Operating costs in Norwegian toll companies: a panel data analysis

Abstract

The objective of this paper is to ease the planning of new toll projects by providing estimates of operating costs, and to help us make better informed decisions about the design of the toll collection system. To do so we use panel data for Norwegian toll companies to estimate average cost functions.The main results can be summarised as follows. We provide evidence of very important unexploited economies of scale. The estimates cost curves are very steep for traffic levels below the sample mean, and becomes almost entirely flat over a wide range above the sample mean. A higher share of vehicles using on board units will significantly reduce average costs. Competitive tendering will significantly reduce average operating costs by as much as 25 %. Our results also suggest that increased number of lanes, higher debt and passenger charging will increase average operating costs whereas average operating costs are lower for toll cordons compared with other projects.

The efficiency of Norwegian road toll companies

“…Odeck (2008) extended these studies, but in the context of efficiency and productivity measurement using Data Envelopment Analysis (DEA). He verified the claims by Welde and Amdal (2006) and Amdal et al (2007) to the extent that there are scale economies in the sector, there are potentials for efficiency improvements and added that toll companies have in fact improved their productivities over the years studied, possibly as a result of using new technologies for toll collection. The objective of this paper is to contribute further to the debate surrounding the performance of toll companies in Norway.…”

“…Operating costs are real costs and are also important from a socio economic point of view -the higher the operating costs, the lower will the net present value of a toll financed road be. As stated by Amdal et al (2007), all toll roads should provide a net benefit in social costbenefit analysis terms, generate substantial net revenues and be acceptable to a major proportion of the public. Minimising the operating costs is critical for meeting all these three basic criteria.…”

“…However, a related issue that has been debated recently in the transportation literature is the operating costs of tolls; see for instance Prud'Homme and Bocajero (2005), Mackie (2005) and Raux (2005). In the Norwegian context that we relate to in this paper, Welde and Amdal (2006) and Amdal et al (2007) have investigated the levels of operating cost per vehicle in the Norwegian toll road industry. They applied regression analysis using panel data and found that operating costs varied tremendously between 6 and 20% of gross revenues with the larger toll companies serving larger traffic levels having lower operating costs per vehicle served.…”

Revisiting the cost of the Stockholm congestion charging system

“…For comparison, a corresponding cost ratio for the Norwegian toll rings is in the range of 9-10%. (Amdal et al, 2007) By these cost ratio measures, the Stockholm system seems very expensive. Using cost ratio as a measurement of efficiency of a congestion charging system is however not completely relevant.…”

“…To measure efficiency is to relate quantity of outcome to its required quantity of input. Amdal et al (2007) therefore rightly chooses cost ratio as their primary illustration of toll operators" efficiency. But the desired outcome of the Stockholm system was not primarily to collect funds, but to improve the traffic situation.…”