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Yesterday, the Surface Transportation Board (STB) announced it’s instituting a rulemaking proceeding to address the application of the stand-alone cost (SAC) test in rail rate cases and calculation of rate relief.
The rule would provide alternatives to the percent reduction method used to determine maximum reasonable rates, and set a timeframe for SAC analyses, and standards for reopening or vacating a previous SAC decision. The rule also would address the allocation of revenue from cross-over traffic, forecasting future operating expenses of a stand-alone railroad and movement-specific adjustments to the board’s Uniform Railroad Costing System.
Under a SAC test, the shipper involved in a rate complaint designs a hypothetical railroad tailored to serve their needs. The cost to build and operate the railroad are compared to its projected revenue. If the shipper demonstrates the stand-alone railroad would earn more than necessary to cover all its costs (including a reasonable return on investment), the board determines the shipper is entitled to rate relief. Most captive rail shippers seek rate relief under the SAC test, the STB said.
The board will accept comments on its notice of proposed rulemaking until May 1; reply comments will be due May 31 and final rebuttal comments, June 30.
3/1/2006
Rail News: Rail Industry Trends
STB proposes rule to address stand-alone cost test procedures
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Yesterday, the Surface Transportation Board (STB) announced it’s instituting a rulemaking proceeding to address the application of the stand-alone cost (SAC) test in rail rate cases and calculation of rate relief.
The rule would provide alternatives to the percent reduction method used to determine maximum reasonable rates, and set a timeframe for SAC analyses, and standards for reopening or vacating a previous SAC decision. The rule also would address the allocation of revenue from cross-over traffic, forecasting future operating expenses of a stand-alone railroad and movement-specific adjustments to the board’s Uniform Railroad Costing System.
Under a SAC test, the shipper involved in a rate complaint designs a hypothetical railroad tailored to serve their needs. The cost to build and operate the railroad are compared to its projected revenue. If the shipper demonstrates the stand-alone railroad would earn more than necessary to cover all its costs (including a reasonable return on investment), the board determines the shipper is entitled to rate relief. Most captive rail shippers seek rate relief under the SAC test, the STB said.
The board will accept comments on its notice of proposed rulemaking until May 1; reply comments will be due May 31 and final rebuttal comments, June 30.
