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Utility bills for parking

October 2018

We are all used to paying for parking based on the length of time we leave our vehicle in a car park or by the kerbside. But I would like to suggest that charging for time is not the right method of pricing parking. What I am advocating is that towns and cities introduce a tariff system that is not based on time of stay. Instead, they should be looking at the wider social and economic value of a parking action. Pricing should be priced according to its utility.

The value chain

Let’s look at where people get value from parking. People get value from parking because it enables them to use their cars to make a trip. The reason they like to use their cars is, primarily, because it is a time-saver when compared with walking, taking the bus or cycling. There are other benefits of using a car, such as it is comfortable and can carry heavy loads.

Travel by car also creates social benefits. Owning a car means that we can make more trips and we can travel further, which from an economic point of view is great. There is value and utility that people get from using a car.

However, it is worth noting that when we park the car, the act of parking actually has no value in itself. We go off and do something else whilst the car is parked, be it for 10 minutes or four hours. We get back in the car and then drive off. We are using the car because it is a fast way there and back. The act of travelling is where we get the value. That is why we choose to take the car. The car park is simply an enabler that allows us to derive the benefits (primarily the time saving benefits) from using a car. People enjoy a benefit from using their car. However, and this is key, when people benefit from using their cars they impose disbenefits on others.

Big queues in little streets

Let’s consider a situation that may be familiar. A central car park in a town centre. It’s probably a short stay car park. Being in the centre of the town let’s imagine that the street used to access the car park passes through the historic part of the town centre. Not only does the car park have high turnover, at popular times of the day it generates a queue in the approach road.

The vehicles that are queuing up to get into the car park do so because it is a quick and convenient car park for the town centre; they are getting great utility by using that car park. But the queuing cars are placing a big disutility on this part of the town. With the current arrangement this road only really serves that car park. With the volume of cars going in and out, with the queuing traffic, despite the ready built heritage, there is no scope for pavement cafés, little interest by people to wander around and lost commercial activity.

Pop & Shop

Take also the example of a team working on a building site. The project hits a problem and they need a jackhammer. One of the builders gets into a van, drives into town, parks the van, picks up the jackhammer, gets back in the van, drives back to the building site and, 35 minutes later, all the builders can carry on with the job.

The value of being able to go to that parking location is huge for the builder because if they had to walk that journey or take the bus they could have been five or six hours to get back on site. All the other builders would just be sitting, waiting. Even if they had driven, without access to and the availability of that central parking spot, they would have parked elsewhere and the journey could have taken considerably longer. That lost time could prove very expensive.

Under our current pricing philosophy, the fact that the van was only parked for five minutes means the builder probably would not pay even a pound, if at all anything. Therefore, as a system we are not relating the charge of the parking to the value derived.

Welcome to the matrix

A new pricing system can be developed to capture the utility value of parking. ‘Utility pricing’ is based on the cumulative impacts of the parking event. To determine the utility charge, we can develop a series of matrices to price each component:

Severance matrix: If you are driving into or out of the car park between 9.30am and 4pm you create ‘severance’, which means you take away the utility of using the access streets for other purposes. For example, your vehicular access prevents that street being pedestrianised, it causes inconvenience to traders and residents. A severance charge collected on exit or retrospectively on account would reflect this diminution of the street’s utility. This is all pre-determined and known in advance, so there are no surprises.

Congestion Charge matrix: Another matrix could be related to congestion generated by the vehicle while it uses the road network on its journey to get to the car park. In the matrix at the bottom of the page you drive in during the morning peak you get charged £3, and if you drive out in the evening peak you are charged £2.

Occupation Charge matrix: A third matrix might set out charges for actual occupation of the car park. Cars pose a disutility when they are parked at the point when the car park be comes full, because once a car park becomes full all those parked vehicles are stopping somebody else deriving the benefit of being able to use their car and make a journey.

Using a ‘performance pricing’ approach (as covered in Parking Review in June 2015 and February 2016), we could set a charge that will reflect how a parked car is stopping others making a journey because it is in a car park that is full. For example, if the car park was full from 9.30am to 1.30pm, we could set a charge of £1 an hour. But at any other time, when that car park is not full, drivers can be allowed to stay as long as they like at no charge. At those times they are not imposing any disutility costs on others.

The matrices might thus look like the ones shown at the bottom of the page. The utility charge is calculated by adding all three elements together – severance charge, congestion charge and occupancy charge. A town or city may wish to add more layers to reflect local policies and needs. For example, they may want to levy a pollution charge. We might live in a town where air quality is particularly bad in July and August. In those months between 10am and 6pm a pollution charge matrix is applied, in addition to the others, when you drive a vehicle into the car park. Another matrix could be for noise, applying a unit charge for entry or exit to the car park during the early hours of the night.

A transparent approach

A utility pricing approach would make the charges applied for parking, and driving, more transparent. Every one of the tables used could be justified against policy and each would have a rationale behind it. On receiving their bill or exit charge, if a driver wishes to know how the utility charge applied had been determined, a breakdown of the bill could be provided.

In essence, utility pricing of parking would be a bit like your phone bill, which is made up of all sorts of complex components. Most people just get their bill at the end of the month and say, “It’s £24 this month, that’s fine.” But if they really want to know where all the money went they can drill down into the cost of data, duration of the calls and what tariff applied to each.

The key point is that the charges applied with utility pricing would be known up front, having been agreed politically for the year ahead. This means drivers would know before they make the journey what it is going to cost to travel and park those particular times. For example, in a utility parking system, commuters would know they paid £9 because they would go in and out at peak time for congestion. In this case, they would not pay a severance charge because they arrived when there is no significant commercial activity. They would however pay a £4 occupation charge because their car would be sitting there when the car park was likely to be full.

By way of contrast, somebody who goes shopping and only comes into town for an hour would pay £3. This would be made up of £1 for the hour that they parked during the busy time, while the other £2 represents the severance cost due to the disruption they were causing to the shopping street by driving into the town centre.

In the real world

West Sussex County Council is considering aspects of this approach. It is looking at performance pricing, where the price of parking is set to ensure spaces are always available.

Cambridge City Council has been trialling a parking tariff system that means if parking between 8am and 10am you face a different tariff than after 10am. You pay 50p an hour more if you drive in during the morning peak. Also, before, if you went in at 5pm you went on to an evening tariff. They have pushed that back so that you are on the higher tariff until 6pm because they don’t want people driving in Cambridge between 5pm and 6pm.

The Cambridge initiative is not quite the utility pricing system, but perhaps the initial steps towards one. If this approach becomes acceptable, maybe we are on our way to a system that ends simply charging for length of stay.

Welcome to utility pricing

‘Utility pricing’ is based on the cumulative impacts of the parking event. To determine the utility charge, we can develop a series of matrices to price each component. In this example we consider how to calculate the optimum price for a car that drives into or out of the car park between 9.30am and 4pm. The four tables represent:
• Utility Charge matrix: This is the combined Utility Charge. The final fee of £3 is made up by combining the three matrices below…

• Severance matrix: Our charging matrix cross-references the time the car arrives and the time it leaves to determine the severance charge.

• Congestion Charge matrix: This matrix is related to the congestion the vehicle generates on the road network when heading to the car park. If the car is driven in during the morning peak its will be charged £3, and if it is driven out during the evening peak it will be charged £2.

• Occupation Charge matrix: This matrix sets out charges for actual occupation of the car park. Cars pose a disutility when they are parked at the point if the car park becomes full, because once a car park becomes full all those parked vehicles are stopping somebody else deriving the benefit of being able to use their car and make a journey.