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Published in:
2022 | OriginalPaper | Chapter
9. SCUTs
Authors : Carlos Oliveira Cruz, Joaquim Miranda Sarmento
Published in: Public Private Partnerships Renegotiations in Transportation
Publisher: Springer International Publishing
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Abstract
The SCUT model, whose acronym means “No Costs for the User” (originally “Sem custos para o utilizador” in Portuguese) was introduced in 1997. This model, although new in Portugal, consisted of an “import” of the shadow tolls model developed in the UK in the 1990s. In 2010, following the introduction of a new model for the financing of the road system and as a result of the fiscal crisis that Portugal was facing, the Government unilaterally decided to introduce tolls in the shadow toll highways.
The initial government forecasted values turned out to be incorrect in relation to the real levels of traffic. The renegotiation of 2010 was also inadequate, as it failed to update the initial forecasted values to reasonable values in virtue of the expected decrease resulting from the introduction of tolls (which the Regulator expected to be around 15% on average, based on international experiences). Despite the regulator’s forecast of a reduction of 15% in traffic, government forecasts were extremely optimistic in the case of several concessions, and failed to take into account the historical evidence of the pattern of traffic, as well as the negative effect of introducing tolls. For example, errors of 51 and 59% in the forecasts were, respectively, verified for two cases—Grande Porto and Costa de Prata.
The introduction of tolls in SCUTs has created a much greater risk system for the public sector in maintaining the profitability of private operators, which in turn represents an overall negative economic value for society as a whole. With the introduction of tolls in the SCUTs, the concessionaires in effect no longer assume the traffic risk, which is now fully supported by the public entity—Infraestruturas de Portugal S.A. However, this change did not lead to a reduction in the forecast level of profitability for the private shareholders, as would be expected, due to the downward adjustment of the risk profile of the projects.
However, this change gave rise to overcosting for users, and has reduced the economic benefits that users expect to gain from using highways, based on the associated saving of journey time due to the habitual lower level of traffic on highways.
Overall, this decision to charge tolls on SCUTs has been negative for society. Infraestruturas de Portugal saw their costs (payments to the private partners) increased with this renegotiation. The real revenues were substantially below the forecast, which led to a small benefit for the SOE. There was a substantial reduction in traffic, which explains the deviation in the forecast revenues.