|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|SIMPLIFIED STANDARDS FOR RAIL RATE CASES—2011 RSAM AND R/VC>180 CALCULATIONS|
|Director, Office Of Economics|
|DECISION PUBLISHED THE MOST RECENT REVENUE SHORTFALL ALLOCATION METHODOLOGY AND REVENUE-TO-VARIABLE COST GREATER THAN 180% RATIOS FOR THE CLASS I CARRIERS, AS WELL AS THEIR 4-YEAR AVERAGES, FOR USE IN THREE-BENCHMARK CASES.|
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|Full Text of Decision|
42901 SERVICE DATE – LATE RELEASE FEBRUARY 11, 2013
SURFACE TRANSPORTATION BOARD
Docket No. EP 689 (Sub-No. 4)
SIMPLIFIED STANDARDS FOR RAIL RATE CASES—
2011 RSAM and R/VC>180 CALCULATIONS
Decided: February 8, 2013
In this decision, the Board is publishing the most recent revenue shortfall allocation methodology (RSAM) and revenue-to-variable cost greater than 180% (R/VC>180) ratios for the Class I carriers (for the years 2008-2011), as well as their 4-year averages, for use in Three-Benchmark cases.
Under 49 U.S.C. § 10701(d)(3), the Board is directed to “establish a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case.” In Simplified Standards for Rail Rate Cases, EP 646 (Sub-No. 1) (STB served Sept. 5, 2007), the Board modified and clarified its guidelines for such proceedings by establishing a simplified Stand-Alone Cost test for medium-sized cases, clarifying its Three-Benchmark approach for the smallest disputes, and establishing eligibility thresholds for each type of case. The Three-Benchmark approach compares a challenged rate to three measures of the defendant’s revenues and variable costs.
benchmark, RSAM, measures the average markup that the
railroad would need to charge all of its “potentially captive” traffic in order
for the railroad to earn adequate revenues as measured by the Board under
49 U.S.C. § 10704(a)(2).
Potentially captive traffic is defined as all traffic priced at or above
the 180% R/VC level, which is the statutory floor for regulatory rail rate
intervention. See 49 U.S.C.
second benchmark is R/VC>180.
This benchmark measures the average markup over variable cost earned by
the defendant railroad on its potentially captive traffic. Simplified
Standards for Rail Rate Cases, EP 646
(Sub-No. 1), slip op. at 10. The R/VC>180
benchmark is calculated using the Board’s confidential Waybill Sample data by dividing the total revenues earned by
the carrier on potentially captive traffic by the carrier’s total variable
costs for that traffic. Id. at 20. The
ratio of RSAM to R/VC>180 provides an estimate of how much more
or less the railroad would need to charge its potentially captive traffic to be
benchmark is revenue-to-variable cost comparison (R/VCCOMP). This benchmark is used to compare the markup
on the challenged traffic to the average markup assessed on other potentially
captive traffic involving the same or a similar commodity with similar
transportation characteristics. Id. at 10. The
R/VCCOMP ratio for appropriate comparison traffic is computed using
traffic data from the rail industry Waybill Sample and applying the Board’s
Uniform Rail Costing System.
The Board publishes tables each year showing the most recent RSAM and R/VC>180 ratios for each Class I railroad, as well as their rolling 4-year averages. Because R/VCCOMP is case specific, that ratio is calculated only after a shipper files a Three-Benchmark rail rate complaint.
The attached tables contain the most recent RSAM and R/VC>180 ratios. Tables I and II represent percentages for the most recent 4-year period 2008 to 2011 for all Class I carriers. Interested readers may review the workbooks used to compute the data in these tables by visiting our website at http://www.stb.dot.gov/stb/index.html (open “Industry Data” menu; then open “Economic Data” menu; then follow “Financial & Statistical Reports” hyperlink; then follow “RSAM 2008-2011 Tables” and “2011 RSAM Computation” hyperlinks).
By the Board, Dr. William F. Huneke, Chief Economist.
RSAM Mark-up Percentages 2008 – 2011
R/VC>180 Percentages 2008 – 2011
 The Waybill Sample is a statistical sampling of railroad waybills that is collected and maintained for use by the Board and by the public (with appropriate restrictions to protect the confidentiality of individual traffic data). See 49 C.F.R. § 1244.