Written evidence submitted by Insurance and Mobility Solutions (EVP0060)

1.1    IMS welcomes the opportunity to contribute to the House of Commons Transport Select Committee’s inquiry into Zero emissions vehicles and road pricing.

1.2    IMS (Insurance & Mobility Solutions) is part of the UK company Trak Global Group, a global provider of connected car solutions, services, and analytics to insurers, mobility operators, automotive OEMs, and governments. IMS has extensive experience piloting and implementing road usage charging schemes in North America, enabling all enacted deployments and working in collaboration with state agencies and key stakeholders. Our focus for this submission is road pricing, where we hope the deliberations of the Committee will benefit from our direct experience in a number of jurisdictions. We would be pleased to provide oral evidence to the Committee if required.

2        The case for introducing some form of road pricing and the economic, fiscal, environmental and social impacts of doing so;

2.1  The forward-looking ‘Ten Point Plan for a Green Industrial Revolution’ accelerates the transition of vehicles in the UK toward zero emissions by 2035, delivering significant environmental benefits for both road users and non-road users alike.  While reducing vehicle emissions, the necessary transition away from liquid fuels also reduces the fuel duty we depend on for revenue to fund the future of transportation.

Inequities of Fuel Duty

2.2  When fuel duty was introduced in article 85 of the Finance Act of 1908 (https://hansard.parliament.uk/Commons/1909-10-29/debates/5e415fe2-afb5-4c24-9b4b-e0d70b05548d/FinanceBill), it was a logical option to collect revenue from vehicles using liquid fuel.  The opposition at the time foreshadowed the inequity challenges that we face today:  At the time of this bill, the arguments included fairness for pleasure versus commerce vehicle use or an improper focus on just vehicles with rubber tyres versus heavy farm carts.  Today, while there are far more vehicles with rubber tyres, similar arguments still hold based on the inequities that exist between vehicles with vastly differing fuel efficiencies. 

2.3  Introducing a road pricing scheme that can fairly assess fees based on an individual’s actual use of the underlying road is important to transparently and equitably distribute the economic, fiscal, environmental, and social impacts of road use across the responsible road users.  While such a scheme was not an option in 1908, we are in a fortunate position today to enable road pricing schemes using data-driven inputs about the road usage on an individual vehicle basis.

Timing

2.4  Given the transition to zero emissions by 2035, it will be valuable to evaluate road pricing options, their applications in other jurisdictions, including the US, and embark on trials early to inform and refine future road pricing policy.  While technologies are mature, and road usage charging schemes have been deployed in other jurisdictions, the accelerated electrification of vehicles in the UK will drive the economic need for alternate road pricing schemes long before reaching 2035.

2.5  Positive actions to improve the environmental impact of vehicles through electrification helps to provide clear timeframes within which to enact alternate road pricing schemes to ensure all road users are paying a fair share of the roads being used.

3        Which particular road pricing or pay-as-you-drive schemes would be most appropriate for the UK context and the practicalities of implementing such schemes;

3.1  As studied during the road pricing demonstrations project in the UK in 2007-2011 (https://www.gov.uk/government/publications/road-pricing-demonstrations-project-introduction), mature technology already exists to deliver commercially-run time, distance place “pay-as-you-drive” or “road usage charge” schemes.  Additional evidence is available from the US-based examples referenced in the later part of this submission.  This mature technology and ability to deliver commercial solutions includes the protection of privacy in addition to the delivery of an accurate and reliable end-to-end service in a trusted framework.  While this previous study validated the viability of commercial delivery of a road pricing scheme in the UK, work is still required to confirm the most appropriate scheme for the UK today and in the future.

3.2  Fortunately, a pay-as-you-drive scheme that supports rules using a combination of time, distance, and place provides maximum flexibility to support current and future policies in the UK.  This type of scheme enables:

1. Pure distance-based fees, in which fees are charged at a specific per-mile rate,
2. Distance-based fees that may vary between regions (or road segment), enabling different per-mile rates for each region to support the different revenue requirements of specific regions, or as a means to influence route decisions to minimise congestion and improve environmental impacts.
3. Distance and time-based fees, enabling methods to incentivise travel at non-peak times and distribute travel loads better throughout the day.
4. Time/distance/place fees that incorporate all of the above options for maximum flexibility.

3.3  As learned in the US during road usage charging pilots and enacted deployments, a simple and easily understood scheme is important, especially since road users are already comfortable with the simplicity of fuel duty and traditional tolling or congestion charges.

3.4  Given the maturity of telematics technology in modern vehicles and the general availability of retrofit telematics options, it is both practical and logical to re-use the same technology to enable a flexible road pricing or pay-as-you-drive scheme.  Fortunately, the prevalence of telematics also enables multiple complementary optional benefits for vehicle owners, including fleet management, driver coaching, and insurance telematics.

4        The level of public support for road pricing and how the views of the public need to be considered in the development of any road pricing scheme;

4.1  Inclusion of all stakeholders (including the public) is essential, as the views, concerns and questions will help both assess the level of public support while also identifying areas where additional investigation and public outreach may be beneficial along the journey toward road pricing.  The views of the public should include industry representation – such as the BVRLA, the Road Haulage Association, and the SMMT – to ensure stakeholder representation is as comprehensive as practical.

4.2  As shown in the 2007-2011 road pricing demonstrations project in addition to multiple road usage charge pilots and enacted deployments in the US, providing multiple options and empowering participants with choices can be a powerful tool to increase public acceptance of new road pricing schemes. 

4.3  In other jurisdictions, direct public involvement has helped to shape road pricing policy, including fair methods to phase-in mandatory schemes, and solutions to address privacy concerns by offering options to report mileage-only without location information in the states of Oregon and Washington (https://waroadusagecharge.org/wp-content/uploads/2020/01/WSTC-Final-Report-Vol-1-WEB-2020_01.pdf).

5        The lessons to be learned from other countries who are seeking to decarbonise road transport and/or utilise forms of road pricing.

5.1  Along the journey to arrive at mileage-based models in the US, it was very important to understand, investigate, and share information about potential challenges and concerns.  These challenges spanned the full spectrum from education to privacy, equity for rural drivers or others, adoption, enforcement and interoperability, each of which are relevant independent of country or jurisdiction.  In the US, different government agencies pooled resources and collaborated with private industry to improve efficiency and avoid duplication of effort by sharing learnings and experiences between public and private organisations. 

Infrastructure/gantry vs vehicle-based telemetry

5.2  Some countries, like Singapore, chose to deploy gantries and automatic license plate readers to manage congestion and shift travellers from private-vehicles to public transit.  This approach can be very useful when focusing on a specific set of road segments or small regions, however, it is not designed to capture all miles travelled or to be used as a fair and sustainable road pricing scheme for the entire road network.  In Canada, the 407ETR is another example of a gantry-based tolling scheme, where vehicles are charged for use a specific road segment.  Similarly, in the US, a series of electronic toll collection systems exist, although they cover less than 1% of the US transportation network (https://www.fhwa.dot.gov/policyinformation/).  Unfortunately, it is impractical to expand the physical infrastructure necessary to support traditional tolling across entire countries.

5.3  The flexibility of vehicle-based assessment using telemetry / GNSS information is one of the reasons why Singapore can consider vehicle-based assessments using distance based schemes in the future (https://www.straitstimes.com/singapore/transport/new-erp-system-to-start-2023-but-no-distance-based-charging-just-yet), and the reason why multiple US states are piloting or have enacted successful road usage charging schemes including Oregon, Utah, Washington, California and more.

Early and Frequent Public Involvement

5.4  The importance of public involvement was emphasised in the US when Washington State embraced strong public representation by forming a road usage charge steering committee in 2012 (https://waroadusagecharge.org/steering-committee/) and legislated the need for representation across key stakeholders including auto and light truck manufacturers, environmental, counties, trucking industry, cities, public transportation, tribal, public at large, department of licensing, ports, and more.  This approach served Washington well since challenges and potential concerns were thoroughly analysed from diverse perspectives.  As part of this process, Washington completed a successful pilot programme to help assess public acceptance, understand participant reactions across 5 different methods to report mileage, and refine policy for future legislation.  This steering committee continues to meet as a critical part of the adoption of road usage charging in Washington State.

Clarifying Myths:  Rural vs Urban

5.5  Rather than relying on historical arguments about the potential societal challenges with fuel duties and related road pricing schemes, it will be valuable to quantify actual vehicle use in the UK to make informed decisions about road pricing.  In the US market, where the impact of vehicle electrification and reduced revenue from fuel duty is more severe, extensive studies of different road pricing schemes helped to raise awareness about how roads are funded, while also dispelling common myths.  One of the key myths is that people living in rural areas drive more than people living in urban regions.  Based on a study completed by DHM Research (https://knowledgecenter.csg.org/kc/system/files/dhm_midghall.pdf), it was shown that rural residents may drive longer during each journey, however, the lower frequency of journeys compensates for the longer distance.  Rural and urban residents in this study drove about the same distance within the state of Oregon.

5.6  In subsequent studies, the rural driver equity myth was dispelled with results showing that a rural household will actually end up paying 1.9%-6.3% less and urban households 0.3%-1.4% more within a mileage-based scheme designed to replace the fuel tax.  While these results may seem counter-intuitive, they are an excellent example of the importance to solicit, capture, and understand potential concerns from as many vehicle owners and stakeholders as possible, and ideally, representative of the affected population. (https://www.rucwest.org/wp-content/uploads/2018/07/RUC_RuralDrivers_folio_final-LTR.pdf)

Directed Funding

5.7  Surface transportation in the US is funded through state and federal taxes on fuel consumption, vehicle registration fees, tolls, a Federal Highway Trust Fund and financial instruments based on related revenue streams.  Revenue generated from these sources is often dedicated for use within the transportation network rather than being allocated to a general pool and decoupled from the budgeting process.  While this narrowly focused allocation of fuel duty and vehicle related revenue has resulted in severe funding shortfalls in parts of the US, it can be a valuable means to transparently assess the sustainability of transportation funding as a closed-loop system.  Collecting fuel duties or revenue from alternate road pricing schemes can be valuable, however, if the revenue is not directed back into funding transportation, it may be difficult to justify and maintain sustainable transportation funding solutions.

Aligned International Timing

5.8  Increasing fuel taxes has diminishing value given the acceleration of electric vehicle production and mandates in some US states – including California making a decision to transition to zero-emission vehicles in the same timeframes as the UK (https://www.gov.ca.gov/2020/09/23/governor-newsom-announces-california-will-phase-out-gasoline-powered-cars-drastically-reduce-demand-for-fossil-fuel-in-californias-fight-against-climate-change/).  This aligned timing is important since it provides opportunities for transportation organisations in different global regions to collaborate and work together to share challenges and learnings.  For example, in January, 2021, the US federal government ruled out raising federal fuel taxes as a short-term sticking plaster to address the revenue shortfall and impending insolvency of the US Highway Trust Fund (https://www.rollcall.com/2021/01/21/buttigieg-faces-largely-friendly-panel-at-confirmation-hearing/).  Fortunately, multiple states have already completed studies, pilots and enacted legislated deployments for alternate road pricing schemes with the support of the US federal government.  These proactive actions by US states all converged on mileage-based models (“pay-as-you-drive”) with vehicle-based measurements as the basis for sustainable and equitable long-term transportation funding.

Interoperability

5.9  In other jurisdictions, interoperability is a key consideration – both interoperability between new road pricing schemes and traditional methods, and interoperability between solution providers.  Defining a clear set of interfaces with mature and tested specifications has worked well in the US market, enabling government agencies to qualify solution providers and provide options or choices to vehicle owners.  Similarly, interoperability between traditional infrastructure-based tolling systems and nationwide road pricing schemes is also very important.  Vehicle owners often prefer to manage transportation payments using a common wallet, or a unified billing system.  To enable this positive end-user experience, reconciliation and pre-defined collections and revenue management methods are important.

Enforcement

5.10          Enforcement options are typically evaluated against potential leakage.  In a road pricing scheme involving vehicle-based reporting, it is critical that the technologies used to measure vehicle information can positively identify potential fraud, misuse, or error scenarios.  In US deployments, examples include the detection of device removal duration and frequency, and the use of multiple complementary sensors to validate internal consistency in measurements.  An additional validation step is sometimes included to reconcile the absolute odometer value in the vehicle against the measurements used to assess road usage fees.  In all cases, a simple and clear set of business rules can provide an effective means of enforcement while enjoying the flexibility and coverage of a vehicle-based road pricing scheme.

Pilots and Enacted Road Usage Charge Deployments in the US

5.11          Multiple US states have already successfully completed pilots, resulting in two states running enacted road usage charge schemes, and other states planning similar steps forward.  IMS has first-hand experience as an account manager and solution or technology provider in large scale deployments including in California, Oregon, Utah, and Washington State.  The Washington State Transportation Committee (WSTC) produced an extensive report at the conclusion of their last pilot including information about other states in the US that are exploring road usage charging opportunities as a replacement for the gas tax, as shown in Figure 5.  Pilot programmes, public demonstrations, research projects, and legislatively-enacted road usage charging programs are underway nationwide with interest growing about road usage charging as many states face similar revenue problems from shrinking gas taxes.

Figure 5. Road usage charging research, programmes, pilots, and planning.[1]

OReGO – Oregon’s Road Usage Charge

5.12          Road usage charging programmes established by state legislation are enacted and live in Oregon and Utah.  In fact, in 2015, with IMS’ involvement, Oregon became the first statewide road usage charging programme instituted in the US, currently charging participants 1.8 cents for each mile travelled on state roads in their vehicles; proceeds are deposited directly into the State Highway Fund for road and bridge maintenance and repair. Noteworthy aspects of this road usage charging programme include:

• Participants can choose between reporting mileage without location, or reporting mileage with location and optionally benefit from location-based services and smartphone applications.
• Participants can take advantage of many value-added services.
• Flexible payment options are available to participants.

5.13          Legislation signed by Oregon governor Kate Brown in 2019 expanded the voluntary programme to an unlimited number of qualified vehicles and the legislation also directs the Oregon Department of Transportation to consult with vehicle dealers to encourage participation in OReGO at the point-of-sale (https://www.ttnews.com/articles/oregon-gov-kate-brown-expands-road-usage-charge-program ). Gov. Brown commented: “The historic implementation of OReGO, the nation’s first road-usage charge, provides a fair and sustainable path to transition from a per-gallon charge to a per-mile charge. The system is going to enable us to maintain and improve Oregon’s infrastructure in the face of growing fuel efficiencies.”

California Road Charge

5.14          California completed a 5000 participant pilot study in 2017 with IMS, exploring the ways in which funding road and highway repairs could be linked to actual travel on public roads rather than fuel consumption.  Building on the success of the earlier pilot, California started testing alternate options for funds collection in the 2021 California Four Phase Demonstration (http://caroadcharge.com/projects/california-four-phase-demonstration/). The California Four Phase Demonstration is testing and evaluating methods to collect road usage charges as enabled by four emerging technologies, including:

• Electric vehicle charging stations and pay-at-the-pump systems
• Usage-based insurance
• Ridesharing
• Autonomous vehicle operation

5.15          The overall goal is to discover ways to make the user experience within road usage charging programmes as positive and convenient as possible. The earlier pilot project achieved some noteworthy road usage charging milestones, including:

• Provided a means to interoperate across state lines, recording and coordinating road travel across Oregon and California into the programme using unified invoices,
• Differentiated between public and private roads, factoring this information into the road charges
• Successfully integrated data from embedded OEM telematics technology, alongside aftermarket OBD options with and without location data

Utah’s Road Usage Charge

5.16          In response to the rise in vehicle fuel efficiency and growing popularity of electric vehicles, the Utah Department of Transportation and Division of Motor Vehicles has initiated a transition to a per-mile fee structure, which is voluntary for electric and hybrid vehicle owners (https://roadusagecharge.utah.gov/). Utah’s road usage charge programme offers participation to drivers who would like to waive the alternative fuel vehicle registration fee and instead pay by the mile for their road use.

5.17          The programme relies on using data from embedded OEM telematics systems or installing an OBD-II mileage reporting device and smartphone app for recording the initial odometer reading. Per mile fees are deducted from a pre-paid wallet, not to exceed the amount of the flat alternative fuel registration fee.

5.18          Those drivers who tend to drive less benefit from the 1.5 cents per mile fee. They also have access to the value-added benefits of the app that delivers trip reviews and driving reports to encourage safer driving practices and an enhanced driving experience. The programme has proven popular with drivers in Utah and expansion of the programme seems likely at this point.

Summary / Lessons Learned

5.19          While the UK has a significantly higher population density than most of the US, the lessons learned are still important.  Fortunately, this means that key learnings and outcomes of decisions, pilots and enacted alternate road pricing schemes in the US can help enable the UK to accelerate forward and leverage the benefits of international experiences. Some of the key lessons learned in the US include:

1. Outreach and education are essential to raise awareness of not only road pricing, but also help ensure all stakeholders understand why change is important and how it might affect road users and our society as a whole
2. Open collaboration with public and private / industry participants is critical to accelerate progress and learn from the mistakes of the past without the need to repeat them.
3. Well defined interfaces improve interoperability, choice, and flexibility for the future
4. Independently addressing passenger and fleet vehicles with optimized schemes to meet the unique needs of each market segment
5. Objectively study vehicle travel patterns to quantify urban vs rural and other potential sources of inequity so that they can be proactively considered within a road pricing scheme.
6. Gantry-based tolling can co-exist with road usage charging or new road pricing schemes, however, it is not practical to deploy infrastructure across all roads in the UK.  Gantry-based tolling is practical for specific point assets, whereas vehicle-based telemetry is practical for flexible road pricing schemes involving all UK roads.

February 2021

Endnotes