SURFACE TRANSPORTATION BOARD DECISION DOCUMENT
    Decision Information

Docket Number:  
EP_290_4

Case Title:  
RAILROAD COST RECOVERY PROCEDURES-PRODUCTIVITY ADJUSTMENT

Decision Type:  
Decision

Deciding Body:  
Entire Board

    Decision Summary

Decision Notes:  
DECISION PRESENTED THE BOARD'S CALCULATION FOR THE CHANGE IN RAILROAD PRODUCTIVITY FOR THE 2010-2014 AVERAGING PERIOD. COMMENTS ADDRESSING ANY PERCEIVED DATA AND COMPUTATIONAL ERRORS IN THE BOARD'S CALCULATION ARE DUE BY FEBRUARY 24, 2016.

    Decision Attachments

91 KB


Approximate download time at 28.8 kb: 60 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

45046 SERVICE DATE – LATE RELEASE FEBRUARY 12, 2016

EB

 

SURFACE TRANSPORTATION BOARD

 

DECISION

 

Docket No. EP 290 (Sub-No. 4)

 

RAILROAD COST RECOVERY PROCEDURES—PRODUCTIVITY ADJUSTMENT

 

Digest:[1] Each year the Board calculates the change, if any, in the rail industry’s productivity, i.e., how efficiently railroads move freight. The Board calculates this figure by comparing year-to-year the average cost of producing a unit of railroad output. Here, the Board presents its calculation for the change in railroad productivity for the 2010-2014 averaging period.

 

Decided: February 12, 2016

 

We propose to adopt 1.014 (1.4% per year) as the measure of average (geometric mean) change in railroad productivity for the 2010-2014 (five-year) period. This represents an increase of 0.7% from the average for the 2009-2013 period.

 

Since 1989, the cost recovery procedures have required that the quarterly rail cost adjustment factor (RCAF)[2] be adjusted for long-run changes in railroad productivity. R.R. Cost Recovery Procedures—Productivity Adjustment, 5 I.C.C. 2d 434 (1989); see also 49 U.S.C.  10708. This long-run measure of productivity is computed using a 5-year moving geometric average. Productivity Adjustment—Implementation, 9 I.C.C. 2d 1072 (1993).

 

The productivity change for the year 2014 is 1.018, based on changes in input and output levels from 2013 and represents an increase of 1.4% from the rate of productivity growth in 2013 relative to 2012 (1.004). Incorporating the 2014 value with the values for the 2010-2013 period produces a geometric average productivity growth of 1.014 for the five-year period 2010-2014, or 1.4% per year. As the new geometric mean was computed by replacing the 2009 figure of 0.984 with the larger figure of 1.018 for 2014, there was an increase of 0.7% in the geometric mean from last year’s value. A detailed discussion of the Board’s calculations is contained in the Appendix to this decision.

 

Comments may be filed addressing any perceived data and computational errors in the Board’s calculation. Any party proposing a different estimate of productivity growth must, at the time it files comments, furnish the Board with one set of detailed workpapers and documentation underlying its calculations. The same information must be made available to other parties upon request.

 

It is ordered:

 

1.      Comments are due by February 24, 2016.

 

2. An original and 10 copies must be filed with:

 

United States Surface Transportation Board

395 E Street, S.W.

Washington, DC 20423-0001

 

3. Comments must be served on all parties appearing on the current service list.

4. Unless a further order is issued postponing the effective date, this decision is effective on March 1, 2016.

 

By the Board, Chairman Elliott, Vice Chairman Miller, and Commissioner Begeman.


APPENDIX

 

The following is a description of the methodology currently used to calculate the RCAF productivity adjustment.[3] The annual rate of productivity change is calculated by dividing an output index by an input index.

 

The input index uses constant dollar-adjusted expenses. The inputs in this index—freight expenses, fixed charges and contingent interest—are stated on a constant dollar basis using the most recent year available as the base, and updating the base by the Series Rail Cost Recovery (RCR) Index published by the Association of American Railroads. Freight expenses, fixed charges, and contingent interest were obtained from railroad Annual Report (Form R-1) data. The 2014 Total Expense Constant Dollars for each of the 6 years was calculated by dividing a given year’s RCR index value into the RCR index values for 2014 (531.0) and then multiplying that ratio by the Total Expense Unadjusted. The calculation of the input indices and values used are shown in Table A.

 

The 2014 output index was developed from the costed waybill sample, a commonly used data source. The costed waybill sample excludes movements lacking sufficient information for the application of unit costs.

 

Using the costed waybill sample as a base, each movement is assigned to one of the 189 segments or categories used to develop the output index. Segmentation is based on three mileage blocks, seven car types, three weight brackets, and three shipment sizes. The output index is a composite of the year-to-year change in ton-miles for each of the 189 segments weighted by each segment’s base-year share of total revenues.

 

The change in productivity is calculated by dividing the output index by the input index. The multi-year average for the period 2010-2014 is calculated by taking a geometric mean, which was found to be 1.014 (1.4% per year). The input index, the output index, the annual productivity change, and the calculation of the 2010-2014 average are shown in Table B.

 


Table A

Calculation of Input Indices

2009-2014

 

Year

Total Expense Unadjusted (000s)

RCR Indices 2009-2014

Total Expense Constant Dollars

Input Index Column (3) 2010/2009 etc.

 

(1)

(2)

(3)

(4)

2009

38,221,745

434.5

46,710,579

 

2010

43,763,629

465.1

49,964,496

1.070

2011

50,243,494

513.7

51,935,556

1.039

2012

51,464,512

526.8

51,874,821

0.999

2013

52,366,102

526.3

52,833,745

1.018

2014

54,753,917

531.0

54,753,917

1.036

 

Table B

Comparison of Output, Input, and Productivity

2010-2014

 

Year

Output Index

Input Index

Productivity Change [4] Col (1)/Col (2)

 

(1)

(2)

(3)

2010

1.109

1.070

1.037

2011

1.041

1.039

1.001

2012

1.007

0.999

1.008

2013

1.022

1.018

1.004

2014

1.055

1.036

1.018

Productivity Change 5 Year Moving Avg

1.014

 

The five-year (2010-2014) productivity trend calculated using a geometric average is 1.014, or 1.4%. Note that there are changes in some of the individual numbers in Table A and Table B compared with corresponding years prior to the Board’s Productivity Adjustment decision for 2013—Railroad Cost Recovery Procedures—Productivity Adjustment, EP 290 (Sub-No. 4) (STB served Mar. 4, 2014). These changes represent the revisions to the R-1 submitted by the railroads which were first incorporated into the Board’s 2008-2012 productivity study. None of the changes are large enough to affect the five-year moving geometric average calculated in previous decisions.



[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 RCAF is an index of railroad input prices that is published by the Board on a quarterly basis. See, e.g., Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2016-1) (STB served Dec. 18, 2015).

[3] The development and application of the productivity adjustment is explained in the decision in this proceeding found at 5 I.C.C. 2d 434 (1989).

[4] The values shown in Column 3 are taken from the spreadsheet used to calculate productivity and, due to rounding, may not equal numbers calculated using the rounded numbers shown in Columns 1 and 2.