SURFACE TRANSPORTATION BOARD

Railroad Cost Adjustment Factor (RCAF)

October 15, 2018 by michael.booth

The rail cost adjustment factor (RCAF) is an index formulated to represent changes in railroad costs over 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 (AAR) computes three types of RCAF figures and submits those figures to the Board for approval.  The most recent RCAF figures are below.

Origins of RCAF

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 RCAF.  Under these procedures, the 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.

Three Different RCAF Calculations

The provisions of 49 U.S.C. § 10708 direct the 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 (RCAF-U) is an index reflecting cost changes experienced by the railroad industry, without reference to changes in rail productivity.
• The RCAF Adjusted (RCAF-A) 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.

Productivity Adjustment

The Board calculates the productivity adjustment for use in calculating the RCAF-A and RCAF-5 each year.  The productivity adjustment seeks to measure 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.  The annual productivity adjustment calculations are issued in Railroad Cost Recovery Procedures—Productivity Adjustment, Docket No. EP 290 (Sub-No. 4) (the docket can be accessed here).  For a detailed explanation of how the productivity adjustment is calculated, view Appendix A in any of the Board’s annual decisions in this docket.

For a list of the productivity adjustments back to 1996, click here:  Productivity Adjustments (Excel).

Recent RCAF Figures

The Board’s decisions concerning the RCAF are available on our website under Docket No. EP 290 (Sub-No. 5) (the docket can be accessed here).  The RCAF figures for the last four quarters are below.

The quarterly RCAF figures from the present quarter back to 2000 are available here:  RCAF Figures (Excel).