Eddie's Tunnel Toll Increase And Bill C-3

CKLW reports this morning:

"TUNNEL INCREASE CONSIDERED

Windsor's Tunnel Commission is considering a toll increase. Right now, the rate is $3.50 CDN to travel from Windsor to Detroit. The return trip - from Detroit to Windsor - is $4.75 CDN. Tunnel Commission Chair, Eddie Francis, says travellers are confused by the discrepancy. A decision on an increase is expected soon."

I was confused too...To avoid the discrepancy, why not REDUCE the US toll so that the combined Tunnel toll at the Cities owned Tunnel would be less than the private sector Ambassador Bridge. Shouldn't that drive more traffic TO the Tunnel rather than a price increase which should drive traffic AWAY from the Tunnel

Anyway, back to the main point of this BLOG. What would happen under Bill C-3 if this happened?

Let us assume that the Tunnel's tolls increased by 50 cents so that the combined Tunnel toll was now $8.75. Let us also assume that since the Bridge is so well-managed, there is no need for them to increase their tolls and they remained at $8. What would we expect to happen assuming that border crossers are price sensitive.

Almost immediately, vehicles would move from the Tunnel and over to the bridge to cross the border since the costs were lower there. There now could be huge back-ups at the border at the bridge and to get vehicles back, the Tunnel would have to reduce its price back to what it was before to re-establish equilibrium.

The end result---Consumers win because competition in the market kept prices low.

Let's look at what could happen with the same facts under Bill C-3.

The Act states:

15. The Governor in Council may, on the recommendation of the Minister, make regulations respecting the operation and use of international bridges and tunnels, including regulations
(b) respecting the tolls, fees and other charges that may be imposed by owners or operators of international bridges or tunnels for their use, to ensure the efficient flow of traffic

Obviously the backups at the bridge means that there is not an "efficient flow of traffic." That allows the Government to intervene in the market economy and "regulate the price." Do you really think one Government is going to cut the money another level of Government may take in? Hey they are Governments after all.

Accordingly, to re-establish the equilibrium between the bridge and Tunnel again, the Government could "regulate" the Bridge Co. to increase their tolls, yes increase. The bridge's price would be viewed in Transport Canada's terms as "predatory" and have to be increased by at least the extra 50 cents.

The end result---Consumers lose because Government regulation and not the competitive marketplace forced prices up. In other words, the Consumer is forced to pay the price of a market participant's inefficiency!

I know, I know...Transport Canada's business model did not take into account Eddie needing more money at the Tunnel so this eventuality was never factored into their plans. But then again, Bureaucrats' business models do not often work in practice do they since they have no sense of business reality!

So much for Bill C-3.