Posts Tagged ‘STB rate cases’

STB Issues Final Rule Regarding Rate Cases

August 5, 2020

The U.S. Surface Transportation Board this week adopted a rule designed to streamline its approach to cases in which one or more parties is arguing market dominance led to an unreasonable rate.

In a news release, the STB said that market dominance cases can be costly and time-consuming, especially in smaller cases.

The rule adopted this week, which becomes effective Sept. 5, was initially proposed in September 2019 and lays out the factors

that could establish a prima facie showing of market dominance. Those include:

  • The movement has a revenue-to-variable cost ratio of 180 percent or greater;
    • The movement would exceed 500 highway miles between origin and destination;
    • There is no intramodal competition from other railroads;
    • There is no barge competition;
    • There is no pipeline competition;
    • The complainant has used trucks for 10 percent or less of its volume (by tonnage) subject to the rate at issue over a five-year period; and
    • The complainant has no practice buildout alternative (regardless of transportation mode) due to physical, regulatory, financial or other issues.

The STB said complainants who provide evidence of one or more of these

would have the option to use the non-streamlined market dominance approach to prove market dominance.

Under either approach, defendant railroads would continue to have the opportunity to rebut a complainant’s evidence, they added.

The STB also announced that it would soon initiate a proceeding to further explore the adoption of various commodity-specific thresholds, including for chlorine and agricultural products.

AAR Rips Proposed STB Rate Review Rule

November 14, 2019

The Association of American Railroads has characters a proposed rate review rule being advanced by the U.S. Surface Transportation Board as unlawful.

The AAR wants the agency to withdraw the rule because it said it exceeds STB’s authority in determining rate reasonableness.

In a statement, AAR President and Chief Executive Officer Ian Jefferies said the rule “abdicates the agency’s statutory responsibility to judge the reasonableness of rail rates and abandons careful deliberation vital to a balanced regulatory structure.”

AAR contends that the rule would establish a new rate review procedure that would deny shippers and railroads alike their right to a full hearing as required by law and represents a radical departure from the market-based, economic principles that have traditionally guided the Board’s maximum rate determinations.

Michigan Utility Wins Rate Case Against CSX

January 30, 2018

A Michigan utility company has won a rate case against CSX before the U.S. Surface Transportation Board.

The STB recently sided with Consumers Energy of Jackson, Michigan, against CSX in a case filed in January 2015 that challenged the rates CSX charged to haul coal to the utility’s J.H. Campbell generating plant near West Olive, Michigan.

CSX picked up the Powder River Basin coal from BNSF in Chicago and hauled it 235 route miles to the power plant. The STB agreed with the utility company and set a lower rate.

However, CSX has asked the Board to extend the proceeding to Feb. 20 during which time it will decide whether to ask the board to reconsider its ruling.

Trains magazine cited an unidentified attorney who was said to be familiar with the case as saying that it has become rare in recent years for shippers to win rate challenge disputes.

The attorney said most rate cases have involved chemical companies, but the volumes of cars in question and the varied distribution of chemical products makes it difficult for the STB to determine if the rates charged by the railroads are reasonable.

In the Consumer Energy case, the STB said that CSX was the “dominant” carrier in the market and the utility was a captive shipper.

The STB staff used the “stand-alone cost” method to determine if CSX’s revenue unfairly exceeded the cost of hauling the coal.

In response, CSX argued that Consumers Energy had an alternative to rail, including by water because the generating plant was close to the shore of Lake Michigan.

CSX said that a nearby generating plant operated by Consumers Energy on the lake receives coal by boat.

In rejecting the CSX arguments, the STB determined that the railroad had an unusually high revenue-to-variable cost ratio because of the costs of moving coal through the Chicago gateway and maintaining the rail line along the eastern shore of Lake Michigan.