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 GRANTS RAIL COST ADJUSTMENT FACTOR (RCAF) INDICES SUBMITTED BY THE ASSOCIATION OF AMERICAN RAILROADS TO THE BOARD FOR THE FIRST QUARTER OF 2012. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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42080 SERVICE DATE –
DECEMBER 20, 2011 EB SURFACE TRANSPORTATION BOARD DECISION Docket No. EP 290 (Sub-No. 5) (2012-1) 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 statute requires the Surface
Transportation Board (Board) 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 2012. Decided: December 19,
2012 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 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 5-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 5-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 2012 are shown in Table A of the Appendix to this decision. Table B shows the third quarter 2011 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. In
its submission, The
Board has used the forecast error adjustment procedure to remedy similar
errors, and we believe it is the best available method to correct the Labor
index.^{[2]}
Therefore, we will not restate
the fourth quarter 2011 RCAF figures, but will allow the correction to be made
using the second quarter 2012 forecast error calculation. As a result, the second quarter 2012 forecast
error calculation will include the forecast version of the fourth quarter 2011
Labor index of the original 375.3, and the actual version of the Labor index of
the corrected 373.9 index. In the
current first quarter 2012 RCAF calculations, the Labor index has been
calculated as if the fourth quarter 2011 version had used the corrected price. We
have examined AAR’s calculations and we find that 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 2005-2009, which is 1.014
(1.4% per year). We find the RCAF-5 for the first quarter of
2012 is 0.488, a decrease of 3.6% from the previously reported fourth quarter
2011 RCAF-5 of 0.506.^{[5]} 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 Board has approved the first quarter 2012
RCAF (Unadjusted) of 1.169, RCAF (Adjusted) of 0.514, and RCAF-5 of 0.488. 2. Notice of this decision will be published in
the Federal Register. 3. The effective date of this decision is
January 1, 2012. By the Board, Chairman
Elliott, Vice Chairman Begeman, and Commissioner Mulvey. APPENDIX TABLE
A EP 290
(Sub-No. 5) (2012-1) All
Inclusive Index of Railroad Input Costs (Endnotes Following Table B)
TABLE B EP 290 (Sub-No. 5) (2012-1) Comparison of Third Quarter 2011 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]} See Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2011-4), slip op. at 2 (correcting, but not restating, the third quarter 2011 Materials and Supplies index using the first quarter 2012 forecast error calculation); see also Quarterly Rail Cost Adjustment Factor, EP 290 (Sub-No. 5) (2001-1), slip op. at 2 (STB served Dec. 20, 2000) (noting that the forecast error adjustment was the best available method to correct an earlier overstated RCAF calculation and not restating that earlier overstated RCAF). ^{[3]} The percent changes for the first quarter 2012 RCAF (Unadjusted), RCAF (Adjusted), and the RCAF-5 are all based on the original fourth quarter 2011 decision. ^{[4]} The first quarter 2012 RCAF Adjusted (0.514) is calculated by dividing the first quarter 2012 RCAF Unadjusted (1.169) by the first quarter productivity adjustment factor of 2.2724. The first quarter 2012 productivity adjustment factor is calculated by multiplying the fourth quarter 2011 productivity adjustment of 2.2645 by the fourth root (1.0035) of the 2005-2009 annual average productivity growth rate of 1.4%. ^{[5]} The first quarter 2012 RCAF-5 (0.488) is calculated by dividing the first quarter 2012 RCAF Unadjusted (1.169) by the first quarter productivity adjustment factor-5 (PAF-5) of 2.3978. The first quarter 2012 PAF-5 is calculated by multiplying the fourth quarter 2011 PAF-5 of 2.3894 by the fourth root (1.0035) of the 2005-2009 annual average productivity growth rate of 1.4%. ^{[1]} For calculation purposes, the fourth quarter 2011 forecast includes a revision made to the Labor index. ^{2} “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. ^{3} Linking is necessitated by a change to the 2010 weights beginning in the fourth quarter 2011. The following formula was used for the current quarter’s index: 1st Qr. 2012 Index (2010 Weights) Times 4th Quarter Linked Index Equals Linked Index 4th Qr. 2011 Index (1980 = 100 Linked) (Current Quarter) (2010 Weights) Or 298.3 X 290.2 = 289.2 299.3 ^{4} 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 = 100). ^{5} The first quarter 2012 forecast error
adjustment was calculated as follows: (a)
third quarter 2011 RCAF using forecasted data equals 118.6; (b) third quarter 2011 RCAF using actual data equals
117.9; and (c) the difference equals the forecast error
(b-a) of -0.7. Because the
actual third quarter value is less than the forecast value, the difference is
subtracted from the Preliminary RCAF. |