SURFACE TRANSPORTATION BOARD DECISION DOCUMENT | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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 2010 RAIL COST ADJUSTMENT FACTOR (UNADJUSTED) OF 1.068, RCAF (ADJUSTED) OF 0.479, AND RCAF-5 OF 0.454. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Full Text of Decision | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
40869 SERVICE
DATE – JUNE 18, 2010 EB SURFACE
TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2010-3) QUARTERLY RAIL COST ADJUSTMENT FACTOR Decided: June 17, 2010 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 established procedures, the Association of American Railroads
(AAR) is required to calculate the index on a quarterly basis and submit it to
the Board 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 Board to publish both an unadjusted RCAF and a productivity-adjusted
RCAF. The RCAF (Adjusted) reflects
national average productivity changes as originally developed and applied by
the ICC. In Productivity Adjustment—Implementation,
1 S.T.B. 739 (1996), the Board decided to publish a second
productivity-adjusted RCAF called the RCAF-5.
The RCAF-5 reflects national average productivity changes as if a 5-year
moving average had been applied consistently from the productivity adjustment’s
inception in 1989. Consequently, three
indices are now published by the Board:
the RCAF (Unadjusted), the RCAF (Adjusted), and the RCAF-5. The index of railroad input prices, RCAF
(Unadjusted), RCAF (Adjusted), and RCAF-5 for the third quarter 2010 are shown
in Table A of the Appendix to this decision.
Table B shows the first quarter 2010 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. We have
examined the AAR’s calculations for compliance with our procedures and find
that the third quarter 2010 RCAF (Unadjusted) is 1.068, an increase of 0.8%
from the second quarter 2010 RCAF of 1.060.
The RCAF (Adjusted) is calculated, in part, using the RCAF (Unadjusted)
and the 2008 productivity adjustment, a 5-year moving geometric average of productivity
change for U.S. Class I railroads from 2004-2008, which is 1.012 (1.2% per
year). We find the RCAF (Adjusted) is 0.479,
an increase of 0.4% from the previously reported second quarter 2010 RCAF
(Adjusted) of 0.477.^{[1]} In
accordance with Productivity Adjustment—Implementation, 1 S.T.B. at
748-49, the RCAF-5 for the second, third, and fourth quarters of 2010 will use
a productivity trend for the years 2003-2007, which is 1.012 (1.2% per year). We find the RCAF-5 for the third quarter of
2010 is 0.454, an increase of 0.4% from the previously reported second quarter
2010 RCAF-5 of 0.452.^{[2]} 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 third quarter 2010 Rail Cost Adjustment Factor (Unadjusted) is 1.068,
RCAF (Adjusted) is 0.479, and RCAF-5 is 0.454. 2.
Notice of this decision will be published in the Federal Register. 3.
The effective date of this decision is July 1, 2010. By the Board, Chairman Elliott, Vice
Chairman Mulvey, and Commissioner Nottingham. APPENDIX TABLE A Ex Parte
No. 290 (Sub-No. 5) (2010-3) All
Inclusive Index of Railroad Input Costs (Refer to Endnotes Page 5)
TABLE B Ex Parte No. 290 (Sub-No. 5) (2010-3) Comparison of First Quarter 2010 Index Calculated on Both a Forecasted and an
Actual Basis
Endnotes: ^{[1]} The third quarter 2010 RCAF adjusted (0.479) is calculated by dividing the third quarter RCAF Unadjusted (1.068) by the third quarter productivity adjustment factor of 2.2275. The third quarter 2010 productivity adjustment factor is calculated by multiplying the second quarter 2010 productivity adjustment of 2.2208 by the fourth root (1.0030) of the 2004-2008 annual average productivity growth rate of 1.2%. ^{[2]} The third quarter 2010 RCAF-5 (0.454) is calculated by dividing the third quarter 2010 RCAF Unadjusted (1.068) by the third quarter productivity adjustment factor-5 (PAF-5) of 2.3539. The third quarter 2010 productivity adjustment factor -5 (PAF-5) is calculated by multiplying the second quarter 2010 PAF-5 of 2.3469 by the fourth root (1.0030) of the 2003-2007 annual average productivity growth rate of 1.2%. ^{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
2008 weights beginning in the fourth quarter 2009. The following formula was used for the
current quarter’s index: 3^{rd} Qr.
2010 Index ___(2008 Weights) Times 2^{nd}
Quarter Linked Index Equals Linked
Index 2^{nd} Qr.
2010 Index (1980 = 100 Linked) (Current Quarter) (2008 Weights) Or 268.1 X
256.8 = 262.0 262.8 3 The
first quarter 2008 RCAF was rebased using the October 1, 2007, level of 245.9
in accordance with the requirements of the Staggers Rail Act of 1980 (10/1/2007
= 1.00). ^{4} The
third quarter 2010 forecast error adjustment was calculated as follows: a. first quarter 2010 RCAF using forecasted
data equals 104.5; b. first quarter 2010 RCAF using actual data equals 104.8;
c. the difference equals the forecast error (b-a) of 0.3. Since the actual first quarter value is greater
than the forecast value, the difference is added to the Preliminary RCAF. |