Legislation – STB Releases Study on Rail Rate Case Methodologies

Shippers can seek Federal regulatory relief when they believe a carrier is not providing them with legally reasonable rail freight rates. In 2014 the Surface Transportation Board (STB) commissioned a study for an independent assessment of the Board’s stand-alone cost (SAC) rate reasonableness methodology. The STB released the report on September 22, 2016.

The research questions that this report sought to answer were:

  • What methodologies do other national regulatory agencies apply to examine the reasonableness of rates?
  • Is SAC still a valid instrument to determine the reasonableness of rates?
  • Can that procedure be simplified?

In addition to exploring these questions, the 150 page report explains the regulatory history of Federal oversight of freight rail rates, through to current methods for determining the reasonableness of rail rates. So it is worth reading if you would like to improve your understanding of the context and process for bringing rail rate disputes before the STB.

Here are two key conclusions from the synopsis at the end of the report:

Is the time and expense of Full-SAC justifiable?

Our observation is that use of Full-SAC generally is difficult to justify, although it may be important in certain cases, where there are clear indications of management inefficiency.

Can STB’s SAC tests be further simplified or modified?

 The Three-Benchmark test is already relatively simple and straightforward.

In sum, the STB’s Full-SAC method has stood the test of time as a maximum rate reasonableness methodology and is a justifiable complaint choice in some cases. However, the less expensive SimplifiedSAC and Three-Benchmark approaches are available to shippers and may be a better option for shippers in many cases.

Source:  InterVISTAS “An Examination of the STB’s Approach to Freight Rail Rate Regulation and Options for Simplification.” Synopsis of Key Conclusions pages 132 and 134

Download the full report from the STB website.

The Board intends to hold public discussions of the issues and conclusions in the coming month.