Don’t Like Congestion? Then Maybe You’ll Like Pricing Better

Lynne Kiesling

Technology Review has an interview with Kara Kockelman from the University of Texas about transportation technologies, pricing, and other ways of reducing congestion. When asked about the effect of new technology like cameras, she observes that

But while information is helpful to those seeking to avoid some congestion, these basic technologies are not moving traffic much, if any, faster because travelers receiving the information already are on the road. Right now, radio-broadcast traffic reports may be just as effective for relaying news of such events to drivers.

Furthermore, she argues that “pricing is needed, so that people can decide how much they are willing to pay to get somewhere faster”. Her group has been modeling something called credit-based congestion pricing:

Credit-based congestion pricing is a policy wherein tolls rise with traffic demand, thus keeping traffic moving, and distribution of travel budgets ensures a reasonable level of access for everyone. For example, the first 100 miles a vehicle travels during peak periods each month would be “free.” But after that, the driver is on his or her own, paying tolls out of pocket, via a transponder account. And the tolls would be higher during times of congestion. This incentive structure optimizes demand by allowing tolls to vary with congestion, on each link in the system across all times of day.

I’ve wanted to test the electricity pricing analog for a long time: $40/month buys you 400 anytime kilowatts. After that, you pay either a real-time price that reflects the fluctuations in the actual underlying production cost, or a time-of-use rate (different block prices at different times of day). If as hidebound an infrastructure industry as transportation can do this, why can’t electricity?


6 thoughts on “Don’t Like Congestion? Then Maybe You’ll Like Pricing Better

  1. There is one piece of this puzzle I don’t quite understand. What is the mechanism for determining that car x has traveled its first 100 miles during peak periods?

    I suppose that it might be doable as long as the measuring mechanism and the transponder accounts can be kept anonymous.

  2. “$40/month buys you 400 anytime kilowatts”
    At this usage level, I assume you’re talking about residential, and that the objective is to introduce marginal pricing for price response.

    Except for the word “anytime” this would resemble a typical two-part real-time-pricing arrangement. The thing that concerns me here is the arbitrariness of the “month” and the way that the price response would likely be delayed to the end of the arbitrary period. A month such as September (or October these days)comes to mind, in which the need for price response would likely be in the beginning of the month. Besides, 400kWh might be a gracious plenty for some months and not near enough for peak months. Naturally, customers would prefer a “load shape” that better approximates their seasonal usage. But once you start load-shaping, you’re beginning to build a customer-baseline [CBL]. You might as well go ahead and create a CBL that follows a typical seasonal load pattern but stays below the typical daily weather variations. That would place the customer in real-time prices at the margin almost all the time, so that price response would always be available.

    Of course, even with 400-for-$40 there would ostensibly be some price response even during the first part of the month, arising from fear of the monthly bill. I suppose that’s what a test could determine and quantify — how consumers respond to price information all month long. The shoulder months would be particularly interesting.

  3. one easy reason why this pricing system will never happen with energy: because it is energy, one of the most highly regulated industries. If a worker in energy so much as farts they get invesigated by lawmakers, congestion pricing would start a civil war, and you would most likely endup with more regulation the minute energy companies even start to think about it.

  4. Mr. Marks! You are seriously out of date! Legitimate congestion pricing is used throughout the northern part of the Eastern Interconnection, and has been working well since 1998 (PJM’s first year of congestion pricing). It has been used in other countries since 1992! It’s history!

  5. Mr. Marks! You are seriously out of date! Legitimate congestion pricing is used throughout the northern part of the Eastern Interconnection, and has been working well since 1998 (PJM’s first year of congestion pricing). It has been used in other countries since 1992! It’s history!

  6. The 100 “anytime miles” would require tollways with transponders. Currently, there are many tollways with this technology (EZPASS, IPASS, Palmeto Pass, SunPass, etc.)

    The only problem that I see with it is that, perhaps, tollways don’t have the congestion that freeways do. It seems to me that the roads to and from city centers are the most congested, and they are generally freeways, not tollways.

    It also seems to me that the transponder technology is advancing rapidly. Perhaps the cost to convert a freeway to a tollway will drop to the point where there is widespread conversion from one to the other. Maybe if gas taxes were rebated for driving on tollways, based on that transponder mileage, a political compromise could be reached to turn freeways into tollways (which would have a lot of political opposition).

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