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 THIRD QUARTER 2014 RAIL COST ADJUSTMENT FACTOR AND COST INDEX FILED BY THE ASSOCIATION OF AMERICAN RAILROADS. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Attachments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
43 KB 41 KB | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Approximate download time at 28.8 kb: 40 Seconds | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Note: 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 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
43841 SERVICE
DATE – JUNE 20, 2014 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2014-3) 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 third
quarter of 2014. Decided: June 20,
2014 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 five-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 five-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 third quarter of 2014 are shown in Table A of the Appendix to this decision. Table B shows the first quarter 2014 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. In its
submission, AAR states that on May 23, 2014, one railroad revised fringe
benefit data used by the AAR to calculate the Other Supplements portion of the
Labor Index, which directly affected Total Supplements for 2012Q3 and
2013Q3. AAR also states that the
revisions caused changes to the 2012 benchmark for Health & Welfare, which
caused small decreases for Health & Welfare in all quarters that have used
the 2012 benchmark.^{[2]} In the past, the Board used the forecast error
adjustment procedure to remedy similar errors, and we continue to believe it is
the best available method to correct the Labor Index.^{[3]} Therefore, we will not restate the first or
second quarter 2014 RCAF figures, but rather will allow the corrections to be
made using the forecast error calculations.
The revision had no impact on the Labor Index for the first quarter of
2014, and therefore, the third quarter 2014 forecast error calculation will
include the original 386.2 figure as the “forecast” version of the first
quarter 2014 Labor component, and the same 386.2 figure as the “actual” version
of the first quarter 2014 Labor component. In the fourth quarter 2014 index calculation,
the fourth quarter 2014 forecast error calculation will include the original
388.1 figure as the “forecast” version of the second quarter 2014 Labor component,
and the corrected 388.1 figure as the “actual” version of the second quarter
2014 Labor component.^{[4]} In the current third quarter 2014 RCAF
calculations, the Labor component has been calculated as if the second quarter
2014 version had used the corrected figure. We
have examined AAR’s calculations and we find that AAR has complied with our
procedures. We find that the third quarter
2014 RCAF (Unadjusted) is 0.985, an increase of 1.0% from the second quarter
2014 RCAF of 0.975. The RCAF (Adjusted)
is calculated, in part, using the RCAF (Unadjusted) and a five-year moving
geometric average of productivity change for U.S. Class I railroads from 2008-2012,
which is 1.010 (1.0% per year). We find
the RCAF (Adjusted) is 0.424, an increase of 0.7% from the second quarter 2014
RCAF (Adjusted) of 0.421.^{[5]} 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
2007-2011, which is 1.009 (0.9% per year).
We find that the RCAF-5 for the third quarter of 2014 is 0.401, an increase
of 1.0% from the second quarter 2014 RCAF-5 of 0.397.^{[6]} 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 approves the third quarter 2014
RCAF (Unadjusted) of 0.985, RCAF (Adjusted) of 0.424, and RCAF-5 of 0.401. 2. Notice of this decision will be published in
the Federal Register. 3. The effective date
of this decision is July 1, 2014. By the
Board, Chairman Elliott, Vice Chairman Miller, and Commissioner Begeman. APPENDIX TABLE
A EP
290 (Sub-No. 5) (2014-3) All
Inclusive Index of Railroad Input Costs (Endnotes Following Table B)
TABLE B EP 290 (Sub-No. 5) (2014-3) Comparison of First Quarter 2014 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]} AAR’s filing (dated June 5, 2014), Appx. AA. ^{[3]} See Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2012-3), slip op. at 2 (STB served June 20, 2012); Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2011-4), slip op. at 2 (STB served Sept. 20, 2011) (correcting, but not restating, the third quarter 2011 Materials & Supplies component using the first quarter 2012 forecast error calculation); Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2001-1), slip op. at 2 (STB served Dec. 20, 2000) (noting that the forecast error adjustment was the best available method for correcting a previously overstated RCAF calculation and not restating the previously overstated RCAF). ^{[4]} The 388.1 figure does not change due to rounding. ^{[5]} The third quarter 2014 RCAF Adjusted (0.424) is calculated by dividing the third quarter 2014 RCAF Unadjusted (0.985) by the third quarter productivity adjustment factor of 2.3226. The third quarter 2014 productivity adjustment factor is calculated by multiplying the second quarter 2014 productivity adjustment of 2.3168 by the fourth root (1.0025) of the 2008-2012 annual average productivity growth rate of 1.0%. ^{[6]} The third quarter 2014 RCAF-5 (0.401) is calculated by dividing the third quarter 2014 RCAF Unadjusted (0.985) by the third quarter productivity adjustment factor-5 (PAF-5) of 2.4588. The third quarter 2014 PAF-5 is calculated by multiplying the second quarter 2014 PAF-5 of 2.4534 by the fourth root (1.0022) of the 2007-2011 annual average productivity growth rate of 0.9%.^{} ^{[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 2012 weights beginning in the fourth quarter of 2013. The following formula was used for the current quarter’s index: 3rd Qr. 2014 Index (2012 Weights) Times 2nd Quarter Linked Index Equals Linked Index 2nd Qr. 2014 Index (1980 = 100 Linked) (Current Quarter) (2012 Weights) Or 309.0 X
296.8 = 296.1 309.7 ^{[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). In compliance to our November 27, 2013
decision, AAR has restated the October 1 2012, level of 297.5 to 297.6. ^{[4]} The third
quarter 2014 forecast error adjustment was calculated as follows: (a) first quarter 2014 RCAF using
forecasted data equals 98.5; (b) first quarter 2014 RCAF
using actual data equals 97.5; (c) the difference equals
the forecast error (b-a) of -1.0.
Because the actual first quarter value is less than the forecast value,
the difference is subtracted from the Preliminary RCAF. |