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Regulation

 

Introduction – The powers of any PTA are defined by regulations that govern the modes of transport and functions of the Authority.  The regulatory framework determines the way in which transport services are designed, planned and produced. The definition of transparent rules for the allocation of responsibilities and sharing of risks between the different agents of the system is thus an indispensable tool for the management of public transport. These regulations have to be fully understood by all stakeholders to avoid any confusion and possible conflicts

Levels of regulation

Regulation at the EU level stems from the recent White Paper- “Roadmap to a Single European Transport Area– Towards a competitive and resource efficient transport system” (European Commission, 2011) and the Citizens’ Network Green Paper.  These have prompted significant changes in the legal and organisational frameworks of public transport in a number of member states. These changes aim at improvement in transparency, economic efficiency and quality of the service provided. The levels and powers of government varies from country to country and impacts on the success of its transport policies.

In practice, whatever regulatory regime is in force, its success strongly depends on the effectiveness of the relationship between authorities and operators. That is, one of the main functional roles of authorities is to induce operators to conduct their business towards the achievement of the strategic goals of the system, for which complementary schemes of incentives and penalties are an indispensable tool.

It is important that the role of regulation is recognised by PTAs as they are critical to the decision making policies that will be adopted by the organisation. A successful PTA structure in one country may not provide a transferrable model due to a number of factors unique to a local site for example; regulation, political support and operational conditions.

Several kinds of legal features can govern the relationship between transport authorities and transport operators. Licences, authorisations, concessions, contracts, etc. are examples of such relationships. The legal frameworks of the various member states are determinant in the shaping of such relationships. Furthermore, it is important to realise that the exact legal meaning of words such as ‘concession’ or ‘licence’ varies considerably from legal regime to legal regime to cover widely divergent regulatory concepts.

City governance

 

The rich agenda of organization, regulation and finance of passenger transport in cities can be broken into four large sets.

 

The first group of issues is related to the demand aspects of public transport services, specifically as regards quality-price relations. Passenger travel markets in developing cities are sometimes homogeneous, consisting of low-income captives keenly interested in low price. An increase in service quality may lead to prices difficult to bear by passengers and/or an increase in subsidies straining the budget of the subsidizing authority. In other cities, in the presence of economic growth, the market is heterogeneous, with “choice” travelers owning or aspiring to own a motorcycle or a car of their own but still interested in services offered by public transport modes. “Choice” travelers tend to be interested in both quality and price.   The challenge for the regulating authority is to evolve a complement of service quality, price policy and funding mechanisms so as to balance equitably the demands of these different markets, those of the larger urban community, and its budget.

 

The second set of issues has to do with pricing and financing public transport services relative to pricing and financing urban road infrastructure. The pressure for applying fully the user-pay principle has to be applied to all modes, and to consider the externalities involved. This means that public transport fares should reflect the extent to which road infrastructure is adequately charged. Given the prevalent undercharging of motor vehicles for road use in cities and the high level of interaction among modes, financial transfers between roads and public transport services- and between modes of public transport-are potentially consistent with optimal pricing strategy. Overall, pricing and financing regimes for individual transport modes should be designed within an integrated urban transport strategy. This in turn presupposes an institutional arrangement transcending traditional modal barriers and vertical integration from local to national levels.

 

The third set of issues involves the organization regulation of the service supply. The debates about relative roles of the public and private sector and the degree of regulation have yielded a best-practice position that regulation and delivery of passenger transport services should be kept apart, with local governments retaining only the former of these functions. On the delivery side, the preference is for a system based on a for-market competition, since public-owned monopolies lack incentives for efficient performance and unregulated, in-market competition is strongly linked to increased problems of congestion, safety, security and exclusion. As practical experiences with the implementation of these principles accumulate, the trend is to transcend the public vs. private dichotomy in favor of an inclusive public-private framework, with emphasis on detailed features of partnership agreements, especially the inclusion of feed-back mechanisms.

 

The fourth set of issues links the subjects of price subsidies and the regulation of the service supply. The past identification between subsidized operations and a public-owned, monopoly supplier of services has been removed. In the interests of efficient service supply, transport operators should operate competitively, with purely commercial objectives, independent of whether they are public or privately owned. Any noncommercial objectives imposed on them should be compensated directly and transparently by the government institutions at whose demand these objectives are imposed. The financial transfers are regulated through contracts between municipal authorities and operators for the supply of services. The difficulties with implementing these clear principles remain, especially under remaining public ownership, and require strong oversight institutions at the urban level. Above all, in the absence of appropriate contracting or other support mechanisms, the sustainability of public transport service should be paramount, and should generally have precedence over traditional price regulation arrangements.

 

Source http://web.worldbank.org

Best practices related to the Regulatory function of a PTA