SURFACE TRANSPORTATION BOARD DECISION DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Information | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Docket Number: | EP_290_4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Case Title: | RAILROAD COST RECOVERY PROCEDURES-PRODUCTIVITY ADJUSTMENT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Type: | Decision | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deciding Body: | Entire Board | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Summary | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Notes: | DECISION PROPOSED TO ADOPT 1.009 (0.9% PER YEAR) AS THE MEASURE FOR AVERAGE CHANGE IN RAILROAD PRODUCTIVITY FOR THE 2007-2011 PERIOD. THE BOARD CALCULATED THIS FIGURE BY COMPARING YEAR-TO-YEAR THE AVERAGE COST OF PRODUCING A UNIT OF RAILROAD OUTPUT. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Full Text of Decision | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
42907 SERVICE DATE – FEBRUARY
11, 2013 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 4) RAILROAD COST RECOVERY PROCEDURES—PRODUCTIVITY ADJUSTMENT Digest:^{[1]} Each year the Board calculates the change, if any, in the rail industry’s productivity, i.e., how efficiently railroads move freight. The Board calculates this figure by comparing year-to-year the average cost of producing a unit of railroad output. Here, the Board presents its calculation for the change in railroad productivity for the 2007-2011 averaging period. Decided: February 7, 2013 We
propose to adopt 1.009 (0.9% per year) as the measure of average (geometric
mean) change in railroad productivity for the 2007-2011 (5-year) period. This represents a 0.1% increase over the
average for the 2006-2010 period. Since
1989, the cost recovery procedures have required that the quarterly rail cost
adjustment factor (RCAF)^{[2]}
be adjusted for long-run changes in railroad productivity. R.R. Cost Recovery Procedures—Productivity
Adjustment, 5 I.C.C. 2d 434 (1989); see also 49 U.S.C.
§ 10708. This long-run measure of
productivity is computed using a 5-year moving geometric average. Productivity Adjustment—Implementation,
9 I.C.C. 2d 1072 (1993). The
productivity change for the year 2011 is 1.000, based on changes in input and
output levels from 2010 and represents a decrease of 3.6% from the rate of
productivity growth in 2010 relative to 2009 (1.036). Incorporating the 2011 value with the values
for the 2007-2010 period produces a geometric average
productivity growth of 1.009 for the 5-year period 2007-2011, or 0.9% per
year. As the new geometric mean was
computed by replacing the 2006 figure of 0.994 with the higher figure of 1.000
for 2011, there was a 0.1% increase in the geometric mean from last year’s
value. A detailed discussion of our
calculations is contained in the Appendix to this decision. Comments
may be filed addressing any perceived data and computational errors in our
calculation. Any party proposing a
different estimate of productivity growth must, at the time it files comments,
furnish the Board with one set of detailed workpapers
and documentation underlying its calculations.
The same information must be made available to other parties upon
request. This decision will not significantly affect the quality of
the human environment or the conservation of energy resources. It is ordered: 1.
Comments are due by February
26, 2013. 2. An original and 10 copies must be filed with: 395 E Street, S.W. 3. Comments must be served on all parties
appearing on the current service list. 4.
Unless further order is issued postponing the effective date, this decision
is effective on March 1, 2013. By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey. APPENDIX The
following is a description of the methodology currently used to calculate the
RCAF productivity adjustment.^{[3]} The annual rate of productivity change is
calculated by dividing an output index by an input index. The input
index uses constant dollar-adjusted expenses.
The inputs in this index—freight expenses, fixed charges and contingent
interest—are stated on a constant dollar basis using the most recent year available
as the base, and updating the base by the Series Rail Cost Recovery (RCR) Index
published by the Association of American Railroads. Freight expenses, fixed charges, and
contingent interest were obtained from railroad Annual Report (Form R-1)
data. The 2011 constant dollar
adjustment factor for each of the 6 years was calculated by dividing the 2011
RCR index value (513.7) by the RCR index values for 2006 and each subsequent
year through 2010, inclusive. The
calculation of the input indices and values used are shown in Table A. The 2011
output index was developed from the costed waybill
sample, a commonly used data source. The
costed waybill sample excludes movements lacking
sufficient information for the application of unit costs. Using the
costed waybill sample as a base, each movement is
assigned to one of the 189 segments or categories used to develop the
output index. Segmentation is based on
three mileage blocks, seven car types, three weight brackets, and three
shipment sizes. The output index is a
composite of the year-to-year change in ton-miles for each of the 189 segments
weighted by each segment’s base-year share of total revenues. The
change in productivity is calculated by dividing the output index by the input
index. The multi-year average for the
period 2007-2011 is calculated by taking a geometric mean, which was found to
be 1.009 (0.9% per year). The input
index, the output index, the annual productivity change, and the calculation of
the 2007-2011 average are shown in Table B. Table A Calculation of Input Indices
Table B Comparison of
Output, Input, and Productivity 2007-2011
The 5-year (2007-2011)
productivity trend calculated using a geometric average is 1.009, or 0.9% ^{[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 RCAF is an index of railroad input prices
that is published by the Board on a quarterly basis. See, e.g., Quarterly Rail Cost
Adjustment Factor, EP 290 (Sub-No. 5) (STB served Dec. 20, 2012). ^{[3]} The development and application of the
productivity adjustment is explained in the decision in this proceeding found
at 5 I.C.C. 2d 434 (1989). ^{[4]} The values
shown in Column 3 are taken from the spreadsheet used to calculate productivity
and, due to rounding, may not equal numbers calculated
using the rounded numbers shown in Columns 1 and 2. |