1. Stakeholder forum
Consultation on Heavy vehicle Road Reform Phase 2 Independent price regulation and Forward Looking Cost Base
August 2018
First of all welcome to the stakeholder forum/webinar. Marsden Jacob have been asked by the Transport and Infrastructure Council to prepare a Regulation Impact Statement of independent price regulation for heavy vehicle road infrastructure charging and also the introduction of a forward looking cost base.

2. Introductions
Matthew Clarke, Associate Director (Transport & Reform expert) 
Melbourne Office
Alex Marsden Associate Director (Reform & RIS expert)
Perth Office
Two Marsden Jacob staff are here today to present – Matthew Clarke and Alex Marsden. Our details are shown on the slide.

3. Agenda Background on the Heavy Vehicle Road Reform program
Overview of reform options for the Regulation Impact Statement (RIS)
Analysis of the options – cost benefit analysis
Key questions for stakeholders
Next steps and timelines
An overview of the agenda is shown on the slide. We will first provide an overview of the broader heavy vehicle road reform program and reform options for the regulation impact statement. We will then provide an overview of the analysis of the options (including cost benefit analysis) then discuss the key questions we are seeking to be addressed from stakeholders then finally we will discuss next steps and timelines.

4. Background on the Heavy Vehicle Road Reform (HVRR)
We will start by providing an overview of the current heavy vehicle road reform program and then discuss how the current RIS fits within this program

5. Broader HVRR program
The Transport and Infrastructure Council of COAG agreed in May 2015 to progress a reform road map that involves four phases
The program builds on joint work by governments on heavy vehicles between 2007 and 2014 which links back to the Productivity Commission review in 2006
The PC review found that current pricing and regulatory arrangements are hampering the efficient provision and productive use of road and rail infrastructure
To address problems with the current heavy vehicle charging and investment arrangements, the Transport and Infrastructure Council agreed in May 2015 to progress Heavy Vehicle Road Reform (HVRR) and agreed on a reform road map that set out a four-phase reform program. The road map outlines reform steps along the path to full market reform of heavy vehicle investment and charging arrangements. The road map builds on joint work undertaken by governments on heavy vehicle road reform between 2007 and 2014 which links back to the Productivity Commission review of road and rail infrastructure pricing in 2006.

6. Four phase HVRR program
The Transport and Infrastructure Council’s reform road map comprises four phases.
The first phase of reform aimed to improve transparency around road expenditure, investment and service delivery. Initial measures have included the publication of the heavy vehicle asset registers and state and territory expenditure plans, with the second editions published in early These provide a basic level of reporting of service levels and proposed expenditure on key freight routes.
In November 2017, the Transport and Infrastructure Council agreed to commence work on a regulation impact statement to examine the costs and benefits of the implementation of independent price regulation and a forward-looking cost base. The regulation impact statement is a key part of implementing Phase 2 of the heavy vehicle reform road map. Also of note, in pre-testing elements of phase 4, is that the Commonwealth Government has announced two initiatives to engage heavy vehicle operators on the reform: the National Heavy Vehicle Charging Pilot and the Business Case Program for Location-Specific Heavy Vehicle Charging Trials.
The third phase of reform is currently under development and involves reforming road funding arrangements to achieve a more direct link between heavy vehicle charges and road service delivery.
The fourth phase (which is still some years away) would see the current revenue determination process (PAYGO) be replaced with more direct road user charges.

7. End state / full economic regulation
The ultimate objective of Heavy vehicle road reform is to turn the provision of heavy vehicle road infrastructure into an economic service, where feasible. This would be similar to the way other utilities are regulated (like water, electricity, gas and rail).
This would see a market established that links the needs of heavy vehicle users with the level of service they receive, the charges they pay and the investment of those charges back into road services.
As an illustration of the ideal end state, this is depicted in the slide as five components:
Improved investment coordination and planning is where investment plans take into account industry priorities and community service obligations.
Independent economic regulation involves full economic regulation, where an independent regulator is given oversight of pricing and road investments, involving a framework similar to those currently used in other sectors, such as water, energy and telecommunications. This type of reform should enable heavy vehicle charges to be set to recover economically efficient road management investments and to meet agreed service standards.
For road managers this involves road services being delivered to defined standards according to agreed investment plans. To support this, road managers gain funding certainty to promote long-term planning and asset optimisation.
For heavy vehicle operators: Road users pay charges that more directly reflect the costs imposed by road users on the road network. This is sometimes referred to as ‘direct charging’, as charges more closely reflect the nature of road use that affects the cost of road provision, such as the weight on each vehicle axle, the distance travelled by a vehicle and the location of travel.
Revised funding arrangements involves establishing a more direct link between heavy vehicle charging revenue and funds available for road investments. This type of reform should improve the ability of road managers to invest in capital expenditure and maintenance projects that best maximise net benefits for road managers and road users.

8. Overview of reform options for the Regulation Impact Statement (RIS)
We will now turn to objective of the regulation impact statement and then discuss the reform components for each of two options outlined in the regulation impact statement

9. Objective of RIS
The objective of the HVRR Phase 2 reforms (considered in the RIS) is to implement key steps towards full economic regulation of heavy vehicle road expenditure. This will be achieved by:
reforming governance arrangements
reforming charging arrangements as well as
introducing mechanisms to allow for improvements to investment prioritisation.
The reforms in the RIS only partially addresses key problems with current arrangements and therefore partially shift towards the full end state.
The objective of the RIS is to implement key steps towards full economic regulation of heavy vehicle road expenditure by reforming governance and charging arrangements as well as introducing mechanisms to allow for improvements to investment prioritisation. However, the reforms in the RIS only partially addresses key problems with current arrangements and therefore partially shift towards the full end state shown on the previous slide.
Mention that we have already been around to see each of the states.

10. Current charging arrangements
State governments
Local governments
Other inputs (e.g. road use data)
Expenditure template
ABS expenditure data
Historical expenditure
NTC recommend new charges (RUC and registration)
The current charging arrangements are illustrated on this slide. Since 1992, the National Transport Commission (NTC) has made periodic recommendations to the Transport and Infrastructure Council (TIC) about heavy vehicle charges. Charges are set by the NTC based on historical expenditure on state and local roads and other inputs (such as road use data). Heavy vehicle charges comprise the road user charge (RUC) and registration charges. Once new charges are approved by the Transport and Infrastructure Council, the Australian Government and individual states and territories have discretion to adopt or not adopt the recommended NTC charges.
Transport and Infrastructure Council approval
Charges implemented at discretion of state and territory governments

11. RIS options
Do nothing
Status Quo
Reform option A
Option A implements a simple level of independent price regulation
Reform option B
Option B is a more progressive step with slightly more ambitious implementation settings
This slide shows that the RIS sets out three options. Do nothing and Reform options A and B. We will explain Reform options A and B in more detail on the next slide. Reform option A implements a minimum level of independent price regulation while option B is a is a larger step involving slightly more ambitious regulatory reforms. As shows on the slide, option B thus can be seen as a bit further along the continuum from current practice to the end state of full economic regulation.
Current system
Option A (most basic IPR)
Option B (IPR plus)
Full economic regulation

12. RIS options Parameter Reform option A Reform option B Network coverage
All roads currently covered under pay-as-you-go (PAYGO)
Independent regulation
Basic price regulation
See below
Basic price regulation plus
Some additional scrutiny of expenditure, but no power to disallow
Formal mechanism for user input into pricing determinations (e.g. expert panel)
Can alter the mix of registration charges and RUC, but changes are to be revenue neutral to governments
The Independent Price Regulator (IPR):
reviews expenditure proposals to ensure consistency with the scope of the charging system
requires expenditure proposals in comparable formats
sets a suitable rate of return
corrects for under- and over-expenditure in the previous period (a ‘true-up’ mechanism)
determines prices in law.
Reform option A and B are defined by eight components. These reform components were developed by a working group comprising all state and territory governments. Therefore, although Marsden Jacob is undertaking the RIS process, we did not develop the reform components.
We will discuss the reform components over two slides with the first two components on this slide.
The first component is network coverage and the point to be made here is that the intention is for the reform options to incorporate all roads currently covered under the National Transport Commission’s PAYGO or pay as you go charging model.
The second component is independent price regulation which involves a new independent price regulator undertaking a range of new activities. We will refer to the independent price regulator as the IPR. The RIS makes no assumption about who the independent price regulator would be.
As shown on the slide, the role of the IPR under option A and B can be defined by a number of points. There are some points that are common to both reform option A and B and there are three additional points which solely relate to option B.
The role of the IPR under option A and B is defined by the five dot points in the horizontal box at the bottom of the slide.
Under the first dot point, the IPR reviews state road agency expenditure proposals to ensure consistency with the scope of the charging system. The NTC has historically undertaken informal and formal checks of the alignment, consistency and accuracy of state government road expenditure with the current expenditure template (and supporting guidelines). However, the NTC does not currently have formal powers to compel state and territory governments to participate in review processes. Under Reform options A and B, the IPR would be able to undertake formal scrutiny and review processes, which compel governments to participate, in order to scrutinise and review the alignment of proposed forward-looking expenditure with the IPR’s guidelines.
Under the second dot point, the IPR requires state road agency expenditure proposals in comparable formats. This is similar to the NTC’s current approach, but slightly enhanced. The key difference is that, unlike the current arrangements, the IPR would have the power to reject forecast expenditure if the forecast is not provided in the required format.
Under the third dot point, The IPR sets a suitable rate of return. This is directly related to the implementation of the building block model and forward looking cost base which will be discussed later. The rate of return is important under the building block model as it contributes to estimating the return on capital building block.
Under the fourth dot point, The IPR corrects for under- and over-expenditure in the previous period (a ‘true-up’ mechanism). This is not relevant under the current PAYGO model as it uses historical expenditure. However, under a forward looking cost base it is required as actual expenditure may be higher or lower than forecast expenditure.
Under the fifth dot point, The IPR determines prices in law. Under the current approach the NTC recommends price changes to the Transport and Infrastructure Council. Once the price changes are agreed by the Council, state and territory governments then decide to implement all, some or none of the changes. Clearly, the difference is that under Reform options A and B once the IPR determines the price it becomes law and does not need to go through the current approval and implementation processes.
Under Reform option B the role of the IPR would be broader as identified by three additional points As shown on the slide there are three parts to this.
Under the first dot point the IPR would be able to scrutinise the prudency and efficiency of expenditure proposals. However, the IPR does not have the power to disallow expenditure – it can only highlight expenditures that may nor may not be prudent or efficient. This may result in the IPR highlighting different practices across jurisdictions, which may lead to further analysis of the reasons for those differences.
Currently the NTC has no power to assess the efficiency of costs or whether expenditure is necessary or prudent.
Under the second dot point, the IPR would establish a formal mechanism for user input into pricing determinations (e.g. expert panel). This builds on some existing consultation mechanisms at a state level on transport infrastructure and also the NTC consultative mechanisms.
Under the third dot point, the IPR would be able to alter the mix of registration charges and RUC, but changes are to be revenue neutral to governments. The NTC currently has the ability to recommend changes to the mix of registration and road user charges. However, changes to the mix are typically constrained as it impacts the respective revenues of federal and state governments. Under the reform being proposed, the mix is able to change with the assumption that any change in the registration portion of the charging mix would see States and Territories receive a corresponding allocation of fuel excise receipts to maintain each state’s total share of current revenue received. It is also noted that any changes to federal financial relations arising from decisions about the IPR and FLCB would be considered separately by the relevant cross-jurisdiction working group.

13. RIS options (cont’d) Parameter Reform option A Reform option B
Forward-looking cost base
Apply a building-block model (BBM) to determine allowed revenue. One BBM for each state or territory government
Levels of service
No change to existing levels of service
Customer service charter for key freight routes (not a legally binding commitment)
Data requirements
Maintain existing data measurement and reporting
Improved data measurement and reporting to assist with expenditure oversight. This will apply only to state and territory roads
Price setting
Regulator sets a band of allowable registration charges, which allows jurisdictions to move towards nationally consistent charges during a transition period
Hypothecation / funding reform
Maintain the existing system of funding via government budget processes (with general lack of hypothecation and transparency)
Community service obligations
Maintain existing funding to ensure minimum levels of service on all roads.
This slide shows the next six components that define reform options A and B.
The third component relates to implementing a forward looking cost base. The National Transport Commission will present on this after our talk. Essentially this involves estimating forward looking road expenditure and placing it within a standard building block model that is used in other regulated sectors. This contrasts with the current PAYGO charging model which is based on historical expenditure.
The fourth component relates to levels of service. Reform option A is no change to current arrangements while reform option B allows for road managers to establish a customer service charter for key freight routes, noting that the charter is yet to be defined and would not be legally binding. While the charter is not yet defined, the Heavy Vehicle Infrastructure Rating (HVIR) provides a useful starting point for discussions on the charter.
The fifth component relates to data requirements. Reform option A maintains existing data measurement and reporting while Reform option B involves state road managers providing a range of data that assists the IPR with expenditure oversight – an example could be more detailed information on maintenance expenditure and road traffic on different roads.
The sixth component relates to price setting. Under both reform options, the IPR would set a band of allowable registration charges, noting that registration charges are not currently identical across jurisdictions. Every time there is a price reset this allows state and territory governments to move towards nationally consistent charges during a transition period.
The seventh component relates to funding reform. Under both options there are no changes to the current funding arrangements. It is proposed that this would be included in phase 3 of the reforms.
The eight component relates to community service obligations. Both options do not involve introducing a community service obligation framework or, again, changes to funding arrangements that link to minimum levels of service being achieved.

14. Key changes in charging arrangements
Current
RIS reform options
State governments provide historical expenditure to NTC
Option A and B
State governments provide forward looking expenditure to the IPR (e.g. 2 years)
NTC has no powers to scrutinise historical road expenditure
Option B
The IPR undertakes scrutiny of the efficiency and prudency of expenditure proposals (and past expenditure) assisted by comparative benchmarking
The Australian Government and individual states and territories have discretion to adopt the recommended NTC charges
The IPR sets the charges in law
The NTC can recommend changes to the mix of registration and road user charges, noting that changes to the mix are typically constrained as it impacts the respective revenues of federal and state governments.
The IPR can alter the mix of registration charges and RUC, but changes are to be revenue neutral to governments
The key changes in charging arrangements that flows from reform options A and B are illustrated on this slide.
Under current arrangements, state governments provide historical expenditure to NTC which are then used to estimate charges. Under reform options A and B state governments will provide forward looking expenditure instead of what they have already spent.
Under current arrangements, NTC has no powers to scrutinise expenditure while under Reform Option B the independent price regulator undertakes scrutiny of the efficiency and prudency of expenditure proposals (and past expenditure) assisted by comparative benchmarking.
Under current arrangements, the Australian Government and individual states and territories have discretion to adopt or not adopt the recommended NTC charges while under reform options A and B the independent price regulator sets charges in law.
Under current arrangements, the NTC can recommend changes to the mix of registration and road user charges, noting that changes to the mix are typically constrained as it impacts the respective revenues of federal and state governments while under reform option B the independent price regulator can alter the mix of registration charges and RUC, but changes are to be revenue neutral to governments.

15. What’s not part of the RIS?
The RIS does not examine the full reform package or mass distance charging. It focuses on the components in reform options A and B.
The RIS also does not contain detailed settings for the independent price regulator and forward looking cost base, such as:
Valuing the regulated asset base
Cost base allocators
Determining the cost of capital
These regulatory settings are yet to be determined (either by governments or the IPR) and will be examined via subsequent additional policy work and industry consultations.
We have spent some time talking about what is in the RIS. It is also worth noting what is not in the RIS. The RIS does not examine the full reform package or mass distance charging. It focuses on the components in reform options A and B. Additionally, the RIS does not contain detailed settings for the independent price regulator and forward looking cost base, such as valuing the regulated asset base, cost base allocators and determining the cost of capital.
These regulatory settings are yet to be determined (either by governments or the independent price regulator) and will be examined via subsequent additional policy work and industry consultations.

16. Cost benefit analysis of scenarios
Benefits have been examined under two scenarios:
Scenario
Approach to estimate benefits
Scenario 1: No further reform undertaken
Estimate efficiency benefits associated with the components of the current reform
Scenario 2: Further reform undertaken
Estimate avoided cost of delay – the benefit of the full end state being achieved earlier than otherwise the case
We will now turn to the cost benefit analysis of the options presented in the RIS.
Benefits and costs have been examined under two scenarios.
Under scenario 1 no further reform is undertaken after the implementation of Reform options A or B. The approach to estimate benefits under this scenario is to examine the efficiency benefits associated with each of the reform components in Reform options A or B only.
Under scenario 2 further reform is undertaken after the implementation of Reform options A or B and by this we mean that some version of the full end state we talked about on an earlier slide is assumed to occur some time in the future. The approach to estimate the benefits under this scenario is to examine the avoided cost of delay which is the benefit of the full end state being achieved at an earlier point in time than would be the case without Reform Options A and B going ahead.

17. Cost benefit analysis of scenarios (Cont’d)
Under Scenario 1 in the RIS, benefits are examined by:
Using the end state benefits estimated in 2017 Deloitte Access Economic report (Option 1 = $10.8 billion in present value terms) as starting point
Making adjustments (e.g. excluding components not in scope for this reform) to estimate a revised end state reform benefit (=$5.8 billion)
Examining how much of the $5.8 billion could be attributed to Reform options A or B)
Under scenario 2
The full end state reform benefit used to estimate the avoided cost is $13.4 billion
Starting with Scenario 1, benefits are examined in the regulation impact statement by using the value of end state benefits estimated in 2017 Deloitte Access Economics report as a starting point – in particular Option 1 in that report which has a value of $10.8 billion in present value terms.
Then, after making some adjustments we estimate a revised end state benefit, such as to exclude components of option 1 in the Deloittes report that are not relevant for this RIS, which is valued at $5.8 billion.
Finally, the key question is then how much of the $5.8 billion can be attributed to Reform options A or B
Under scenario 2, The full end state reform benefit used to estimate the avoided cost is $13.4 billion which is an average across the three options in the Deloittes report.

18. Threshold approach
A key challenge with Scenario 1 is estimating the proportion of $5.8 billion that can be attributed to the reform since:
Difficult to assess the extent to which road managers will change behaviour & improve efficiency in response to Reform options A and B.
Some key reform components, which are integral to full reform, are not part of Reform options A or B – e.g. IPR power to disallow, funding reform.
As a result, the RIS applies a threshold test that examines whether it is likely that the benefits will be greater than the incremental costs, taking into consideration the type of benefits identified in the RIS and how they may contribute, even partially, to the end-state benefits.
A similar approach is taken with Scenario 2, as it is difficult to know how much the end state will be delayed if Reform option A or B are not approved.
Because it’s a partial reform we know we wont see all the benefits.
So we looked at what is the minimum amount of the benefits we would need for the benefits to be bigger than the costs.
A key challenge with Scenario 1 is estimating the proportion of $5.8 billion that can be attributed to the reform since it is difficult to assess the extent to which road managers will be incentivised to improve the efficiency of their investments in response to the specific type of reforms envisaged under Reform options A and B.
Additionally, some key reform components, which are integral to quantifying the end state, are not part of Reform options A or B – for example full economic regulation which provides for the independent price regulator the power to disallow and funding reform which provides for charging revenues to be returned in some way to road managers.
As a result, the RIS applies a threshold test that examines whether it is likely that the benefits will be greater than the incremental costs, taking into consideration the type of benefits identified in the regulation impact statement and how they may contribute, even partially, to the end-state benefits.
A similar approach is taken with Scenario 2, as it is difficult to know how much the end state will be delayed if Reform option A or B are not approved.

19. Determining the threshold
The net benefits are greater than zero if the following threshold values are achieved.
Scenario
Threshold values
Scenario 1: No further reform undertaken
0.16% of $5.8 billion for Reform option A
1.3% of $5.8 billion for Reform option B
Scenario 2: Further reform undertaken
Avoids a delay in achieving the end state by 6 days for Reform option A
62 days for Reform option B
The thresholds estimated in the RIS are illustrated on this slide. They reflect the costs associated with implementing either of the two reform options. Under scenario 1, for the benefits to be greater than the costs approximately 0.16% of the revised end state benefit of $5.8 billion are needed to be achieved under reform option A and 1.3% for reform option B. For example, this means that the costs of the reform for Reform Option A are 0.16% of $5.8 billion or $9 million.
Under scenario 2, the threshold is reached if implementing Reform option A avoids a delay of 6 days in implementing the full end state reform and 62 days for Reform Option B.
Clearly, these thresholds appear small. However, there is a question as to whether there are material efficiency gains which we will discuss in coming slides.

20. $9 million (present value) $92 million (present value)
Reform costs
Type of costs
Reform option A
Reform option B
Establishment costs
Establish regulator
Establish FLCB method and processes
Develop regulator benchmarking system
Develop data and analytical systems to support expenditure scrutiny
Ongoing costs
Forward-looking cost base data provision
Benchmarking analysis
Data provision and systems maintenance
Customer service charter (monitoring etc.)
Expert panel
Total
$9 million (present value)
$92 million (present value)
The thresholds were estimated based on the estimated reform costs. The type of costs that were estimated are illustrated in the slide and include both establishment and ongoing costs. These costs are additional to those under business as usual. A full description of these costs and how they were calculated is contained in section 6 of the regulation impact statement. The costs are estimated at $9 million in present value terms for Reform option A and $92 million for Reform option B. The costs were estimated based on direct discussions with each state and territory government as well as the National Transport Commission and the ACCC.

21. Scenario 1: Potential efficiency benefits
Reform components
Potential benefits
Reform options A and B
Independent price regulation
Benefit 1: More optimal lifecycle maintenance decisions
Forward-looking cost base
Further scrutiny of maintenance expenditure
Benefit 2: Increased efficiency from better governance through forward-looking pricing and economic regulation
Further scrutiny of capacity expansion expenditure
Reform option B only
More formal industry consultation mechanisms
Customer service charter for key freight routes
Benefit 3: Better quality roads
As stated on a previous slide, a key issue is whether the benefits will be significant enough to outweigh the costs. To help examine this issue we link the reform components to potential benefits as illustrated on this slide. For example, introducing independent price regulation and a forward looking cost base has the potential to facilitate more optimal lifecycle maintenance decisions by road managers and hence reduce maintenance costs. Another example is the customer service charter which has the potential to incentivise road managers to provide better quality roads.
Higher RUC (as % of total heavy charging revenue)
Benefit 4: More efficient pricing leading to lower vehicle operating costs
Reform options A and B
Independent scrutiny of expenditure categorisation

22. Scenario 1: size of benefits?
Revised end state benefit types
Revised end state benefit
Contribution of Reform options A/B to Revised end state benefits?
Key assumptions underlying $5.8 billion
Key questions to assess benefit contribution
Benefit 1: More optimal lifecycle maintenance decisions
8.6% lower overall maintenance costs
What amount of the 8.6% lower cost?
PV of $1.5 billion
Benefit 2: Increased efficiency from better governance through forward-looking pricing and economic regulation
7% lower capital expansion expenditure
What amount of the 7% benefit?
PV of $3.2 billion
To further this discussion, this slide shows the upper bound potential end state benefits that could be delivered by Reform options A and B. For example, more optimal lifecycle maintenance decisions is estimated to have a present value of $1.5 billion under the full end state and assumes an 8.6% reduction in maintenance costs. The 8.6% was sourced from the Deloittes report. The question for this regulation impact statement is what proportion of the 8.6% could be achieved via Reform options A or B given they only partially take us along the way or continuum towards full end state reform. The slide illustrates a similar question that can be asked of capacity expansion expenditure and road quality improvements. The present value of shifting to a more efficient RUC is estimate to be around $17 million in present value terms, although we note that there are a lot of assumptions used to estimate this figure which impacts its robustness.
0.4% improvement in road quality each year
What amount of the 0.4% improvement each year?
Benefit 3: Better quality roads
PV of $1.1 billion
Benefit 4: More efficient pricing leading to lower vehicle operating costs
Lower vehicle operating and financing costs
0% of benefit for Reform option A/100% of benefit for Reform option B
PV of $17 million

23. Scenario 1: Enabling and limiting factors
Benefit type
Enabling factors
Limiting factors
Benefit 1: More optimal lifecycle maintenance decisions
Encourages efficient investment over the longer term
Additional scrutiny may encourage lower maintenance costs
A one- or two-year forecast may not result in much change
No reforms to road funding
Benefit 2: Increased efficiency from better governance
IPR undertakes place public scrutiny of expenditure proposals
Scrutiny assisted by comparative benchmarking
More formal industry consultation impacts investment prioritisation
Existing processes already provide a level of scrutiny
Existing freight industry consultation forums already provide a degree of formal user input mechanisms.
Benefit 3: Better quality roads
The charter results in some roads receive a higher level of service than they would have otherwise receive.
The charter applies only to key freight routes.
No reforms to funding.
Benefit 4: More efficient pricing
A road user charge (RUC) that is set at a higher level to reflect more efficient pricing will not exceed the current fuel excise level.
It is unclear whether there are any limitations.
As explained before it is challenging to know how much the type of reforms will incentivise road managers to deliver material benefits. Some key factors that we believe will enable or limit the benefits from being large enough to outweigh the costs are illustrated in this slide. As an example, introducing a forward looking cost base and other components has the potential to lead to a more optimal lifecycle maintenance program. This is benefit 1 on the slide. Under the enabling column, this has the potential to encourage efficient investment over the longer term under both Reform options A or B and additional expenditure scrutiny under Reform option B has the potential to encourage lower maintenance costs. However, under the limiting factors column, if implementing a forward looking cost base only incorporates 1 or 2 year forecasts this may not result in much change to the maintenance program. Similarly, if there are no reforms to road funding (which is the case under reform options A or B) this limits the ability of road managers to alter their maintenance program.
This slide provides a number of enabling and limiting factors. We are keen to get feedback on the extent to which enabling and limiting factors will impact the size of the benefits. For example, do the limiting factors limit benefits from being delivered in such a way that the benefits are not significant in a threshold sense?

24. Key cost benefit issues
While the thresholds appear low, we would welcome input from stakeholders on whether they consider that the benefits are likely to be sufficient to outweigh the costs, taking into account:
the potential for the reforms to contribute to end state benefits in terms of lower maintenance costs, lower capacity expansion costs and improvements in road quality
the enabling and limiting factors which may influence the potential to achieve the thresholds
Therefore, taking into account the previous slides, while noting that the thresholds appear low, we would welcome input from stakeholders on whether they consider that the benefits are likely to be sufficient to outweigh the costs, taking into account the potential for the reforms to contribute to end state benefits in terms of lower maintenance costs, lower capacity expansion costs and improvements in road quality and the enabling and limiting factors which may influence the potential to achieve the thresholds.

25. Key questions (1)
Key questions we are seeking feedback via submissions:
Background questions
Is the RIS reform objective appropriate?
In general, do you support the program of heavy vehicle road reform?
Overview questions
Of the reforms considered in this Consultation RIS, which reform option(s) do you support? What are your reasons/concerns?
Do you think that the preliminary analysis presented in this RIS understates or overstates the costs of any of the options? If so, by how much and in what ways? Are there costs that will be borne by industry we have not included in the RIS?
Do you think that the preliminary analysis understates or overstates the benefits of any of the options? If so, by how much and in what ways?
What impact will Reform option A or B have on road maintenance costs?
What impact will Reform option A or B have on road capacity expansion costs?
What impact will Reform option A or B have on road quality and levels of service?
The key questions we are seeking feedback on via submissions are…

26. Key questions (2)
Do you believe that any of the reform options will result in other impacts (such as regulatory burden, competition impacts or increased risks) compared to the current arrangements?
Thinking of your preferred reform option, are there particular elements that you feel strongly about and either support or oppose?
Please explain your reasons and describe the change in costs and/or other changes that are likely to arise.
What other matters should decision-makers take into account when considering whether to implement an IPR and FLCB?
Transitional arrangements
When laws and regulations are changed, the arrangements and timings for introducing and enforcing the new laws are often referred to as ‘transitional’ arrangements.
Can you identify particular changes for which a particular type of transitional arrangement would provide a benefit?

27. Next steps
Please provide written feedback on the proposed options by close of business on Friday, 31 August 2018.
Submissions can be provided via or hard copy.
Please send electronic copies of submissions by to .
Please send printed copies of submissions to
Marsden Jacob Associates Level 4, 683 Burke Rd CAMBERWELL  VIC   3124 Attention: HVRR CRIS
Submissions may be published (unless marked confidential).
Copy of the presentation will be made available on
The intention is to produce a draft RIS by the end of October 2018.

28. Questions
Questions?
That’s the end of our presentation. We would be happy to take questions (following the NTC presentation in the case of the webinar)

29. Final Slide
The end