|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|RAILROAD COST RECOVERY PROCEDURES-PRODUCTIVITY ADJUSTMENT|
|DECISION PROPOSED TO ADOPT 1.010 (1.0% PER YEAR) AS THE MEASURE OF AVERAGE (GEOMETRIC MEAN) CHANGE IN RAILROAD PRODUCTIVITY FOR THE 2008-2012 (5-YEAR) PERIOD. THIS REPRESENTED AN INCREASE OF 0.1% FROM THE AVERAGE FOR THE 2007-2011 PERIOD.|
| 16 KB|
|Approximate download time at 28.8 kb: 24 Seconds|
If you do not have Acrobat Reader, or if you have problems reading our files with your current version of Acrobat Reader, the latest version of Acrobat Reader is available free at www.adobe.com.
|Full Text of Decision|
43671 SERVICE DATE – LATE RELEASE MARCH 4, 2014
SURFACE TRANSPORTATION BOARD
Docket No. EP 290 (Sub-No. 4)
RAILROAD COST RECOVERY PROCEDURES—PRODUCTIVITY ADJUSTMENT
Digest: 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 2008-2012 averaging period.
Decided: March 4, 2014
We propose to adopt 1.010 (1.0% per year) as the measure of average (geometric mean) change in railroad productivity for the 2008-2012 (5-year) period. This represents an increase of 0.1% from the average for the 2007-2011 period.
Since 1989, the cost recovery procedures have required that the quarterly rail cost adjustment factor (RCAF) 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 2012 is 1.008, based on changes in input and output levels from 2011 and represents an increase of 0.7% from the rate of productivity growth in 2011 relative to 2010 (1.001). Incorporating the 2012 value with the values for the 2008-2011 period produces a geometric average productivity growth of 1.010 for the 5-year period 2008-2012, or 1.0% per year. As the new geometric mean was computed by replacing the 2007 figure of 1.004 with the larger figure of 1.008 for 2012, there was an increase of 0.1% 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 March 17, 2014.
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 a further order is issued postponing the effective date, this decision is effective on March 19, 2014.
By the Board, Chairman Elliott and Vice Chairman Begeman.
The following is a description of the methodology currently used to calculate the RCAF productivity adjustment. 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 2012 constant dollar adjustment factor for each of the 6 years was calculated by dividing the 2012 RCR index value (526.8) by the RCR index values for 2007 and each subsequent year through 2011, inclusive. The calculation of the input indices and values used are shown in Table A.
The 2012 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 2008-2012 is calculated by taking a geometric mean, which was found to be 1.010 (1.0% per year). The input index, the output index, the annual productivity change, and the calculation of the 2008-2012 average are shown in Table B.
Calculation of Input Indices
Comparison of Output, Input, and Productivity
The 5-year (2008-2012) productivity trend calculated using a geometric average is 1.010, or 1.0%. Note that there are changes in some of the individual numbers in Table A and Table B compared with corresponding years in previous decisions. These changes represent the revisions to the R-1 submitted by the railroads. None of the changes are large enough to affect the five-year moving geometric average calculated in previous decisions.
 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).
 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.