SURFACE TRANSPORTATION BOARD DECISION DOCUMENT | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Information | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Docket Number: | EP_689_2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Case Title: | SIMPLIFIED STANDARDS FOR RAIL RATE CASES—2009 RSAM AND R/VC>180 CALCULATIONS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Type: | Decision | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deciding Body: | Director, Office Of Economics | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Summary | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Decision Notes: | DECISION PUBLISHED THE MOST RECENT REVENUE SHORTFALL ALLOCATION METHODOLOGY AND REVENUE TO VARIABLE COSTS GREATER THAN 180% RATIOS FOR THE CLASS I CARRIERS, AS WELL AS THEIR 4-YEAR AVERAGES. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Full Text of Decision | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
41694 SERVICE
DATE – JULY 14, 2011 OE SURFACE TRANSPORTATION BOARD NOTICE Docket No. EP 689 (Sub-No. 2) SIMPLIFIED STANDARDS FOR RAIL RATE CASES— 2009 RSAM and R/VC_{>180} CALCULATIONS Decided: July 13, 2011 In this decision, the Board is publishing the most recent Revenue Shortfall
Allocation Methodology (RSAM) and Revenues to Variable Costs greater than 180%
(R/VC_{>180}) ratios for the Class I carriers (for the years
2006-2009), as well as their 4-year averages. 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),^{[1]}
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. The first 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.
§ 10707(d); Burlington N. R.R. v. STB, 114 F.3d 206, 210 (D.C. Cir. 1997); W.
Tex. Util. v. Burlington N. R.R., 1 S.T.B. 638, 677-78 (1996). The RSAM benchmark is
calculated by adding the carrier’s revenue shortfall (or subtracting the
overage) shown in our annual revenue adequacy determination, adjusted for
taxes, to the numerator of the R/VC_{>180} benchmark. Simplified Standards for Rail Rate Cases–Taxes
in Revenue Shortfall Allocation Method, EP 646 (Sub-No. 2), slip op. 2-3 (STB served
May 11, 2009). The 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^{[2]}
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 revenue adequate. Id.
The third benchmark is R/VC_{COMP}. This benchmark is used to compare the markup being paid by 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 17. The R/VC_{COMP}
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. Id. at
18. 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/VC_{COMP}
is case specific, that ratio is calculated 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 2006 to 2009 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 2006-2009
Tables” and “2009 RSAM Computation” hyperlinks). By the Board, Dr.
William J. Huneke, Chief Economist.
Table I RSAM Markup Percentages 2006 – 2009
Table II R/VC>180 Percentages 2006 – 2009
^{[1]} Aff’d sub nom. CSX Transp., Inc. v. STB, 568 F.3d 236 (D.C. Cir. 2009), and vacated in part on reh’g, CSX Transp., Inc. v. STB, 584 F.3d 1076 (D.C. Cir. 2009). ^{[2]} 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. |