Public service obligation
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In the context of
Transport law
In EU transport law, a PSO is an arrangement by which a governing body or other authority offers subsidies in an auction, whereby the winning company will be obliged to operate a specified service of public transport for a specified period of time in return for the subsidy. This usually leads to the winning bidder having a monopoly on the route, as competing services would not be viable without subsidies. PSOs are aimed at routes which are unprofitable in a free market, but where there is a socially desirable advantage to transport being available.
The use of PSO can be applied to many
Traditionally, public transport has been operated by a company wholly-owned by the state with a monopoly, like a national railway company. Alternatively, private companies were granted
Specification
The authority issuing the auction may be a
The auctioneer will specify a number of terms of the service, such as frequency, size of vehicle, timing of services, the maximum permitted fare, and/or other specifications related to service and quality. The auctioneer can specify either a net or gross contract. In the latter the operator bids for the full operating costs, and all revenue goes to the authority; with net contracts the operator will be granted all revenue, and will bid only for the difference between fare revenue and that needed to make the desired profit. The use of gross contracts reduces the risk of the operator since they do not need to estimate the ridership and will normally result in lower bids since there is a lower risk premium in each bid. This option also makes it easier to create free transfer between operators and modes.
Net contracts give the operators an incentive to increase ridership and reduce risk to the auctioneer. Gross contracts tend to have higher administrative costs for the authority administrating the fares. Urban public transport with transit authorities is most commonly operated with gross contracts, while airlines and ferry routes are typically operated on net contracts.
Typical uses of PSO include
and therefore the cost of operation.European Union
In the
Examples of air transport PSOs currently in operation in Europe are routes from
International routes are usually not supported by PSO. This is because of a political principle that people should pay for international travel themselves, not through tax money. This is especially evident in Scandinavia where there is very little international air traffic between cities other than through the capitals, where connections are commercially profitable. There are exceptions, like the Stockholm-Narvik night trains.
The term is also used in relation to electricity generation, such as wind power and biomass powerplants.[2]
United States
The
The
References
- ^ European Commission, A Quality Framework for Services of General Interest in Europe, Brussels 20.12.2011 COM(2011)900 Final
- ^ "Public Service Obligation Levy 2015/2016" (PDF). Archived from the original (PDF) on 2016-07-05. Retrieved 2015-11-07.
- ^ a b c "Essential Air Service". U.S. Department of Transportation (DOT). Retrieved 1 Oct 2014.
External links
- Regulation (EC) No 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the community
- Example of PSO tender notice in the Official Journal of the European Union