[Federal Register Volume 84, Number 112 (Tuesday, June 11, 2019)]
[Notices]
[Pages 27181-27182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-12241]
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SURFACE TRANSPORTATION BOARD
[Docket No. EP 431 (Sub-No. 4)]
Review of the General Purpose Costing System
In a Notice of Proposed Rulemaking (NPR) served in this docket on
February 4, 2013, the Board sought public comment on proposals to
modify the Board's general purpose costing system, the Uniform Railroad
Costing System (URCS), to eliminate a feature known as the ``make-whole
adjustment'' and to adjust the locomotive unit-mile (LUM) cost
allocation. After evaluating comments received in response to the NPR,
the Board served a Supplemental Notice of Proposed Rulemaking (SNPR) on
August 4, 2016, with modified proposals for eliminating the make-whole
adjustment and changing the LUM cost allocation, and a new proposal to
modify train-mile (TM) cost allocations. For the reasons stated below,
the Board will discontinue this proceeding.
As discussed in prior decisions in this proceeding, the Board uses
URCS for a variety of regulatory functions. URCS is used in rate
reasonableness proceedings as part of the initial market dominance
determination. URCS also plays a role in the Board's determination of
whether a rate exceeds a reasonable maximum, and, when warranted,
setting the maximum rate prescription. In addition, URCS is used to
develop variable costs for making cost determinations in abandonment,
certain trackage rights, and other proceedings; to provide the railroad
industry and shippers with a standardized costing model; to cost the
Board's Carload Waybill Sample; and to provide interested parties with
basic cost information regarding railroad industry operations.
URCS develops a regulatory cost estimate that can be applied to a
service that occurs anywhere on a rail carrier's system. These cost
estimates are developed through three distinct phases of URCS.
Phase I occurred only once when URCS was originally
developed using the annual reports submitted by Class I rail carriers
(R-1 reports). Regression
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analyses were performed to develop equations linking expense account
groupings with particular measures of railroad activities.
Annually, in Phase II, URCS takes the aggregated cost data
and traffic statistics provided by Class I carriers in their most
recent R-1 reports and other reports and disaggregates them by
calculating system-average unit costs associated with specific rail
activities.
In Phase III, when movements are costed, URCS takes the
unit costs from Phase II and applies them to the characteristics of a
particular movement in order to calculate the variable cost of that
movement.
The Board initiated this proceeding to address concerns with the
make-whole adjustment, which is calculated and applied in Phase III.
The make-whole adjustment is intended to recognize the efficiency
savings that a carrier obtains in its higher-volume shipments and thus
render more appropriate unit costs. The Board questioned whether the
current make-whole adjustment best reflects economies of scale as
shipment size increases. Review of the General Purpose Costing System
(NPR), EP 431 (Sub-No. 4), slip op. at 4 (STB served Feb. 4, 2013);
Review of the General Purpose Costing System (SNPR), EP 431 (Sub-No.
4), slip op. at 3-4 (STB served Aug. 4, 2016). The Board noted that, as
applied, the make-whole adjustment creates particular types of step
functions between shipment sizes by reducing system-average unit costs
by various set percentages depending on whether the movement is
classified as unit train, multi-car, or single-car. NPR, EP 431 (Sub-
No. 4), slip op. at 3-4; SNPR, EP 431 (Sub-No. 4), slip op. at 4-5.
While the current URCS methodology generally reflects economies of
scale across those movement classifications, the Board proposed ways to
attempt to reflect economies of scale within those movement
classifications to better address economies of scale overall.
To address the concerns with the make-whole adjustment, the NPR
proposed changes to switching costs related to switch engine minutes,
equipment costs for the use of railroad-owned equipment during
switching, station clerical costs, and car-mile costs, as well as other
related changes to URCS. NPR, EP 431 (Sub-No. 4), slip op. at 5-9. The
NPR also proposed changes to the LUM cost allocation. Id. at 9-10. With
respect to switching costs, the NPR proposed to allocate costs on a
shipment basis. Id. at 5-6.
After reviewing comments in response to the NPR, the Board modified
its proposal in the SNPR by changing how the current efficiency
adjustments would be applied to switching costs, railroad-owned
equipment costs, station clerical costs, and car-mile costs. SNPR, EP
431 (Sub-No. 4), slip op. at 7-20. The SNPR also proposed to address
step functions arising from LUM and TM cost allocations. Id. at 25-28.
With respect to switching costs, the SNPR proposed to implement a new
concept called the Carload Weighted Block (CWB) Adjustment, which would
incorporate parties' NPR comments that switching costs should be
allocated based not just on an event component (the shipment), but on a
time component (influenced by the number of cars in a shipment) as
well. Id. at 9-11.
The Board held a technical workshop regarding the SNPR proposals on
September 7, 2016, and then received public comments on October 11,
2016, and reply comments on November 7, 2016.\1\ While these comments
were not uniformly critical, many stakeholders expressed concerns about
various aspects of the SNPR proposals. No commenter supported the CWB
Adjustment and several commenters generally opposed other aspects of
the SNPR, including proposals to modify the calculation of railroad-
owned equipment costs, and car-mile costs.
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\1\ The following parties filed comments and reply comments on
the SNPR in this proceeding: Association of American Railroads
(AAR); Highroad Consulting, Ltd. (Highroad); SMART-Transportation
Division-New York State Legislative Board (SMART-TD) (reply comments
only); Union Pacific Railroad Company (UP); and Western Coal Traffic
League (WCTL). Additionally, joint comments and reply comments were
filed by the American Chemistry Council and others (referred to
collectively as ACC).
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The Board recognizes and appreciates the substantial effort
undertaken by stakeholders in this proceeding to assist the Board in
grappling with the complexities of URCS. The Board continues to believe
that URCS can be updated to better reflect economies of scale and
improve cost allocations. However, the Board has determined that
potential refinements of URCS would benefit from additional study and
analysis, as most commenters argued. Given the need for further study
and analysis to arrive at a more optimal revision of the URCS system,
and to also ensure efficient docket management, the Board will not take
further action in this proceeding and will discontinue this docket. Any
future proposals by the Board to update URCS would be made in a new
proceeding.
It is ordered:
1. This proceeding is discontinued.
2. Notice of the Board's action will be published in the Federal
Register.
3. This decision is effective on its date of service.
By the Board, Board Members Begeman, Fuchs, and Oberman.
Aretha Laws-Byrum,
Clearance Clerk.
[FR Doc. 2019-12241 Filed 6-10-19; 8:45 am]
BILLING CODE 4915-01-P