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The Viaducts

by Franck Latrémolière on 9 September 2014

These fictional charging announcements illustrate the potential impact of different attitudes to a few of the questions that arise in connection with infrastructure charging. These announcements use the example of a railway viaduct, but it might be possible to apply some of the points to other types of infrastructure.

The Good Viaduct Company
The Good Viaduct Company logo
The Good Viaduct Company starts with a simple approach to charging: it sets its use of viaduct charges to earn a return on its assets, valued at their estimated reconstruction cost.
In order to ensure fairness between existing users and new users requiring new capacity, it uses viaduct development charges which are based on the difference between the investment required to increase capacity and a tariff support contribution reflecting the fact that higher capacity will increase future profits from use of viaduct charges.
The Evil Viaduct Company
The Evil Viaduct Company logo
The Evil Viaduct Company has made an eight-year pact with Lucifer. It is dedicated to serving Lucifer, not to its earthly customers.
The Evil Viaduct Company relies on economists to set its approach to charging. It has no concept of the natural order of things in business, in particular of the fact that you have to invest before you earn a return.
The Evil Viaduct Company approaches several other commercial questions from the wrong end. Most remarkably, it sets its policy for viaduct development charges first, failing to recognise that they need to come last as a balancing item to recover costs not covered by the additional use of viaduct income that will be produced by a capacity increase.
Having failed to set up a rational charging system for viaduct development, it then distorts its use of viaduct charges in order to try and influence customer demand and, through that, viaduct development.

Any overall similarity of the fictional viaduct companies to any real company or regulator is a coincidence, but some features in these stories have been inspired by regulatory interventions in UK infrastructure industries.

This is not a comprehensive satire of charging errors made by UK regulators and the companies they regulate. In particular, even though the stories above are about railway viaducts, railway regulation is actually under-satirised.

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