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 PROVIDED NOTICE OF THE RAIL COST ADJUSTMENT FACTOR FOR THE FIRST QUARTER OF 2019. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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46745 SERVICE DATE –
DECEMBER 19, 2018 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2019-1) 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
2019. Decided: December 17,
2018 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 2019 are shown in Table A of the Appendix to this decision. Table B shows the third quarter 2018 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 2019 RCAF (Unadjusted) is 1.058, a decrease of 1.9% from the fourth
quarter 2018 RCAF (Unadjusted) of 1.079.
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 2012-2016, which is 0.996 (-0.4% per year). The RCAF (Adjusted) is 0.448, a decrease of 2.0%
from the fourth quarter 2018 RCAF (Adjusted) of 0.457.^{[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 2012-2016, which is 0.996 (‑0.4%
per year). The RCAF-5 for the first
quarter of 2019 is 0.419, a decrease of 1.9% from the fourth quarter 2018
RCAF-5 of 0.427.^{[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 2019 RCAF (Unadjusted) is 1.058, RCAF (Adjusted) is 0.448,
and RCAF-5 is 0.419. 2. Notice of this decision will be published in
the Federal Register. 3. The effective date of this decision is January
1, 2019. By
the Board, Board Members Begeman and Miller. APPENDIX TABLE
A EP
290 (Sub-No. 5) (2019-1) All
Inclusive Index of Railroad Input Costs (Endnotes Following Table B)
TABLE B EP 290 (Sub-No. 5) (2019-1) Comparison of Third Quarter 2018 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. See Policy Statement on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010). ^{[2]} The first quarter 2019 RCAF Adjusted (0.448) is calculated by dividing the first quarter 2019 RCAF Unadjusted (1.058) by the first quarter productivity adjustment factor of 2.3593. The first quarter 2019 productivity adjustment factor is calculated by multiplying the fourth quarter 2018 productivity adjustment of 2.3617 by the fourth root (0.9990) of the 2012-2016 annual average productivity growth rate of -0.4%. ^{[3]} The first quarter 2019 RCAF-5 (0.419) is calculated by dividing the first quarter 2019 RCAF Unadjusted (1.058) by the first quarter productivity adjustment factor-5 (PAF-5) of 2.5235. The first quarter 2019 PAF-5 is calculated by multiplying the fourth quarter 2018 PAF-5 of 2.5260 by the fourth root (0.9990) of the 2012-2016 annual average productivity growth rate of -0.4%. ^{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 2017 weights beginning in the fourth quarter of 2018. The following formula was used for the current quarter’s index: 1st Qr. 2019 Index (2017 Weights) Times 4th Quarter Linked Index Equals Linked Index 4th Qr. 2018 Index (1980 = 100 Linked) (Current Quarter) (2017 Weights) Or 306.6 X 285.8 = 283.3 309.3 ^{3} The first quarter 2018 RCAF was re-based
using the October 1, 2017 level of 264.5 in accordance with the requirements of
the Staggers Rail Act of 1980 (10/1/2017 = 100). ^{4} The first quarter 2019
forecast error adjustment was calculated as follows: (a) third quarter 2018
RCAF using forecasted data equals 107.2; (b) third quarter 2018 RCAF using
actual data equals 105.9; and (c) the difference equals the forecast error
(b-a) of -1.3. Because the actual third
quarter value is less than the forecast value, the difference is subtracted from
the Preliminary RCAF. |