.


System delivery and operational costs of the general supplier amounted in the first seven years of operation a total of EUR 565.6 m for Phases 1–4The delivery of the system was financed through a scheme of deferred pay-ments. This PPP style of payment scheme conditioned by performance indi-cators of the system did not require any state funds exceeding the toll revenue at any time and allowed for use of toll revenue for system delivery payments. Payback on the delivery of the system for highways and motorways (total cost of EUR 101.88 m/CZK 2.67 bn) was just six months. Total costs of system delivery and operation in Phases 1–4 payable to the General supplier until December 31st, 2013 reached EUR 565.6 m (CZK 14.5 bn) without VAT.*

Cost breakdown by Phases 1–4 and construction/operation between 2007 and 2013 (EUR millions without VAT)

Source: Kapsch Telematic Services s.r.o.

3.94

7.00

13.47

5.22 7.62

2012

79.59

5.20

59.37

3.85

25.66

3.99

39.97

32.35

6.26

35.99

2007 2008

100.35

7.29

35.05

7.24

5.08 7.25

35.84

76.98 6.81 5.19

2010

5.02 5.08

13.92

2011

14.23

74.69

7.40

79.07

33.91

2013 2009

95.54

33.89

7.20 3.96

5.52

6.88

32.86

5.27

5.91

13.84

36.25

Phase 1 – delivery Phase 2 – delivery Phase 3 – delivery

New OBUs

Phase 4 – delivery Phase 1 – services Phase 2 – services Phase 3 – services Phase 4 – services OBU Recycling

Fees to card issuers Effectiveness bonus

3.94

7.00

13.47

5.22 7.62

2012

79.59

5.20

59.37

3.85

25.66

3.99

39.97

32.35

6.26

35.99

2007 2008

100.35

7.29

35.05

7.24

5.08 7.25

35.84

76.98 6.81 5.19

2010

5.02 5.08

13.92

2011

14.23

74.69

7.40

79.07

33.91

2013 2009

95.54

33.89

7.20 3.96

5.52

6.88

32.86

5.27

5.91

13.84

36.25

Phase 1 – delivery Phase 2 – delivery Phase 3 – delivery

New OBUs

Phase 4 – delivery Phase 1 – services Phase 2 – services Phase 3 – services Phase 4 – services OBU Recycling

Fees to card issuers Effectiveness bonus

*) We are quoting costs without VAT (as the VAT rate changed three times in the Czech Republic between 2007 and 2013 &

toll revenue is not a subject to VAT) and assign costs to years based on due date of invoices. We believe that this approach

reflects the structure of the contractual relationship based on deferred payments.

DATA:

16 I

Cost/income ratio of system operations decreased to 20.4% in 2013, international comparison remains difficult

Average cost/income ratio of the system in the seven years of operation reached 29.5%. Average cost/income ratio of operations was 21.1%. Such percentage per-formance indicators are however without any further context misleading as the cost/income ratios are influenced by costs as well as revenues that largely depend on the structure of the tolled network and tariffs.

Czech toll tariffs were significantly lower than in the neighbouring countries for almost five years until 2012. As the majority of system costs is fixed, the cost/income ratio is higher as the revenues have not been consequently maximized. Prevailing regulatory role of the system since the introduction of the signifi-cantly lower tariffs for Euro V+ vehicles in 2011 is also pushing the cost/income ratio higher. If the Euro V tariffs had been increased (as for all other emission classes) in 2011 and 2012, the cost/income ratio of operations in 2013 would de-crease to 15.9% from the 20.4% achieved in reality.

Cost/income performance of the tolling system is increasing with extension of tolling to roads with lower average revenue. In the Czech reality, we can demon-strate this effect with extension to selected national roads. While the fixed costs of operations are the same or slightly higher than in case of highways, the aver-age revenue is five times lower on national roads than on an average kilometre of highways.

Changing cost/income characteristics of the system, reflecting 2008–2009 peak in deferred payments for system delivery

Source: costs–Kapsch Telematic Services s.r.o., toll revenues–ESVZ ČR

0.4%

2012

23.1%

2009

1.1%

22.0%

2011

23.3%

22.9%

2010

28.7%

3.0%

25.7%

45.6%

21.4%

2008

18.4%

2007

29.6% 22.4%

12.8%

24.2%

16.8%

40.8%

24.0%

22.0%

2013

2.0%

Operating Cost Cost of Delivery

0.4%

2012

23.1%

2009

1.1%

22.0%

2011

23.3%

22.9%

2010

28.7%

3.0%

25.7%

45.6%

21.4%

2008

18.4%

2007

29.6% 22.4%

12.8%

24.2%

16.8%

40.8%

24.0%

22.0%

2013

2.0%

Operating Cost Cost of Delivery

data:


We have intentionally chosen not to compare the effectiveness of the Czech sys-tem with any other foreign countries. Different procurement models in various countries and their reflection into the financial and asset ownership relation-ships between the suppliers and operators make any international comparison a very delicate task. A trustworthy comparison would have to adjust data by in-fluence of road network length, price level of rates, traffic intensity as well as the already mentioned procurement model and accounting principles.

Phases 5a, 5b and 6 implemented the open telematic interface, traffic manage-ment solution on the highway D1 and interface for collection of satellite po-sitioning data from GPS/GNSS units. Cost of implementation (delivery), pilot testing and operation reached EUR 117.27 m (CZK 2.97 bn) without VAT between 2007 and 2013.While the investment in Phases 1–4 were targeted at toll collection (i.e. direct revenue generation), the main objective of the Phase 5 is management of the traffic on the overloaded highway D1. According to the European Commission, congestions cost Europeans about 1% of GDP. Aim of the traffic management system on D1 is to reduce these socio-economic costs. Investments into hybrid system may pay off in the future in case the hybrid (satellite) technology is used for introduction of tolling on national roads.

Revenues (toll collection), costs of the General supplier (for delivery and operations) and gross income of the toll system in its first seven years (EUR millions)

Source: costs Kapsch Telematic Services s.r.o., toll collection ESVZ ČR

Ø 193.7

265.7

2013

345.3

2011

250.1

-79.1

329.2

2012 2010

-79.6

253.5

-77.0

330.5 260.0

2009

-95.5

114.0

209.6

2008

-100.4 -74.7

141.1

-59.4

200.5 246.3

2007

Payments for deliveryand services

Revenue

145.9 185.3

Ø 193.7

265.7

2013

345.3

2011

250.1

-79.1

329.2

2012 2010

-79.6

253.5

-77.0

330.5 260.0

2009

-95.5

114.0

209.6

2008

-100.4 -74.7

141.1

-59.4

200.5 246.3

2007

Payments for deliveryand services

Revenue

145.9 185.3

data:

18 I

Growing Importance of Tolling Revenues for Infrastructure Financing

Infrastructure Financing

Infrastructure Financing I 19

1. Despite of declining toll revenues to EUR 329.2 m in 2013 due to the impact of regulatory policies on tariff structure, the total direct revenue of the Czech infrastructure grew to EUR 495.1 m. Direct revenues accounted already for one quarter of The State Fund for Transport Infrastructure revenues.

2. One of the key fiscal characteristics of the tolling system is the ability to collect the same fees from local and foreign vehicles, independently from their tax residency. This attribute is crucial for the Czech Republic because the share of foreign revenues grows from 39% in 2007 to 44% in 2013.

3. The key financial issue of every tolling system that is used primarily for infrastructure financing is the declining average weighted toll rate. Excessive discounts for the already prevalent Euro V vehicles push down the average weighted toll rate as well as the total revenue. Tariff increases in 2011 and 2012 have been effectively eliminated by the discount policy – tariffs adjusted by inflation are currently lower than in 2007.

20 I

The main goal of toll collection in the Czech Republic is to create one of the main financial sources for infrastructure financing. Since introduction in 2007, the system collected EUR 1.92 bn and the share of tolling revenues on the total incomes of The State Fund for Transport Infrastructure has been steadily ris-ing. Main reason for growing importance of toll revenues in the fund is however not their growth, but decline in other sources of income, mainly privatization revenues.

Direct revenues grow but still remain a minority source of financing

Two items stand out from The State Fund for Transport Infrastructure revenue overview—revenue from the electronic tolling and highway vignettes. These two categories represent the only direct revenues tied to actual use of the Czech infrastructure. All other revenue sources are either allocated tax revenues or transfers from the state budget. Highway stickers were introduced in 1995 for all vehicles to be replaced in 2007 by electronic tolling for large trucks and in 2010 for light trucks as well. Vignettes however remain an important revenue source. As passenger car traffic increases and vignette prices have been raised in the past years, the total revenue already surpassed historical levels achieved

Revenue sources of The State Fund for Transport Infrastructure in billions of Euros between 2006 and 2016 (real, budgeted and forecasted)

Source: SFDI annual reports, 2014 budget and mid-term outlook for 2015 and 2016 l 4

1.67

2016 Outlook

1.36

2.59

2013

0.18

0.21

0.97

0.28

0.21

0.14

0.34

0.15

2010

0.12 0.25

2011

0.28

0.46

0.30

0.30

2.30

2.58

0.79

0.39

0.18

0.20

0.25

2.00

0.24

0.12

0.27

3.19 3.13

0.67

0.19

0.19

0.16

2009

0.24

0.62

0.18

0.30

0.20

0.13

0.13

0.97

0.29

0.79

0.21

0.76

2007 2014 Budget

3.91

0.21

0.24 0.11

0.49

0.18

0.11

0.81

0.26

0.26

0.24

0.28

0.30

0.09

2008 2006

1.87

0.51

0.31

0.89

0.61

0.14

0.46

0.31

2.20

0.30 0.16

0.27

0.37

0.20

0.80 0.33

0.34

0.29

0.20

0.14

0.14

0.27 0.17

0.46

0.27

0.59

0.19

1.74

2015 Outlook

0.19

2012

0.19

0.27

Other Income

EIB Loans EU Funds State Budget Funds Privatization Revenues

Road Tax

Excise Tax on Fuel Vigne�eeToll

data:


Comparison of revenues from sale of highway vignettes and electronic toll collection since 2001 (EUR millions)

Source: SFDI annual reports, ESVZ ČR

1

459

329

123

260

501 495

166

155

2013

345

2011

129

330

2012 2010

383

2009

110 111

2007 2006

288

210

116 200

2005

102 84

87

2003

319 357

2004 2008

246

65

2001

51

2002

62

Vigne e eToll

+148%+72%

data:

when trucks paid vignettes as well. The total direct payments of the infrastruc-ture users surpassed the milestone of CZK 10 bn (EUR 407 m) in 2011 and the 2013 collection reached EUR 495.1 m.

The loosening relationship between taxed vehicle ownership or fuel consump-tion on one side and infrastructure use on the other side remains the weak point of the traditional tax revenue systems. Collection of fuel excise tax has gotten very complicated in the reality of Europe without borders. The tolling systems collect on the other hand fees from local as well as foreign vehicles, fol-lowing a strict non-discriminatory principle.

Shares of Czech and foreign vehicles on registrations (left) and toll revenues (right, EUR millions)

Source: ESVZ ČR

Czech Foreign 329

2012

43%

56%

2013 2010 2011

44%

57%

330

200 246

60%

40%

58%

260

59%

209

41%

58%

42%

345

61%

2009 2008

39%

2007

42%

2012 2013

686

2011

79%

21%

76%

638

77%

23% 595

78%

22%

2010

527

24%

2009

267 23%

2008

436 22%

78%

371

77%

2007

28%

72%

data:

22 I

Shares of foreign nationalities on the total toll collection from foreign vehicles according to the country of registration between 2007 and 2013

Source: ESVZ ČR

100% of foreign users


2013

17%

11%

3%

12%

25%

27%

2012

13%

23%

16%

4%

29%

2011

16%

11%

3%

28%

14% 14%

2009 2010

16%

10%

3%

22%

16%

3%

9% 11%

22%

29%

6%

15% 16%

2008

29%

16%

35%

18%

2007

15%

16%

2%

39%

6%

15%

20%

2% Hungary Poland Slovakia

Bulgaria Others

Germany Romania



2013

17%

11%

3%

12%

25%

27%

2012

13%

23%

16%

4%

29%

2011

16%

11%

3%

28%

14% 14%

2009 2010

16%

10%

3%

22%

16%

3%

9% 11%

22%

29%

6%

15% 16%

2008

29%

16%

35%

18%

2007

15%

16%

2%

39%

6%

15%

20%


Bulgaria Others

Germany Romania



2013

17%

11%

3%

12%

25%

27%

2012

13%

23%

16%

4%

29%

2011

16%

11%

3%

28%

14% 14%

2009 2010

16%

10%

3%

22%

16%

3%

9% 11%

22%

29%

6%

15% 16%

2008

29%

16%

35%

18%

2007

15%

16%

2%

39%

6%

15%

20%


Bulgaria Others

Germany Romania

data:

The Czech system collected between 2007 and 2013 a total of EUR 803.46 m (or 42%) from foreign vehicles. The share of Czech vehicles on the overall toll collec-tion has been declining from the 2007 level of 61.3% and reached 55.7% in 2013. Contrary to this development, the share of registered Czech vehicles in the sys-tem remains stable between 21% and 23%.

The largest share of the foreign toll revenues traditionally pay the vehicles registered in the neighbouring central European countries—Slovakia, Poland and Hungary.


The toll collection reflects macroeconomic situation of the Czech Republic as well as the central European region

The Czech tolling system has already witnessed a rapid economic growth, the financial crisis as well as the slow return to the modest growth after crisis. Sit-uation in the transportation sector is a traditional indicator of economic cycles and data from the system allow for analysis of time series comprising of very accurate data available almost in real time every day in the year.

While the sample of twenty-four quarters from 2008 till 2013 is already long enough to illustrate the correlation of the GDP and traffic performance meas-ured by the tolling system. The following chart shows this correlation by com-paring quarterly year-on-year GDP changes and number of kilometres travelled by trucks and buses on the tolled network.

Correlation between quarterly GDP growth and toll performance. GDP growth measured as change to the same quarter in the previous year, seasonally not adjusted. Toll performance measured as kilometres driven on the tolled road network

Source: toll data ESVZ ČR, macroeconomic data of the Czech statistical office as on March 11th , 2014

6%

4%

2%

0%

-4%

-2%

-6% 4Q

5.2%

3Q

6.5%

2Q

2.7%

1Q/13

-1.7%

3Q 1Q/12 4Q

0.1%

4Q 2Q

-2.8%

7.8%

1Q/11

23.9%

2Q

-0.9%

31.6%

1Q/10 4Q

-7.2%

2Q 3Q 3Q

17.0%

37.4% 27.5%

4Q 3Q

-13.1%

2Q 4Q 2Q

24.0%

1Q/08 1Q/09

19.8%

3Q

GDP of the Czech Republic Toll (paid kilometers)

Quarterly data

7.0%

-1.9%-2.2%-14.4%

22.9%

5.5% 0.6%

data:

24 I

Historical development of the average revenue per one tolled kilometre (EUR thousands) on highways, motorways and national roads

Source: ESVZ ČR

Ø 164

310

2013

63

175

2012

75

2010

187

334

2011

68

185

323

109

2008

222

69

131

58

265

2009

53

136

0

120

265

2007

293

Highways National Roads Motorways

Ø 164

310

2013

63

175

2012

75

2010

187

334

2011

68

185

323

109

2008

222

69

131

58

265

2009

53

136

0

120

265

2007

293

Highways National Roads Motorways

data:

Average revenue per tolled kilometre is mainly influenced by traffic density and tolled network structure

Average revenue per kilometre in the Czech Republic was decreasing between 2007 and 2009. Very small growth started in 2010. The average revenue rose in 2011 and 2012 reaching the peak in 2012—EUR 250 ths—thanks to the toll tariff raises in January 2011 and 2012. The decrease between 2007 and 2010 can be at-tributed to the financial crisis in Europe and changing structure of the Czech tolled road network. While the whole tolled network comprised only of high-ways and motorways in 2007, the numbers for 2008 onward are influenced by introduction of tolling on national roads.

Combination of lower rates on national roads and generally lower traffic inten-sities contributes to the decrease of the average collection per kilometre on the whole network. Average revenue in 2013 reached EUR 231 ths, the decrease was this time caused by the negative impact of Euro V tariff benefits.

The following graph depicts the average revenues per kilometre in a context of various road types. Revenue on average kilometre on highways is five times higher than on the national roads. The main reasons for this striking difference are the lower traffic density (average number of vehicles paying toll on one kilo-metre of highways was 1.85 m 2013, while only 732 ths vehicles paid on national roads) as well as lower average weighted toll rate (EUR 0.088 on a national road vs. EUR 0.168 on a highway).


Average weighted toll rate is the strategic indicator of revenue sustainability

The average weighted toll rate is the most precise expression of the average price paid by the transport companies for use of one road kilometre, taking into account composition of the fleets (emission classes, number of axles etc.) and actual performance in the price categories of the complex tariff tables. To keep the toll revenue sustainable, the average weighted toll rate should be stable or slightly rising. Decline of the average weighted toll rate can be offset only by a rather strong growth in the vehicle performance (driven kilometres) on the tolled road network.

I46

I38

I55 I58

I47

R63

I11

35

R48

28

R10

R35 R46

39

R55

R56

51

18

R52

D11

I33 84 77

R4

60

R6

65 I35 D3

76 73

I52

72 I30 R7

68

I48

67

94

337

163

141 134

105

D8

R1

260 246

216

150

340

148

D5

290 329 D2

D1 506

Average revenue of one tolled kilometre in 2013 broken down by road sections (EUR thousands)

Source: ESVZ ČR

Revenue differences among individual tolling segments are even higher than those of whole road sections. Yearly income of the least profitable segment of the national road I/47 (close to city Hulín) accounts only for 1.66% of yearly in-come generated by the most profitable segment in the Czech Republic, found on the highway D1 in Brno. Among the TOP 10 yielding tolling sections are only sections of the highway D1 and Prague ring road R1. On the other hand, the

10 lowest yielding sections are all on national roads I/47, I/55, and I/58.

26 I

Development of the Czech average weighted toll rate reflects impact of the regulatory policy that awarded significant discounts to the Euro V vehicles. According to the European trends, the rates introduced to the new system in 2007 were slightly differentiated by emission classes. The average weighted toll rate had been declining until 2010 as rates remained the same and the structure of fleets changed in favour of more ecological vehicles. The weighted average grew in 2011 and 2012 with 25% tariff increase in both years. However, as the tariffs for the Euro V vehicles remained unchanged, the weighted average grew only by 14.8% in 2011 and 8.7% in 2012.

The average weighted toll rate therefore reflects a situation of tariff freeze for category of vehicles that has overtaken majority of the performance on the highway network in time. The fast growth of Euro V vehicles to a share of 60% by the end of 2013 constitutes a significant revenue instability issue. The 2013 revenue declined in a situation of simultaneous traffic performance growth for the first time in history of the system.

The following chapter is therefore devoted to the possibilities and impacts of regulatory policies in the tolling systems that can motivate or demotivate certain behaviour through parameters of their tariff policies.

0.162

0.150

2010

2007

2008 0.151

0.137

2013

Average Weighted Toll Rate

2012 0.171

2011

2009

0.157

0.163

+0.9%

-6.3%

-0.8%

-8.9%

+14.8%

+8.7%

-4.5%

0.137

0.139

2010

2013

2012 0.149

2011

0.123

2009

2008 0.147

2007

0.137

0.162

-15.0%

-8.9%

-7.1%

-9.8%

+13.1%

+6.7%

-7.7%

Real Average Weighted Toll Rate

Development of the average weighted toll rate (in EUR) since 2007 in nominal (left) and real terms (right)

Source: ESVZ ČR, Czech statistical office

28 I

Regulatory Functions in the Tolling System

Traffic Regulation

Traffic Regulation I 29

1. Financial and regulatory functions of tolling systems are conflicting. The system can generate revenue and regulate, but the financial function will be subordinated to the regulatory policy and the system will not operate on its revenue potential.

2. The regulatory optimization is used mainly in the urban tolling systems in Europe as well as in the rest of the world. Friday’s afternoon peak time regulation as implemented in the Czech highway tolling system is rather an exception. Internalization of negative externalities based on tariff differentiation according to the emission classes remains the most widely used regulatory policy across Europe.

3. Support of Euro V vehicles through lower tariffs has had a negative impact of EUR 192.8 m since 2011. This experience practically shows that regulation through the tolling system is costly and some regulatory goals can be achieved also by other means. German subsidy programme for fleet renewals accomplished better results in a much larger country with similar costs.

30 I

Tolling system can be optimized either for revenue, or for regulation

Tolling systems in the Czech Republic as well as in the neighbouring countries have been built primarily in order to collect fees for infrastructure maintenance. The practical impact of this decision is a system design that does not leave the road users other economically efficient options than use of the tolled road. How-ever, when this design is combined with regulatory measures introduced to the system through tariff benefits for selected groups of road users, both roles—the financial and regulatory ones get into conflict.

The regulatory optimization is a significantly more complex task than the rev-enue maximization. A choice must be given the drivers—an option to change their behaviour toward the behaviour desired by the policy designers. These may include using a city bypass instead of shorter intra-city route and parking and using public transport for further travel to the city centre. The nature of the conflict between functions lies in the availability of single one optimization tool—the toll tariffs. Practically the regulatory function can co-exist with the fi-nancial function, but the financial function will not be able to use the tariffs for revenue optimization as the tariff structure is already optimized for regulation and the behavioural change.

Knowledge of transportation companies’ sensitivity to tariff alterations is the key parameter of every regulatory policy

The tariff management task becomes a behavioural economics exercise in form of tariffs that are exactly as high as needed to motivate the road users to change their behaviour (i.e. to change economic motivations of individual or company). Key parameter for this task is knowledge of the elasticity of demand for the infrastructure capacity. The elasticity shows the responsiveness to changes in prices. If the regulator strives to limit truck trips during peak times, the elastic-ity shows the percentage change (decrease) in kilometres driven at that particu-lar time after price change by one per cent.

Approximation of the elasticity is a very complicated task, usually achieved through large socio-economic research efforts. The non-linear nature of the elasticity makes the task even more complex. Experience shows that the elas-ticity can be studied only within a given context—for example drivers of pas-senger cars react differently from trucks, as well as a transportation company working in a just-in-time delivery context will act differently from a company that can afford to delay the delivery for a few hours.


The overall impact of the regulatory policies through tariffs does not limit it-self only to transport companies. Their clients who define the requirements as a part of their overall manufacturing and logistic chains largely determine their behaviour. Therefore, any successful regulation has to target decisions of the clients. This factor naturally does not make the regulatory task any easier.

Czech regulation through higher tariffs on Fridays is an example of peak time traffic influence

Variable rates are widespread in urban tolling systems and in the United States. A unique example of traffic regulation on a highway through the toll rate change is the Friday’s afternoon regulation in the Czech Republic. The clear goal of the regulatory intervention was to limit truck traffic in the Friday’s afternoon peak when people leave cities for the weekend.

The impact is depicted on the following chart, showing distribution of the dis-tance (measured in kilometres) travelled on a Friday before and after the regu-latory intervention.*

*) This hi-level analysis is illustrative, full impact analysis would require comparison of more than two Fridays, i.e. work

with a longer time series.

32 I

The graph clearly shows that part of the Friday’s afternoon journeys was moved from afternoon to morning hours. Drivers stop already before 3 pm when the higher rate zone starts and is valid until 9 pm. The graph depicts the original six hours higher tariff peak time, which was shortened by one hour starting on February 7th, 2014, following a European regulation (which allows for peak time tariff increases for maximum of five hours). The number of kilometres trav-elled in the regulated time zone decreased by 15% in the comparison of the two analysed days. 50% increase of rate and only 15% decrease in traffic show low price elasticity of demand in the given context of time, day of the week and the length of the increased peak time rate from 3 pm to 8 pm is this finding all but surprising.

Use of highway tolling systems for such peak-time regulations remains rare. Experiments with this kind of regulation are usually found in urban tolling sys-tems. The main reason is the conflict between regulatory and financial func-tions with the financial function being a priority in highway systems.

Internalization of negative externalities is a common regulatory use of tolling systems

Ecological policies of European states have a strong tendency towards inter-nalization of negative externalities, in practical terms putting an explicit price (through tax or toll) on negative effects of the heavy road transportation. The

4%

6%

2%

1%

5%

3%

23 3 1 0 2 17 21 18 11 8 22 9 6 15 12 5 20 16 14 13 7 4 10 19

unregulated regulated

Increased toll rates between

3 p.m. and 9 p.m.

Impact of the higher rates on the distribution of the intensity within a day: comparison of Friday May 18th, 2007 (without regulation) and May 14th, 2010 (regulated by higher tariffs)

Source: ESVZ ČR and own calculation

4%

6%

2%

1%

5%

3%

23 3 1 0 2 17 21 18 11 8 22 9 6 15 12 5 20 16 14 13 7 4 10 19

unregulated regulated

Increased toll rates between

3 p.m. and 9 p.m.

data:


goal of the taxation is to increase the costs of the activity that produces the ex-ternalities. The increased costs enter the decision making process of transporta-tion companies as well as their clients. The companies are in theory motivated to faster fleet replacement, the clients to a choice of transportation mode that reflects its overall costs.

A practical internalization tool is the toll tariff differentiation by emission class of the vehicle (currently Euro 0–Euro VI). This approach is the same all over Eu-rope, but the degree of differentiation in European countries differs.

The Czech experience of (continuously) supporting emission class Euro V that has already reached a share of 60% on the traffic performance shows a critical need to plan and evaluate financial impact of toll tariff regulations not only by the number of vehicles, but mainly by the share on distance performance. Mainly Euro V vehicles are more active (i.e. one vehicles has a higher perfor-mance in kilometres travelled on the tolled network), which further makes the effect of discounted tariffs higher.

Euro II

0.128

Euro II

0.065

Euro II

0.288

Euro V Euro V

0.155

Euro V Euro V

0.389

Euro II

0.324

0.437

0.162

Euro V

0.181

Euro II

0.234

Czech Republic Austria Slovakia Germany Poland

+29% +86%

+96%

+100%

+12%

Extent of the “ecological discount” for Euro V vehicles shown through comparison with Euro II rates in Central European countries (rates in EUR valid as of January 1st, 2014 for trucks with 5 axles, 12 t+)

Source: MYTOCZ, Asfinag, Sky Toll, Toll Collect, viaToll

Jan 2010

Jan 2009

Jan 2012

Jan 2013

Jan 2011

Jan 2008

Jan 2007

Euro 5 Euro 4 Euro 3 Euro 2 Euro 1 Euro 0

Euro V

Euro IV

Euro III

Euro II

Euro I

Euro 0

100%

The detailed performance data gathered from the tolling systems illustrates transfer of the performance from Euro III to Euro V vehicles. The Euro III vehi-cles used in the past few years for the majority of international highway trans-portation are gradually being replaced with new Euro V vehicles.

34 I

We can also observe that the employed regulatory policy did not manage to fa-cilitate replacement of the most environmentally harmful vehicles in classes Euro 0–II. As these vehicles run mostly outside the tolled network, the higher tariffs of the tolled network cannot provide sufficient economic motivation for their replacement.

Euro V

Euro IV

Share on Performance (Paid Kilometers)

11.52%

Euro III

0.36%

Euro II

Euro I

5.08%

Euro 0

26.41%

0.49%

56.13%

30.65%

1.49%

40.00%

11.14%

Share on New Registrations

3.81%

12.92%

Jan 2010

Jan 2009

Jan 2012

Jan 2013

Jan 2011

Jan 2008

Jan 2007

Euro 5 Euro 4 Euro 3 Euro 2 Euro 1 Euro 0

Euro V

Euro IV

Euro III

Euro II

Euro I

Euro 0

100%

Share of vehicles in individual emission classes on the overall traffic performance (performance measured by kilometres driven on the tolled network)

Source: ESVZ ČR

Comparison of the registrations and performance in individual emission classes in 2013

Source: ESVZ ČR

data:


Tolling is not the only regulatory tool, other measures are often more efficient ways towards regulatory goals

While the higher tariffs on Friday afternoon are an alternative to the total travel ban for trucks in peak times, there are also alternative measures that can be taken to support fleet renewals. Unfortunately, the Czech Republic did not make use of a targeted national subsidy programme for fleet renewal with ecologic ve-hicles. Such programme can according to the European rules support purchase of vehicles compliant with higher emission class than the one which is currently obligatory (i.e. Euro VI until December 31st, 2013 and hypothetical “Euro VII” ve-hicles starting with January 1st, 2014). German subsidy programme supported between September 1st, 2007 and August 31st, 2014 in total 86,500 purchases of Euro V and VI vehicles. Costs of the Czech Euro V tariff support (currently al-most EUR 193 m) are already very close to the costs of the German subsidies (EUR 196 m until the end of August 2013). The important structural difference between both approaches lies in the international context of freight transpor-tation. The German state budget subsidized purchases of vehicles by German companies. On the other hand, the foreign transport companies took benefits from EUR 93 m (48%) of the Czech Euro V tariff benefits in form of lost Czech toll revenue. Even the success rate of the German approach is higher as the traffic performance of Euro V+ vehicles in the Toll Collect system accounted for 83% of the overall driven distance, while the same indicator in the Czech system was only 61%.

The German fleet renewal subsidy is an example of efficient regulatory policy. The ecological differentiation of the tariffs on a basis of emission classes perma-nently acts in favour of externalities internalization (as any other tax would). The national subsidy programme on the other hand provided the one-time fleet renewal impulse. The Czech policy of low Euro V toll tariffs has chosen a per-manent support to motivate one-time fleet renewal—with very high costs and arguable success.

36 I

Electronic Tolling in the Central European Region

Electronic Tolling in the Central Europe

Electronic Tolling in the Central Europe I 37

1. The Czech Republic became the third central European country launching a nationwide tolling system in 2007. Electronic tolling systems have been used in all neighbouring countries since mid 2011.

2. Ever since the introduction of nationwide tolling systems in the central Europe, the tariffs in Austria have been the highest. The main reason is the highway-financing model that relies only on direct revenues from tolling (for trucks and buses) and vignettes for passenger cars.

3. Five central European tolling systems represent not only two technologies, but also a set of different infrastructure financing strategies. Such strategies are reflected in revenue and performance parameters of tolling systems.

38 I

When launched in January 2007, the Czech tolling system became the third na-tionwide truck tolling system in the central European region. Due to the launch issues of the German system, the Austrian launch of the DSRC microwave sys-tem in 2004 marked the first birth of electronic tolling systems in the central Eu-rope. Tolling systems have been however spreading fast over the region and all four Czech neighbours have been operating multi-lane free flow tolling systems since the launch of the Polish system in mid 2011.

Austria

Austria became on January 1st, 2004 the first country in Europe launching a na-tionwide electronic toll collection system for all vehicles exceeding gross weight of 3.5 t. The operator of the system is the state owner infrastructure company Asfinag. The microwave system is very similar to the solution implemented later in the Czech Republic and requires a compulsory on board unit named Go-Box. Toll rates are comparatively higher than in the Czech Republic. Special (higher) rates are collected on five selected roads crossing the Alps due to their higher in-vestment and maintenance costs. Special surcharge is collected on the Brenner highway during the night-time as well.

The system generated estimated EUR 1.12 bn revenue in 2013, collecting toll on 2,178 km of highways. Apart from the crisis year 2009, the toll revenues have been growing each year since introduction of the system as the tariffs are yearly being adjusted by inflation.

Germany

The first nationwide satellite based tolling system was launched in the middle of 2005 in Germany and is operated by a private company Toll Collect under a PPP scheme. The system combines GPS localisation of the vehicle with mobile data communication in GSM network to transmit the location and billing data to the central system. Use of the satellite OBU is not compulsory, the drivers can pay toll for a pre-selected route manually on self-service kiosks. The structure of the tariffs has been stable since 2009 while introduction of a new category for Euro VI vehicles is being discussed.

Tolled network was extended in August 2012 to 1,135 km by selected national roads (Bundesstrassen). Toll is now being collected on 13,999 km of roads and in 2013 the revenue reached stunning EUR 4.41 bn. The system collected over EUR 35 bn since its launch. The revenues grew till 2010 with a record yearly revenue of EUR 4.54 bn and started to slightly decline since 2010 due to the increasing share of Euro V+ vehicles that pay lower tariffs.

The German public private partnership “A-Model” is closely linked to the nation-wide toll collection. Typically the private entity takes over an existing section of the road that is to be refurbished and in some cases extended to 3+3 lanes. The private entity operates the section for 20–30 years and toll on the section is col-lected by the Toll Collect system (i.e. no new systems are built on the PPP sec-tions). The toll collection does not make the privately operated sections self-suf-ficient. Consequently, the existing financing gap is closed using other (tax) resources of the Government. As the A-Model projects usually transfer the de-mand risk to the private sector, the decisive price element in the public procure-ment process is the extent of the to the toll revenues. Typical A-Model projects are A1 Buchholz Kreuz (A1/A261)—Bremer Kreuz (A1/A27), A4 Hörselberge bypass, and A8 Bubesheim–Augsburg West. Other German PPP projects (A5 Baden-Baden–Offenburg, A8 Ulm–Augsburg, A9 Hermsdorf–Schleiz) do not transfer the demand risk to the private operating entity and are, therefore, procured and financed in the availability model of guaranteed payments independent from the actual toll collection.

Slovakia

Slovakia launched the satellite based tolling system in January 2010. Currently the system collects toll from all 3.5 t+ vehicles on 2,681 km of highways, motor-ways and national roads, while the national roads make up to 73% of the tolled network. Vehicles must be equipped with an on board unit. The previously used ticketing scheme was abolished in September 2013. Another large set of changes was introduced to the system in January 2014. This expansion was initially com-bined with extension on further 980 km of road sections within cities (which were previously excluded from tolling even though the road as such was tolled outside the city). Toll was charged to transiting vehicles, but this measure was cancelled in March 2014 because of protests of transport companies.

Tariff table is now restructured to accommodate Euro V, Euro VI and EEV vehi-cles as the Euro IV category was merged with Euro III. Following the example of foreign systems, transport companies can now claim volume discounts.

Toll collection in 2013 amounted for EUR 159 m. Total revenue in the first four years of operation reached EUR 610 m. System was delivered and is now being operated in a 13-years operation agreement by a private company SkyToll.


40 I

Poland

Poland launched its tolling system in the middle of 2011 on 1,573 km of highways, motorways and national roads. Further extension of the tolled network in 2012 and 2013 increased the length of the tolled network to 2,653 km. The goal of the Polish government is to toll up to 7 thousand kilometres by 2018. The micro-wave solution requires the vehicles to be equipped with an on board unit named viaBOX. An exception on the Polish network is the A2 highway from Lodz where toll is still collected manually, however, ETC lanes were established to allow for seamless passage of trucks equipped with OBUs. Operator of the system, private company viaToll, collected EUR 240 m (PLN 1 bn) in 2013.

Austrian tariffs remain the highest in the region

As the toll revenues are only a fraction of the infrastructure investments in the central Europe, tariffs are usually set politically. The situation in the Czech Republic is not different with tariffs being regulated on a basis of a govern-ment decision. However, the global limits are set in the Directive 1999/62/EC as amended by the Directive 2006/38/EC. Both directives stipulate the principle of toll collection up to the real life-cycle costs of the infrastructure, maintenance, service provision and toll collection.

Due to the complexity of tariff tables, simple average cannot be used for inter-national tariff comparison. We have, therefore, chosen to compare actual tariffs for the most used category of vehicles used in long haul international trans-portation—truck with gross weight above 12 tons, with 5 axles complying with the Euro V emission class. The presented simplified comparison however does not reflect the international context of purchasing powers. Even with this sim-plification, the comparison is relevant for international routing decisions (e.g. whether to use Czech or Austrian highway on the Frankfurt—Budapest route).

The Czech tariffs remained unchanged since the launch of the system until 2010. Prices were at half the Austrian ones, while the German tariffs were 30% higher. After minor tariff adjustments made in 2010, drivers of the above men-tioned truck category paid in Austria 98% more than in the Czech Republic.

The first substantial tariff raise came in 2011 when all categories except for Euro V vehicles saw a 25% increase of tariffs. The gap between Czech tariffs and neighbouring countries got therefore smaller, prices in certain categories be-came even higher than in Germany and Slovakia. Prices for the already signifi-cantly increasing Euro V category however stayed on the 2010 levels.

The same measure was repeated in January 2012. Prices for all categories except for Euro V were once again increased by 25%. Tariffs for Euro 0–IV categories


are now higher than in Germany and Slovakia, while the prevailing Euro V trucks still pay more than twice the Czech price in Austria.

During the next year, 2013, only Austria adjusted the rates. All other central Eu-ropean countries did not change their tariff tables (note: difference depicted in the graph is a reflection of the currency fluctuations, mainly CZK/EUR). Aus-tria and Slovakia raised their tariffs in January 2014. Combined with the depre-ciation of the Czech Crown against Euro in the autumn 2013, this raise leads to a record difference between Czech and Austrian tariffs. As of now, a 12 tons Euro V truck with 5 axles pays 2.6 times more per one kilometre in Austria than in the Czech Republic.

Profitability of tolling systems in the Central Europe reflects various tolling strategies

Five central European tolling systems represent not only two technologies, but also very different infrastructure financing strategies that, furthermore, define the role of tolling systems as well as their revenue and performance characteristics.

Austria is an example of thorough highway fee collection from all trucks and buses (with gross weight above 3.5 tons). The tariffs are rather high as the toll revenue is a key income source for the infrastructure management company Asfinag that has no other significant revenue apart from tolls, vignettes (sold to passenger cars) and special tolls collected from passenger cars for passage of alpine mountain passes and tunnels.

Austrian tolling system is with no compromise optimized for revenue maxi-mization. Toll is collected only on highways where the toll collection is very ef-ficient thanks to the limited network with high traffic density. Tariffs reflect real infrastructure lifecycle costs and are adjusted by inflation regularly every January. Higher costs of alpine highways and tunnels are also reflected in more expensive tolls paid on such sections. The result of this strategy is clear—the highest average revenue per kilometre and steadily growing revenue.

Germany has chosen a strategy of tolling only vehicles with gross weight ex-ceeding 12 tons, initially only on highways. Only since 2012, the tolling has been extended to selected sections of national roads (“Bundesstrassen”). As the infra-structure is partially financed from tax revenues, the tariffs are lower than in Austria. Lower average revenue per kilometre also reflects lower tariffs and toll-ing of non-highway roads that bear lower yields than highways.

42 I

The Czech Republic, Slovakia and Poland on the contrary introduced tolling also on a significant part of non-highway roads as the core highway network of three countries still awaits completion. Lower revenue from non-highway roads due lower tariffs and traffic intensity results in comparatively low average revenues. This effect is at best observed in Slovakia, where national roads represent 73% of the tolled network length.

Strong preference of regulatory functions in the tolling system makes the Czech tolling strategy stand out not only in the region, but also in Europe. Increased tariffs on Friday afternoon and significant discounts for Euro V vehicles (in com-parison with Euro V) are unique. While the Austrian strategy is purely focused on revenues, we can describe the Czech strategy as one with a strong regulatory reference, while the financial revenue function is secondary.

Comparison of highway toll tariffs for a Euro V compliant truck with gross weight above 12 tons, with 5 axles

Source: MYTO CZ, Asfinag, Toll Collect, SkyToll, viaToll

2014

EUR 0.065 EUR 0.155

EUR 0.181 EUR 0.389

EUR 0.150

2013

EUR 0.065 EUR 0.155

EUR 0.189

EUR 0.065 EUR 0.155

EUR 0.189

EUR 0.164

2011

EUR 0.347

EUR 0.357 EUR 0.162

2012

EUR 0.163 EUR 0.323

EUR 0.189

EUR 0.189

EUR 0.328

EUR 0.155

EUR 0.155

EUR 0.168

2010 Germany Poland

Slovakia Austria Czech Republic*

2014

EUR 0.065 EUR 0.155

EUR 0.181 EUR 0.389

EUR 0.150

2013

EUR 0.065 EUR 0.155

EUR 0.189

EUR 0.065 EUR 0.155

EUR 0.189

EUR 0.164

2011

EUR 0.347

EUR 0.357 EUR 0.162

2012

EUR 0.163 EUR 0.323

EUR 0.189

EUR 0.189

EUR 0.328

EUR 0.155

EUR 0.155

EUR 0.168

2010 Germany Poland

Slovakia Austria Czech Republic*

*) The toll rate for

the Czech Republic is

considered for common

week (the Friday’s

afternoon tarrifs are not

included).

data:


The only neighbouring country to employ regulatory measures in the tolling system is Austria with a very limited extent on the Brenner highway (higher tariffs in the night try to limit noise).

National tolling strategies reflect the local situation, priorities and toll revenue significance in the overall infrastructure-financing model. The short introduc-tion to the local context also shows pitfalls of international comparison without thorough reflection of national specifics.

PL

90.5

CZ DE

315.0

SK

65.0

AT

514.2

231.6

Average revenue of one tolled road kilometre in the Czech Republic, Slovakia, Austria, Germany and Poland as of 2013 (in EUR thousands)

Source: ESVZ ČR, Asfinag, Toll Collect, SkyToll, viaToll, own calculations

44 I

Electronic Tolling in the European Union

Electronic Tolling in the European Union

Electronic Tolling in the European Union I 45

1. Electronic toll collection has been regulated in the European Union since 1999 by a number of directives that focus mainly on tariff policy, interoperability and internalization of negative road transportation externalities.

2. The currently last Directive 2011/76/EU introduces the environmental surcharges and defines their maximum allowed amounts for noise and pollution. This directive has not been transposed to the Czech national law yet.

3. The European commission sees the need to conclude a toll payment contract in each country as a barrier on the internal market. Introduction of the interoperable European Electronic Tolling Service (EETS) is, therefore, a priority in the European tolling policy.

46 I

Common European policy

In course of the past twenty years, the set of European tolling directives laid out financial, technical and regulatory requirements for nationwide tolling systems. The directives create a definition of framework in which all the tolling systems of member states have to operate, while many decisions are left to individual consideration of the member states and toll chargers.

The directives require collection of fees on highways, but there are no European rules for tolling on non-highway infrastructure. The directives define a meth-odology and financial limits for calculation of toll tariffs. The tariffs themselves are not harmonized and each country can individually decide the pricing, fol-lowing the harmonized methodology. In addition to the infrastructure lifecy-cle cost driven tariff calculation, member states can levy ecological surcharges as a measure for negative externality internalization. Last but not least, the technology choice between DSRC and GSM/GNSS is left to the member states as well.

Internalization of negative externalities is one of the main concerns

The latest addition to the family of European tolling directives—the Directive 2011/76/EU*—takes another step towards internalization of negative external costs of road transportation. Toll rates may, therefore, be in the future increased by environmental surcharges.

The directive stipulates the methodology for calculation of negative external-ities caused by noise and air pollution. Increased toll fees will in the future in-ternalize both the sources of externalities. The maximum fee for air pollution is set to 12 Euro Cents on interurban roads and 16 Euro Cents on suburban roads. Noise surcharge will not exceed 2 Euro Cents while distinguishing day and night.

Internalization of external costs into the costs explicitly born by transport com-panies increases motivation for modernization of vehicles and usage of interur-ban roads (where possible).

*) Directive 2011/76/EU is after the Directive 2006/38/ES another change to the origi-

nal Directive 1999/62/ES on the charging of heavy goods vehicles for the use of certain

infrastructures.

European interoperability is a key long term goal

Introduction of the technical and contractual interoperability of individual na-tional tolling systems in Europe has been a clear priority of the European Com-mission for several years. The current model of having one on board unit for each country is seen as a barrier on the internal market and a source of ineffi-ciencies. One universal unit for toll payments all over Europe would simplify operation of the national systems and save costs in transport companies that have to maintain multiple contracts and equipment for European operation. The interoperability design does not hamper competition of OBU manufactur-ers and suppliers of the local collection systems. If the manufacturers stick to the standard, all units will be able to communicate with tolling systems using standardized open interfaces.

Interoperability of tolling systems is stipulated by the Directive 2004/52/ES and the related Commission Decision 2009/750/ES. Their main goal is to prevent de-ployment of incompatible tolling systems in Europe. The directive defines pa-rameters of the European Electronic Tolling Service (EETS), allowing payment of toll using one device (unit), one contract and one single payment. The technical execution foresees communication between the local toll collection operators and OBU providers using the standard ISO 12 855 that specifies details of tech-nical protocols for data transaction accounting and other necessary adminis-trative data exchanges.

The European Electronic Tolling Service defines contractual rules for the ecosys-tem of EETS providers (OBU issuers), toll chargers (national system operators, i.e. payees) and payers (drivers, transport companies). The basic working princi-ple of EETS is similar to a mobile phone roaming—use of mobile phone abroad while having a contract only with the “home” operator and paying a single bill.

All EU countries should prepare their infrastructures for EETS launch not later than on October 13th, 2014.

REETS—on a way towards EETS

The “Regional European Electronic Tolling Service” project (REETS) is the most significant step towards achieving the EETS vision so far. The project analyses the contractual, procedural and technical issues in order to recommend an ac-tual solutions for EETS introduction. A total of seven EU member states (Aus-tria, Belgium, Germany, Denmark, Spain, France, Italy and Poland) and Switzer-land have been working on the project together with the association of future EETS Service providers AETIS since 2013. The project efforts are co-financed by the European Union through the TEN-T agency.


48 I

While the true European interoperability remains a challenge, the EasyGo+ interoperable model is extending from Scandinavia to the Central Europe

Several smaller interoperability efforts have been developed alongside EETS for the past ten years. Majority of them is focused on technical interopera-bility, while the contractual (procedural) interoperability remains still in the background. Technical interoperability allows for use of one on board unit in multiple states. The contractual interoperability, on the other hand, simplifies contractual relationships.

Bilateral interoperability (as for example between Austria and Germany) con-nects two countries, but the current focus is on multilateral interoperability projects. EasyGo+ is the so far largest multilateral project born originally in 2007 in Scandinavia (Denmark, Sweden and Norway). It is also the only mul-tilateral project supporting contractual interoperability among multiple coun-tries. One service provider facilitates access to all participating tolling systems and other services (such as ferries or bridges) and issues one invoice to the trans-port companies.

EasyGo+ expanded from Scandinavia to Germany and Austria in November 2013. The AutoPASS and BroBizz on board units can now pay for tolls in Norway and Austria, bridges in Sweden, Norway and Denmark as well as ferries mainly between Denmark and neighbouring countries including Germany.

Ambitious French satellite based project EcoTaxe is suspended and launch date is currently not known

French plan to introduce a special ecological tax “EcoTaxe” has run into prob-lems. The system presented for the first time in 2011 should have been launched in 2013. However, no firm launch date was set until March 2014. EcoTaxe is the first satellite based nationwide tolling project in one of the largest EU countries since deployment of the German system. EcoTaxe even surpasses size of the Toll Collect system in both key parameters—the network should encompass 15,000 km of national as well as local roads and all vehicles with a gross weight above 3.5 tons will be liable to EcoTaxe payments.


Use of electronic technologies for tolling systems in Europe

Source: own analysis

GPS / GSMLSVA

DSRC data:

Public transport will be exempt from EcoTaxe. The actual tax rate will be based on number of axles, emission class and weight of the vehicle. Trucks will pay between 0.119 EUR/km for emission class Euro VI up to 0.196 EUR/km for emission class Euro I.

50 I

Outlook for the Close Future of Toll Collection

Outlook for the Close Future

Outlook for the Close Future I 51

1. The operations contract for the Czech system expires by the end of 2016. Continuity of the system operations has therefore become a current topic in the Czech Republic. The selection of the future system operator is connected also to the intention to extend tolling to national roads that has been discussed for several years.

2. While the most attention is paid to the future of the system beyond 2016, the burning issue of 2014 is the decreasing revenue. Stabilization of the revenue through tariff management measures can be implemented immediately.

3. New infrastructure financing models based on direct revenues from truck and passenger car tolls are becoming common in Europe. Various models of toll collection from passenger cars are becoming a European topic as the discussion in Germany intensifies.

52 I

Future of the Czech tolling system beyond 2016 is today’s most current national topic

When the current operations contract with the Kapsch consortium expires by the end of 2016, the current microwave DSRC system covering highways, motor-ways and selected sections of national roads will remain owned by the Czech state. Following the December 2013 government decision, the existing system will be upgraded to support EETS before 2016 in order to fulfil requirements of the valid European Directives.

The current main topic surrounding the future of electronic tolling in the Czech Republic is therefore very clear: the continuity of the toll collection in the Czech Republic in the context of re-use of the existing valuable assets and current dis-cussions on system extension to broader network of national roads.

European directives currently require tolling of non-highway roads in case the highway network of the country has not been completed yet and national roads replace the highways. The Czech Republic, as well as neighbouring Slovakia and Poland used this possibility. The Czech Republic tolled almost 200 km of national roads that replace (yet to be built) highways connecting important border cross-ings and the existing highway network (e.g. I/33 from Hradec Králové to Poland, I/52 to Austria). The second reason for national road tolling was prevention of tolled road bypassing (e.g. I/48 that could almost perfectly replace highway D1 for drivers looking for an alternative to the tolled road).

The decisive parameter for economics of any toll extension to national roads is the average income from one kilometre of such a road. Average revenues in the Czech Republic are significantly lower on national roads than on high-ways. Average revenue per kilometre of national road in 2013 amounted only for EUR 65 ths, while the average kilometre of highway and motorway generated EUR 259 ths revenue. Plans for extension the distance-based tolling model to non-highway roads will, therefore, calculate with real traffic intensities on the roads, not extrapolating current revenues. Rise of toll rates and increasingly cheaper technology would be, on the other hand, the motivating factor for dis-tance-based tolling.

Decision whether to maximize revenue, or use the tolling system for traffic regulation is crucial and can not be deferred further

As we have clearly shown in previous chapters, the tolling system can be op-timized either for revenue maximization, or used to carry out regulatory poli-cies. Despite of being strategically designed as revenue bearing, the regulatory functions prevailed in the Czech system over the past few years. This fact is well reflected by the decreasing revenues due to the low Euro V tariff and other discounts.

The newly formed tolling strategy, that is to take shape in the next months, has to come finally to a clear decision—what is the primary goal of the tolling sys-tem in the Czech Republic? This key strategic decision paves way to answering tactical questions such as extent of the tolled network or tariff structure based on key financial, or regulatory performance indicators.

Should the revenue optimization prevails in the Czech system, the revenue has to be structurally stabilized

In case the main goal of the tolling system is not changed from financial to reg-ulatory by a formal government decision (which would replace the original 2005 decision which is still valid), it is necessary to stabilize the tolling revenues as soon as possible and fully restore the main financial task of the tolling system. The stabilization is possible only by restructuring of the tariff table, reflecting the growing share of Euro V vehicles. This measure has to stop the decline of the average weighted toll rate we have been observing since 2013.

Tariff management should focus on prevention of similar situation as the one we are experiencing now. Higher transparency and lower risk of unforeseea-ble impact of ecological policies can be achieved through toll rate split into two parts:

1. Fee covering the cost of the infrastructure limited by the Directive 1999/62/ES amended by the Directive 2006/38/ES: the same fee for all vehicles, differentia-tion only by the extent of the wear (weight, number of axles)

2. Internalization of external costs pursuant to the Directive 2011/76/ES: by the level of air pollution (rate based on the Euro classification) and noise, taking into account time of the day and location (interurban/suburban)


54 I

The future tariff strategy should be able to quickly adapt on the changing en-vironment (such as inflation, changes in infrastructure costs) as well as traffic patterns and fleet composition.

If the traffic regulation by the system becomes the main concern, new performance metrics has to be defined

Should the decision be made to officially shift the system objective from financ-ing to regulations, the current performance and cost indicators will not be ap-plicable anymore. The cost/income ratio of operations (that reached 20.41% in 2013) can serve as an example—if the Euro V tariffs had been raised in the same manner as tariffs for other emission classes, this ratio would fall to only 15.95%.

If the system revenues remain to be burdened by the impact of regulatory pol-icies, the newly introduced performance indicators have to focus on success of the regulations rather than on traditional revenue and cost metrics.

Passenger cars tolling is growing to a European topic thanks to the intentions of new German government

The second possible extension direction of the distance-based fee collection model is passenger car tolling. Introduction of such a concept was discussed in the Czech Republic as one of the options how to leverage the existing micro-wave DSRC infrastructure on highways. Discussion of a similar electronic fee collection concept has emerged even in Germany, country with a strong tradi-tion of free highways. Fee collection for use of highways by foreign drivers be-came even one of the hottest topics of the 2013 general election campaign.

Electronic systems can collect time based (creating an “electronic vignette”) as well as distance-based fees. Both options bring better control of payments and less fraud. The distance-based model is also fair payment dependent on actual use of road by individual drivers.

56 I

The Tale of Three Scenarios: Future of the Czech Toll Revenues

Revenue Scenarios

Revenue Scenarios I 57

1. Future revenues and profits of the Czech truck tolling system until the end of the current operations contract by the end of 2016 largely depend on tariff decisions for 2015 and 2016 that have to be taken in 2014. The basic scenario built upon assumptions of moderate economic growth and no changes in tariffs predicts the total revenue for 10 years of system operation on a level of almost EUR 3 bn.

2. Introduction of automatic tariff adjustments by inflation would prevent decline of revenues in real terms. However, a significant revenue increase can be achieved only by tariff table restructuring. The financially most important measure is abolition of the excessive Euro V discounts as this category of vehicles has already overtaken the majority of traffic performance and its share is still increasing.

3. The total revenue potential of the Czech tolling system between 2007 and 2013 with the current tariff policy, without the excessive Euro V discounts, was EUR 2.11 bn. Due to the discounts, the potential was filled only to 91% with revenues of EUR 1.92 bn.

58 I

The future of the Czech tolling system is generally tied to the end of 2016, a mile-stone that marks the end of the current operations contract with the Kapsch consortium. The remaining two years (2015 and 2016) however remain available for revenue optimization of the system that is suffering from decreasing reve-nues. The following three scenarios demonstrate impact of several decisions on the tolling revenues. All scenarios are built upon assumptions of a modest eco-nomic growth (of 2–3% real GDP), inflation growth (2.6% in 2014 and 2.4% in 2015) and growing share of the Euro V vehicles to 80% in December 2016.

Scenario number one: business as usual, no changes

The first scenario is built upon preservation of the current tariff policy until the end of 2016. Neither tariff changes, nor changes within the tariff table struc-ture are taken. As the share of Euro V vehicles enjoying the heavily discounted tariffs is rising, the revenues are almost flat. However, as the Euro V saturation progresses, the indicators of revenue growth and distance travelled on the tolled network start to converge. The 2013 situation of growing performance and de-creasing revenues should not therefore repeat.

Despite the optimistic macroeconomic forecasts, the revenues in the basic scenario do not exceed the threshold of CZK 10 bn (EUR 367 m) until 2016.

4,000

0

3,500 3,000 2,500

2,000 1,500 1,000 500

2016 2015 2014 2011 2010 2013 2009 2008 2007 2012

Lost Scenario Scenario 3 Scenario 2 Scenario 1

+585 4,000

0

3,500 3,000 2,500

2,000 1,500 1,000 500

2016 2015 2014 2011 2010 2013 2009 2008 2007 2012


+585

Cumulative toll revenue (in EUR millions) in scenarios since 2007 (real data are depicted til 2013, forecasted ones from 2014)

Source: ESVZ ČR, own calculation

data:

Scenario number two: introduction of Inflation adjustment of tariffs The second scenario introduces inflation adjustment of tariffs starting on Jan-uary 1st, 2015 (for all categories in the tariff table, adjustment by inflation rate of the previous year). The inflation adjustment itself could generate EUR 27.7 m additional revenue in 2015 and 2016 only.

Automatic inflation adjustment of tariffs (e.g. stipulated by law) would be a very important factor in achieving stability of tariffs in real terms. Inspiration can be drawn among others from Austria.

Scenario number three: return to the pre-2011 extent of ecological tariff differentiation

The third scenario assumes a significant tariff policy change on January 1st , 2015. Apart from inflation adjustment introduction (same as in the second scenario), the Euro V rates would be raised in the same extent as all other categories in 2011 and 2012—“twice by 25%”. The 2015 revenue therefore jumps by EUR 143.5 m to EUR 497.3 m (instead of EUR 353.8 m).

The cumulative revenue of the third scenario in 2015 and 2016 is EUR 320.4 m higher than in the basic scenario.


500

550

400

350

300

450

250

0

Evolution of toll revenue (in EUR millions) in scenarios since 2007 (real data are depicted til 2013, forecasted ones from 2014)

Source: ESVZ ČR, own calculation

4,000

0

3,500 3,000 2,500

2,000 1,500 1,000 500

2016 2015 2014 2011 2010 2013 2009 2008 2007 2012


+585 data:

60 I

The lost scenario

The last scenario is entirely hypothetical and models a situation without Euro V discounts already since 2011. All tariffs (including the Euro V) would be raised twice by 25% in 2011 and 2012. This state is then kept unchanged until the end of 2016 (this scenario therefore does not work with inflation adjustments as the scenarios #2 and #3 did). Revenues of this scenario grow faster since 2011 and the yearly collection exceeds the threshold of CZK 10 bn (EUR 367 m) already in 2012. The 2014 collection in this scenario surpasses EUR 454 m (CZK 12 bn).

The cumulative ten-year revenue exceeds the basic scenario by EUR 585 m.

While the future economic development and toll revenues can only be predicted with a high degree of uncertainty, one remains clear: the only significant source of revenue growth is tariff structure adjustment.

czech tolling system at the age of seven

Documents

tolling system implementation

system revenues

rate eur

ths eurkm vavg

vtolling system

toll duty

ths eurkm xavg

czech toll revenues8