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 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Decision Notes: | DECISION ADOPTED THE FIRST QUARTER 2017 RAIL COST ADJUSTMENT FACTOR AND COST INDEX FILED BY THE ASSOCIATION OF AMERICAN RAILROADS. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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45609 SERVICE DATE –
DECEMBER 20, 2016 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2017-1) 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 Surface Transportation Board (Board) is
required by law 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 first quarter of
2017. Decided: December 19,
2016 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 first quarter of 2017 are shown in Table A of the Appendix to this decision. Table B shows the third quarter 2016 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. AAR’s
calculations have been examined, and the Board finds that AAR has complied with
agency procedures. The Board finds that
the first quarter 2017 RCAF (Unadjusted) is 0.888, an increase of 0.8% from the
fourth quarter 2016 RCAF of 0.881. 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
2010-2014, which is 1.014 (1.4% per year).
The RCAF (Adjusted) is 0.373, an increase of 0.5% from the fourth
quarter 2016 RCAF (Adjusted) of 0.371.^{[2]} 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
2010-2014, which is 1.014 (1.4% per year).
The RCAF-5 for the first quarter of 2017 is 0.353, an increase of 0.3%
from the fourth quarter 2016 RCAF-5 of 0.352.^{[3]} This
action is categorically excluded from environmental review under 49 C.F.R. § 1105.6(c). Authority: 49 U.S.C. § 10708. It is ordered: 1. The Board finds
that the first quarter 2017 RCAF (Unadjusted) is 0.888, RCAF (Adjusted) is
0.373, and RCAF-5 is 0.353. 2. Notice of this decision will be published in
the Federal Register. 3. The effective date of this decision is January
1, 2017. By
the Board, Chairman Elliott, Vice Chairman
Miller, and Commissioner Begeman. APPENDIX TABLE
A EP
290 (Sub-No. 5) (2017-1) All
Inclusive Index of Railroad Input Costs (Endnotes Following Table B)
TABLE B EP 290 (Sub-No. 5) (2017-1) Comparison of Third Quarter 2016 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]} The first quarter 2017 RCAF Adjusted (0.373) is calculated by dividing the first quarter 2017 RCAF Unadjusted (0.888) by the first quarter productivity adjustment factor of 2.3833. The first quarter 2017 productivity adjustment factor is calculated by multiplying the fourth quarter 2016 productivity adjustment of 2.3750 by the fourth root (1.0035) of the 2010-2014 annual average productivity growth rate of 1.4%. ^{[3]} The first quarter 2017 RCAF-5 (0.353) is calculated by dividing the first quarter 2017 RCAF Unadjusted (0.888) by the first quarter productivity adjustment factor-5 (PAF-5) of 2.5147. The first quarter 2017 PAF-5 is calculated by multiplying the fourth quarter 2016 PAF-5 of 2.5059 by the fourth root (1.0035) of the 2010-2014 annual average productivity growth rate of 1.4%. ^{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 2015 weights beginning in the fourth quarter of 2016. The following formula was used for the current quarter’s index: 1st Qr. 2017 Index (2015 Weights) Times 4th Quarter Linked Index Equals Linked Index 4th Qr. 2016 Index (1980 = 100 Linked) (Current Quarter) (2015 Weights) Or 287.9 X 260.6 = 267.4 280.6 ^{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 with our November 27, 2013
decision, AAR has restated the October 1, 2012 level of 297.5 to 297.6. ^{4} The first quarter 2017 forecast error
adjustment was calculated as follows: (a) third quarter 2016 RCAF using
forecasted data equals 88.4; (b) third quarter 2016 RCAF using actual data
equals 87.3; and (c) the difference equals the forecast error (b-a) of -1.1. Because the actual third quarter value is
less than the forecast value, the difference is subtracted from the Preliminary
RCAF. |