SURFACE TRANSPORTATION BOARD DECISION DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Docket Number: | EP_290_5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Case Title: | QUARTERLY RAIL COST ADJUSTMENT FACTOR | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Type: | Decision | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deciding Body: | Entire Board | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Summary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Notes: | DECISION APPROVED THE RAIL COST ADJUSTMENT FACTOR INDICES SUBMITTED BY THE ASSOCIATION OF AMERICAN RAILROADS TO THE BOARD FOR THE SECOND QUARTER OF 2013. THE APPROVED RCAF FIGURES ARE AS FOLLOWS: RCAF (UNADJUSTED) IS 1.006, RCAF (ADJUSTED) IS 0.438, AND RCAF-5 IS 0.414. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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42997 SERVICE
DATE – MARCH 20, 2013 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2013-2) QUARTERLY RAIL COST ADJUSTMENT FACTOR Digest:^{[1]} The rail cost adjustment factor (RCAF) is an
index formulated to represent changes in railroad costs incurred by the
nation’s largest railroads over a specified period of time. The statute requires the Surface
Transportation Board (Board) to publish the RCAF on at least a quarterly
basis. Each quarter, the Association of
American Railroads computes three types of RCAF figures and submits those
figures to the Board for approval. The
Board has reviewed the submission and adopts the RCAF figures for the second
quarter of 2013. Decided: March 19,
2013 In Railroad
Cost Recovery Procedures, 1 I.C.C. 2d 207 (1984), the Interstate Commerce
Commission (ICC) outlined the procedures for calculating the all-inclusive
index of railroad input prices and the method for computing the rail cost
adjustment factor (RCAF). Under the
procedures, the Association of American Railroads (AAR) is required to
calculate the index on a quarterly basis and submit it to the agency on the
fifth day of the last month of each calendar quarter. In Railroad Cost Recovery
Procedures—Productivity Adjustment, 5 I.C.C. 2d 434 (1989), aff’d sub
nom. Edison Electric Institute v. ICC, 969 F.2d
1221 (D.C. Cir. 1992), the ICC adopted procedures that require the
adjustment of the quarterly index for a measure of productivity. The
provisions of 49 U.S.C. § 10708 direct the Surface Transportation Board (Board)
to continue to publish both an unadjusted RCAF and a productivity-adjusted
RCAF. In Productivity
Adjustment—Implementation, 1 S.T.B. 739 (1996), the Board decided to
publish a second productivity-adjusted RCAF called the RCAF-5. Consequently, three indices are now filed
with the Board: the RCAF (Unadjusted),
the RCAF (Adjusted), and the RCAF-5. The
RCAF (Unadjusted) is an index reflecting cost changes experienced by the
railroad industry, without reference to changes in rail productivity. The RCAF (Adjusted) is an index that reflects
national average productivity changes as originally developed and applied by
the ICC, the calculation of which is currently based on a 5-year moving
average. The RCAF-5 is an index that
also reflects national average productivity changes; however, those
productivity changes are calculated as if a 5-year moving average had been
applied consistently from the productivity adjustment’s inception in 1989. The index
of railroad input prices, RCAF (Unadjusted), RCAF (Adjusted), and RCAF-5 for
the second quarter 2013 are shown in Table A of the Appendix to this decision. Table B shows the fourth quarter 2012 index
and the RCAF calculated on both an actual and a forecasted basis. The difference between the actual calculation
and the forecasted calculation is the forecast error adjustment. We
have examined AAR’s calculations, and we find that AAR has complied with our
procedures. We find that the second
quarter 2013 RCAF (Unadjusted) is 1.006, an increase of 0.9% from the first
quarter 2013 RCAF of 0.997. The RCAF
(Adjusted) is calculated, in part, using the RCAF (Unadjusted) and a 5-year
moving geometric average of productivity change for U.S. Class I railroads from
2007-2011, which is 1.009 (0.9% per year).
We find the RCAF (Adjusted) is 0.438, an increase of 0.7% from the first
quarter 2013 RCAF (Adjusted) of 0.435.^{[2]} In
accordance with Productivity Adjustment—Implementation, 1 S.T.B. at
748-49, the RCAF-5 for this quarter will use a productivity trend for the years
2006-2010, which is 1.008 (0.8% per year).
We find the RCAF-5 for the second quarter of 2013 is 0.414, an increase of
0.7% from the first quarter 2013 RCAF-5 of 0.411.^{[3]} This
decision will not significantly affect the quality of the human environment or
the conservation of energy resources. Authority: 49 U.S.C. § 10708. It is ordered: 1. The Board has approved the second quarter
2013 RCAF (Unadjusted) of 1.006, RCAF (Adjusted) of 0.438, and RCAF-5 of 0.414. 2. Notice of this decision will be published in
the Federal Register. 3. The effective date
of this decision is April 1, 2013. By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey. APPENDIX TABLE
A EP
290 (Sub-No. 5) (2013-2) All
Inclusive Index of Railroad Input Costs (Endnotes Following Table B)
TABLE B EP 290 (Sub-No. 5) (2013-2) Comparison of Fourth Quarter 2012 Index Calculated on Both a Forecasted and an Actual Basis
Endnotes: ^{[1]} The digest constitutes no part of the decision of the Board but has been prepared for the convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010). ^{[2]} The second quarter 2013 RCAF Adjusted (0.438) is calculated by dividing the second quarter 2013 RCAF Unadjusted (1.006) by the second quarter productivity adjustment factor of 2.2957. The second quarter 2013 productivity adjustment factor is calculated by multiplying the first quarter 2013 productivity adjustment of 2.2907 by the fourth root (1.0022) of the 2007-2011 annual average productivity growth rate of 0.9%. ^{[3]} The second quarter 2013 RCAF-5 (0.414) is calculated by dividing the second quarter 2013 RCAF Unadjusted (1.006) by the second quarter productivity adjustment factor-5 (PAF-5) of 2.4328. The second quarter 2013 PAF-5 is calculated by multiplying the first quarter 2013 PAF-5 of 2.4279 by the fourth root (1.0020) of the 2006-2010 annual average productivity growth rate of 0.8%.^{} ^{[1]} “Other Items”
is a combination of Purchased Services, Casualties and Insurance, General and
Administrative, Other Taxes, Loss and Damage, and Special Charges, price
changes for all of which are measured by the Producer Price Index for
Industrial Commodities Less Fuel and Related Products and Power. ^{[2]} Linking is necessitated by a change to the 2011 weights beginning in the fourth quarter 2012. The following formula was used for the current quarter’s index: 2nd Qr. 2013 Index (2011 Weights) Times 1st Quarter Linked Index Equals Linked Index 1st Qr. 2013 Index (1980 = 100 Linked) (Current Quarter) (2011 Weights) Or 311.3 X 297.3 = 298.5 310.0 ^{[3]} The first
quarter 2013 RCAF was rebased using the October 1, 2012, level of 297.5 in accordance with the requirements of the Staggers
Rail Act of 1980 (10/1/2012 = 100). ^{[4]} The second
quarter 2013 forecast error adjustment was calculated as follows: (a) fourth quarter 2012 RCAF using
forecasted data equals 100.5; (b) fourth quarter 2012
RCAF using actual data equals 100.8; and (c) the difference
equals the forecast error (b-a) of 0.3. Because
the actual fourth quarter value is greater than the forecast value, the
difference is added to the Preliminary RCAF. |