Transportation Planning Casebook/IPART Fare Setting in New South Wales

The Independent Pricing and Regulatory Tribunal or IPART is an independent decision-making body established in 1992 tasked with regulating certain markets as well as government services to ensure effective social, environmental and economic outcomes. Despite being a government agency, the tribunal operates independently in making decisions and recommendations to protect consumers from unreasonable price hikes and unfair competition. It also improves the quality and efficiency of service providers, encourages competition, protects the environment and ensures service providers stay financially viable.

IPART regulates prices and reviews pricing policies of the New South Wales (NSW) government supplied services. IPART also provide assistance to other entities within the NSW government such as in conducting special reviews in pricing, industry, or competition. It also serves as an arbiter in access disputes and protects registers of the subsequent access agreements. Apart from transport, IPART also provides advisory services and regulation compliance monitoring of regulated entities according to their license or authorization conditions in the water, gas, electricity, and transport industries.

Summary
The public transportation fare in New South Wales is highly dependent on the maximum fare price determination undertaken by the IPART. Although a government entity in itself, it functions independently to calculate the maximum fare price that serve primarily as the basis of Transport for New South Wales (TfNSW) for the issuance of fare orders in the state. IPART is composed of three members appointed by the Premier of NSW. These members are expected to have substantial experience in business, economics, finance, engineering, or any relevant field to equip them in undertaking the regulatory tasks of IPART.

Since 2014, when it was mandated to undertake maximum fare price determination under the Passenger Transport Act 2014 No 46 (Part 2, Division 2), IPART has become an integral part in the development of the fare system of NSW public transportation. The fare increase proposals of TfNSW have consistently complied with the IPART maximum fare prices as both government entities ensure the sustainability of the business case of NSW's public transportation. IPART has witnessed the gradual shift from paper tickets to its phase out when the Opal cards were in the early stage of their roll out. The Opal card payment methods complemented by contactless credit card payments simplified further the payment structures of fares with the continuous decline in the demand for single journey tickets.

IPART uses several parameters in determining the maximum fare prices. These include indexation to inflation, cost recovery, demand management, social and policy objectives, intermodality, and incentive systems. Among the recent policy issues include the proposal of a fare-free pubic transportation and the upcoming maximum fare price determination that will set maximum fare prices from 2024 until 2028.

Annotated List of Actors
The IPART’s organizational structure is outlined in the state legislation of New South Wales entitled the Independent Pricing and Regulatory Tribunal Act 1992 No. 39. The tribunal is composed of three members appointed by the premier of as permanent members. Temporary members may be added as appointed also by the premier. The tribunal is led by a chairperson to be appointed from among the permanent members. It is the responsibility of the premier to ensure that members of the tribunal have a knowledge and understanding of economics, consumer interests, and supplier interests.

Actors
In the specific concern of fare setting, IPART is tasked to conduct reviews and reporting to the premier as mandated under the Passenger Transport Act 2014. Among the key actors on the IPART, specifically on fare setting are as follows: 1 Not a permanent actor and is dependent on the engagement with IPART.

Current Members of the Tribunal
The tribunal is currently being led by Carmel Donnelly PSM, whose term started on 1 July 2023 and will end on 30 June 2026.

Maps of Locations
IPART's role in fare setting expands to a wide range of public transport types in New South Wales including buses, trains, light rail, and ferries.

Fare-Free Public Transportation
Affordable public transport has been an ongoing debate in NSW to incentivise economic mobility, to reduce car dependence and ease the financial burden on households. In December of 2019, IPART conducted an independent investigation of a free-fare public transportation service in New South Wales as part of the 2020-2024 Maximum Opal Fares plan. The review concludes that implementing free public transport in NSW, by subsidising a 100% of operational costs from taxpayers, will marginally improve the travel costs for families individuals. A loss of $1.6 billion in yearly revenue will not be fed into the economy through other ways.

It also makes its point by comparing free-fare public transportation programs in other parts of the world, mainly Europe. One of the examples is in the Estonia's capital of Tallinn, that launched a free public transportation program. The real goal in its design, found by scholars, is that it was supposed to bring more subsidies by only allowing registered residents of Tallinn to use the system for free. However, it did little to tackle mobility, accessibility or reduction in car traffic. IPART that 2-5% reduction in car ridership does not explain a proposed 40% increase in public transport patronage.

IPART takes these real examples to make an argument that the cost and operational burden outweighs the social impact of free travel. It advises that the cost of travel was already below the inflation adjusted cost for most patrons so a 5.0% annual increase at a 4 year span is proposed. IPART does not force Transport NSW to increase Opal fares, which can be seen by the effects of Covid-19 reducing patronage for all public transportation services in 2020-2021. The rising fares were limited to about 3% a year to make it more affordable.

Overview of Fare Setting Process
Under the current public transportation system fare structure in NSW, the entire pricing is divided into two sectors: Maximum fare and fare below maximum. Fares below maximum are determined by the NSW Transport Department. The advice on the maximum fare is offered by the IPART to the government. The maximum fare would be discussed and set every four years, with the current fare lasting until June 2024, and the next fare would be applied until July 2028.

In this regard, several key steps are included in the fare setting process of IPART (Independent Pricing and Regulatory Tribunal) for public transportation in New South Wales:


 * 1) IPART considers the amount that transportation services incur and compares this figure with economic considerations and public necessities.
 * 2) They proceed with holding public consultations to get the views of stakeholders and the public.
 * 3) The proposed fare adjustments take account of this information, and it will be further reviewed and refined through additional detailed analysis and feedback.
 * 4) Finally, maximum fares are established so as to reach an equilibrium between affordability for users and the sustainability of the transport services.

IPART considers the following attributes during the setting of fare, among other requirements provided by the law:

IPART undertakes robust public consultation during each review process to be able to understand the full extent of stakeholder views and consider them alongside the findings of our economic modeling and analysis. This ensures that, in any fare changes taking place, there is due information and consequent fairness to the parties involved, supporting efficiency and effectiveness of the public transport system.
 * the cost of providing the services
 * further efficiency is what is called for in the provision of services, hence, reducing cost for consumers and taxpayers.
 * the protection of consumers from abuses of monopoly power in terms of prices, pricing policies, and standards of service.
 * The social impact of the decision or recommendation the impact of the determination or recommendation on the use of the public passenger transport network and the need to increase the proportion of travel undertaken by sustainable modes such as public transport
 * quality, reliability, and safety of services (whether the quality, reliability, or safety has been prescribed by law, agreement, or otherwise)
 * The effect on the level of Government funding
 * any matter referred in the referral to IPART
 * any other thing IPART thinks is important.

Public Reception of Current OPAL Fare Structure
The new introduced cheaper fares on Friday, applying at a 30% discount for services on metro, train, bus, and light rail, have won positive feedback, meant to boost city visit and, on traditionally quieter days, business. However, there was a mixed reaction among the common people in general, as at the said juncture, the living cost had already shot up very high. Business leaders and government officials emphasize that cheaper travel would entice more people to the city, both for work and leisure, which would actually revitalize the city center, especially given the situation that many people work-from-home on Fridays. This is viewed as a strategic response to the challenge of reduced commuter traffic due to increased remote work practices.

Petition of travel concessions for international students in NSW
New South Wales (NSW) is currently the only state which does not provide discount for international students in Australia. In Victoria, international undergraduate students can buy a Travel Pass that can save $1,034 a year. Full-time International students studying in Queensland can access a 50% concession fare.

For over 20 years, campaigns—such as those by the Sydney University Postgraduate Representative Association (SUPRA) and the University of Sydney's Students' Representative Council (SRC)—have highlighted this inequity. Despite all the petitions and advocacy, we still have poor progress, and many students face financial hardships due to high transportation costs, which goes into their overall living costs.

Petition Advocates

In 2024, SUPRA initiated the second round of the petition. With over 20,000 signs, the petition went through the Parliament of NSW and discussed on it. This petition denotes the Legislative Assembly of New South Wales for extending travel concessions to all students, including international and part-time students, referring to the existing unfair policy. It also shows that New South Wales is the only Australian state that does not give any concessions to be given to international students, who significantly contribute to the economy of the same state. When lacking the concessions, it has a bearing not only on their potential to be involved in state-wide economic activities but also places undue financial burdens on the part-time students, many of whom face challenges like caregiving responsibilities or disabilities.

Response from Government

The NSW government realizes that since full fee-paying overseas students in New South Wales are supposed to show sufficiency of funds under visa conditions, they will also not be eligible to avail themselves of travel concessions. However, through this study fare, it will allow these students to benefit by getting a 15% discount on regional rail. These students are also exposed to the adult Opal ticket, which has a weekly cap of fares. Part-time students with disabilities are also permitted travel concessions, but other part-time and correspondence students are not eligible since their study format allows potential full-time employment.

Fare Change Options
Options that are usually available when considering changes to the public transport fare structure in NSW generally include:


 * 1) Indexation to Inflation: Fares may be indexed in accordance with the inflation so that its real value does not diminish over time. In most instances, this will mean raising the fares by a percentage of the annual rise in the Consumer Price Index (CPI).
 * 2) Cost Recovery - The adjustments are made to recover costs of providing services in transport more effectively. This may mean increased fares to cover higher operation costs or investments in infrastructure.
 * 3) Demand Management: Fare changes can be used as a tool to manage demand on the transport network. This can be through, for example, offering off-peak times lower prices of fares so as to encourage users to travel at times outside the busy period, hence distributing the demand more evenly over the day.
 * 4) Social and Policy Objectives: Fare adjustments may also be premised on broader social and government policy objectives, such as improved accessibility to low-income passengers or increased public transport use that assists in easing traffic congestion and decreasing environmental impact.
 * 5) Depending on the mode or distance, adjustments might be made in modality or distance. This could include simplification of the fare structure or the introduction of new fare products that are relevant to a particular user group or travel pattern.
 * 6) Introducing or adjusting caps on daily, weekly, or monthly travel expenses, offering discounts, for instance, off-peak travel, weekends, special passenger categories such as students, seniors, and others.

Social Optimization of Fares
Social fare optimization is the pricing and modification of public transportation prices in order to attain broader social objectives associated with an increase in accessibility, decrease of congestion, and improvement of environmental sustainability. The following are key approaches and considerations in social optimization of fares:


 * 1) Equity and accessibility: Affordability of transport services to all sections of the society including low-income groups, disabled persons, and senior citizens. This can include things such as tiered fare structures, subsidies, or capped fares so that cost isn't a barrier to mobility.
 * 2) Demand Management: Using fare structuring to manage peak and off-peak usage. Cheaper fares during off-peak times can encourage passengers to travel outside of busy periods, helping to distribute demand more evenly and reduce congestion.
 * 3) Integration Across Services: This entails coordination of fares across different modes of transportation (buses, trains, ferries) so that the payment system is simplified, which may encourage the use of public transport against private vehicles. Key in this approach are integrated ticketing systems.
 * 4) Environmental Consideration: Encouraging the use of public transport rather than private transport to reduce traffic, as traffic causes congestion of emissions. This can involve reducing the rate of electric or zero-emission buses and trains.
 * 5) Public consultations: Engage with the community through Public Consultations to understand the people's differing needs and preferences of the various user groups. This can be critical for feedback from the community in designing socially beneficial and widely accepted fare systems.

IPART Role in Fare Setting
The fare setting process for public transportation in New South Wales (NSW) is managed by the Independent Pricing and Regulatory Tribunal (IPART). It involves evaluating transportation costs, aligning them with economic and public needs, and incorporating feedback from public consultations. The NSW Transport Department sets fares below the maximum, while IPART advises on the maximum fare, reviewed every four years. Key considerations include cost-efficiency, consumer protection, social impact, service quality, government funding, and any relevant legal requirements. This thorough process ensures that fare adjustments are fair, informed, and support an efficient public transport system.

Leadership
The main three members of the tribunal are appointed by the premier of as permanent members. Temporary members may be added as appointed also by the premier. The tribunal is led by a chairperson to be appointed from among the permanent members. It is the responsibility of the premier to ensure that members of the tribunal have a knowledge and understanding of economics, consumer interests, and supplier interests.

2020-2024 Maximum Opal Fares

 * Scrapped 5.0% increase fares due to the pandemic.
 * 3-4 day passes, yet to be implemented.
 * Off-peak fares for bus and light rail services (only trains had off-peak rates previously).
 * Integrated fare structure to consider origin and destination points regardless of transport modes.
 * Lower fare options for healthcare cardholders to reduce barriers to participation in the community.

Free-fare travel
IPART considered the viability of a purely taxpayer subsidised public transport. After an extensive review of public transport networks four major cities in Europe (Paris and Dunkirk in France, Tallinn in Estonia, and Hasselt in Belgium, it determined that:


 * Traffic would decrease at most 2-5%.
 * Ridership would increase up 40% immediately.
 * Peak time travel would reach capacity sooner
 * Future operational costs would increase with newly built
 * $1.6 billion lost annual revenue
 * Scheme mostly benefits current non-car users, pedestrians and cyclists.
 * Social activity could increase but with not quantifiable measurement.
 * Higher taxes which neutralises the part of paying for travel.

Public Reception of Current OPAL Fare Structure
Newly introduced 30% discounted fares on Friday for public transport aim to boost city visits and business, receiving mixed reactions due to high living costs. Officials believe the cheaper fares will attract more people to the city, countering decreased commuter traffic from increased remote work.

Petition of travel concessions for international students in NSW
New South Wales (NSW) remains the only Australian state that doesn't offer transportation discounts to international students, unlike Victoria and Queensland where significant savings are available. Despite over 20 years of advocacy by organizations like the Sydney University Postgraduate Representative Association (SUPRA) and the University of Sydney's Students' Representative Council (SRC), little progress has been made. This lack of concession contributes to the financial burden of high transportation costs for many international students, affecting their overall living expenses.

Fare Change Options
In NSW, changes to public transport fares are typically considered to address several goals. Fares might be indexed to inflation to maintain value, adjusted for cost recovery to offset higher service or infrastructure costs, or used to manage demand by encouraging off-peak travel. They can also reflect broader objectives like increasing accessibility for low-income passengers or promoting public transport to alleviate traffic and environmental issues. Additionally, fare structure may be simplified or new products introduced for specific groups, and fare caps or discounts could be applied to support various passenger categories.

Social Optimization of Fares
Social fare optimisation adjusts public transportation prices to achieve goals such as improved accessibility, reduced congestion, and enhanced environmental sustainability. This approach includes making fares affordable for all societal segments, including low-income groups, disabled persons, and seniors, through mechanisms like tiered fares or fare caps. It also involves using fare structuring to manage peak and off-peak usage, encouraging travel outside busy periods to evenly distribute demand. Integration of fares across different transportation modes, like buses, trains, and ferries, simplifies the payment system and may encourage shifts from private to public transport. Additionally, promoting the use of environmentally friendly transport options, such as electric or zero-emission vehicles, helps reduce traffic and emissions. Engaging the community through public consultations is crucial to understanding diverse needs and crafting widely accepted fare systems.

Discussion Questions

 * 1) Should IPART's increase in travel fares for 2024-2028 period be implemented?
 * 2) There are several considerations in the costs of each public transport mode. Can it be possible to have an origin to destination pricing model and if so, how will the fare price be determined?
 * 3) Do you agree with IPART's assertion that free public transport in NSW is not feasible?
 * 4) Opal currently prioritises giving travel discounts to 10 different groups of people from the elderly, to full-time Australian/New Zealand students and people with disabilities. Should IPART prioritise implementing discounts to international students as well? Should any other group receive discounts?
 * 5) Could the impartial nature of this tribunal be improved? Do they truly have the general public's interests in mind?