Discussion Papers

Gernot Müller

Zur Ökonomie von Trassenpreissystemen

Nr. 279 / August 2006

Summary

A vitally important element of the 2001 reform of the common railway law (First Railway Package), also implemented in Germany last year, is the recast of the provisions concerning railway infrastructure charges. They now have to fulfil certain requirements relating to the price level (cost recovery plus rate-of-return, considering state contributions), must be founded on a given costing methodology (marginal cost pricing, mark-ups designed for cost recovery), shall be differentiated according to certain criteria (scarcity during periods of congestion, environmental impacts, cost savings), and must promote quality improvements. An interpretable wording of the provisions, partially contradicting objectives, and prevailing differences between the national railway infrastructure charging systems demand a further need for alignment. Moreover, the national regulatory bodies shall be equipped with some precise guide for an effective verification and valuation of charging principles and levels.

In this context, an economic analysis of railway infrastructure charges is helpful to draw a couple of essential conclusions. Considering the different political, market structural and network specific conditions, a complete international adjustment of charging systems seems to be unrealistic. Indeed, some basic principles and framework terms (transparency, non-discrimination, prohibition of cross-subsidization) as well as the criteria for costing (methodology, definition, measurement), cost recovery targets, the congestion charges, the performance regimes for quality improvements (bonuses, penalties, compensations), the inclusion of externalities, and the pricing parameters should be harmonized.

Despite several problems, marginal cost prices, Ramsey-based charges or two-part tariffs should be advocated in determining railway infrastructure charges. If allocative efficiency and the shifting of traffic are prominent, prices have to be calculated on the basis of short-run marginal costs or incremental costs respectively. Long-run marginal costs or LRAIC are advantageous if capacity constraints or long-run agreements prevail. Due to the dominating cost and demand functions of the railway infrastructure sector, marginal cost pricing implies deficits for the infrastructure manager. To avoid deficits and state contributions and to secure the highest possible level of allocative efficiency at the same time, Ramsey-based charges have to be set. They offer starting points for a comprehensive price differentiation, and can factor in cost and quality divergences, a varying degree of capacity saturation and customer characteristics. Under ideal conditions two-part tariffs guarantee economic efficiency, the generation of additional traffic volume, and cost recovery. [Full text available in German only]

Diskussion Paper is available for download.

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