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 1.010 (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. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Full Text of Decision | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
43671 SERVICE DATE – LATE
RELEASE MARCH 4, 2014 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 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)^{[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 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. 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 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. Table A Calculation of Input Indices
Table
B Comparison
of Output, Input, and Productivity 2008-2012
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.
^{[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, 2013). ^{[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. |