Fare Regulation Framework
To guide PTC’s annual fare review exercises, the fare formula needs to be nimble and responsive to industry cost changes as our public transport landscape undergoes transformation. It is in this spirit that PTC will introduce a Network Capacity Factor (NCF) into the fare formula, to better reflect the cost movements due to changes in public transport network capacity (e.g. running more buses and trains over longer distances) and commuter usage (e.g. more passengers taking more trips on buses or trains). PTC will also update the weights for the price indices and the Productivity Extraction Factor (PEF) in the existing formula to reflect the latest industry cost structure.
The revised fare formula, to be applied from 2018 to 2022, is as follows:
|Maximum Fare Adjustment= 0.5cCPI + 0.4 WI + 0.1EI – 0.1% + NCF|
Network Capacity Factor (NCF)
Between 2012 and 2016, annual operating costs increased by over $900 million. Annual fare revenue increased by around $230 million over the same period, mostly due to ridership growth. However, this only covered about 25% of the increase in annual operating costs. In fact, fares were reduced for the past three consecutive years, mainly due to subdued energy prices. To cover the operating expenditure shortfall, the Government has stepped in to provide substantial subsidies. However, a widening gap between cost and fares is not sustainable for any public transport network.
To address this issue, PTC has introduced a NCF in the fare formula to better reflect cost movements due to public transport capacity changes and commuter usage. The NCF will allow the fare formula to better track the increase in costs incurred by the operators to provide additional services should it be necessary to meet demand.
Fare Formula Review
The revised fare formula will apply from the 2018 Fare Review Exercise onwards.