Railroad Revenue Adequacy: Petition of the Western Coal Traffic League To Institute a Rulemaking Proceeding To Abolish the Use of the Multi-Stage Discounted Cash Flow Model in Determining the Railroad Industry's Cost of Equity Capital, 19042-19044 [2014-07722]
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Federal Register / Vol. 79, No. 66 / Monday, April 7, 2014 / Proposed Rules
the Contractor has reason to believe that the
labor payment and support costs for the order
which will accrue in the next thirty (30) days
will bring total cost to over 85 percent of the
ceiling price specified in the order, the
Contractor shall notify the Ordering Officer.
(f) Under no circumstances will the
Contractor start work prior to the issue date
of the task/delivery order unless specifically
authorized to do so by the Ordering Officer.
Any verbal authorization will be confirmed
in writing by the Ordering Officer or
Contracting Officer within ll calendar
days.
ehiers on DSK2VPTVN1PROD with PROPOSALS-1
(End of clause)
Alternate I. As prescribed in
1516.505(a), insert the subject clause, or
a clause substantially similar to the
subject clause, in indefinite delivery/
indefinite quantity contracts when
formal input from the Contractor will
not be obtained prior to order issuance.
DEPARTMENT OF TRANSPORTATION
395 E Street SW., Washington, DC
20423–0001.
Surface Transportation Board
For
EP 722: Scott Zimmerman at (202) 245–
0386; for EP 664 (Sub-No. 2): Amy
Ziehm at (202) 245–0391. Assistance for
the hearing impaired is available
through the Federal Information Relay
Service (FIRS) at (800) 877–8339.
SUPPLEMENTARY INFORMATION: In Section
205 of the Railroad Revitalization and
Regulatory Reform Act of 1976, Public
Law 94–210, 90 Stat. 127, Congress
mandated that the Board’s predecessor,
the Interstate Commerce Commission
(ICC), promulgate—and thereafter revise
and maintain—standards and
procedures for establishing railroad
revenue adequacy. Four years later, in
the Staggers Rail Act of 1980 (Staggers),
Public Law 96–448, 94 Stat. 1895, the
agency’s rail transportation policy was
revised to include, among other things,
‘‘promot[ing] a safe and efficient rail
transportation system by allowing rail
carriers to earn adequate revenues, as
determined by the [agency].’’
Additionally, Section 205 of Staggers
required the ICC to begin determining
annually ‘‘which rail carriers are
earning adequate revenues.’’ To
implement this requirement, the ICC
began a proceeding to adopt standards
for determining railroad revenue
adequacy. In that proceeding, the ICC
concluded that ‘‘the only revenue
adequacy standard consistent with the
requirements of [Staggers] is one that
uses a rate of return equal to the cost of
capital.’’ Standards for R.R. Revenue
Adequacy, 364 I.C.C. 803, 811 (1981),
aff’d sub nom. Bessemer & Lake Erie
R.R. v. ICC, 691 F.2d 1104 (3d Cir.
1982).
These statutory requirements, now
codified at 49 U.S.C. 10704(a)(2) and
(3),1 still govern, and the Board (like the
ICC before it) annually determines
49 CFR Chapter X
[Docket No. EP 722; Docket No. EP 664
(Sub-No. 2)]
Railroad Revenue Adequacy: Petition
of the Western Coal Traffic League To
Institute a Rulemaking Proceeding To
Abolish the Use of the Multi-Stage
Discounted Cash Flow Model in
Determining the Railroad Industry’s
Cost of Equity Capital
AGENCY:
Surface Transportation Board,
DOT.
ACTION:
Notice.
The Surface Transportation
Board will receive comments in Docket
No. EP 722 to explore the Board’s
methodology for determining railroad
(a) The Government will order any
revenue adequacy, as well as the
supplies and services to be furnished under
revenue adequacy component used in
this contract by issuing task/delivery orders
judging the reasonableness of rail freight
on Optional Form 347, or any agency
rates. The Board will also receive
prescribed form, from ___ through ___. In
comments in Docket No. 664 (Sub-No.
addition to the Contracting Officer, the
2) on how it calculates the railroad
following individuals are authorized ordering
industry’s cost of equity capital. The
officers:
Board is seeking written comments on
lllllllllllllllllllll
these matters, as described below, and
lllllllllllllllllllll
later will hold a hearing to address these
(b) A Standard Form 30 will be the method issues.
of amending task/delivery orders.
DATES: Comments in both dockets are
(c) The Contractor shall acknowledge
due on July 1, 2014. Reply comments
receipt of each order and shall prepare and
are due on August 15, 2014. Following
forward to the Ordering Officer within ll
receipt of comments, the Board will
calendar days the proposed staffing plan for
schedule a public hearing at the Board’s
accomplishing the assigned task within the
headquarters located at 395 E Street
period specified.
SW., Washington, DC, to allow
(d) If the Contractor considers the
participants to appear and discuss the
estimated labor hours or specified work
submissions that were made. The Board
completion date to be unreasonable, the
Contractor shall promptly notify the Ordering will provide more details regarding the
hearing in a future decision.
Officer and Contracting Officer in writing
ADDRESSES: All filings may be submitted
within ll calendar days, stating why the
either via the Board’s e-filing format or
estimated labor hours or specified
in the traditional paper format. Any
completion date is considered unreasonable.
(e) Each task/delivery order will have a
person using e-filing should attach a
ceiling price, which the Contractor may not
document and otherwise comply with
exceed. When the Contractor has reason to
the instructions at the ‘‘E–FILING’’ link
believe that the labor payment and support
on the Board’s ‘‘www.stb.dot.gov’’ Web
costs for the order, which will accrue in the
site. Any person submitting a filing in
next thirty (30) days, will bring total cost to
the traditional paper format should send
over 85 percent of the ceiling price specified
an original and 10 copies of the filing to:
in the order, the Contractor shall notify the
Surface Transportation Board, Attn:
Ordering Officer.
Docket No. [EP 722 or EP 664 (Sub-No.
(f) Paragraphs (c), (d), and (e) of this clause 2), as the case may be], 395 E Street
apply only when services are being ordered.
SW., Washington, DC 20423–0001.
Copies of written submissions will be
(End of clause)
posted to the Board’s Web site and will
be available for viewing and selfEditorial Note: This document was
copying in the Board’s Public Docket
received by the Office of the Federal Register
Room, Suite 131. Copies of the
on March 26, 2014.
submissions will also be available (for a
[FR Doc. 2014–07109 Filed 4–4–14; 8:45 am]
fee) by contacting the Board’s Chief
BILLING CODE 6560–50–P
Records Officer at (202) 245–0236 or
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SUMMARY:
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FOR FURTHER INFORMATION CONTACT:
1 Section 10704(a) of title 49 states with respect
to adequate revenues:
* * * * *
(2) The Board shall maintain and revise as
necessary standards and procedures for establishing
revenue levels for rail carriers * * * that are
adequate, under honest, economical, and efficient
management, to cover total operating expenses,
including depreciation and obsolescence, plus a
reasonable and economic profit or return (or both)
on capital employed in the business.* * * Revenue
levels established under this paragraph should—
(A) provide a flow of net income plus
depreciation adequate to support prudent capital
outlays, assure the repayment of a reasonable level
of debt, permit the raising of needed equity capital,
and cover the effects of inflation; and
(B) attract and retain capital in amounts adequate
to provide a sound transportation system in the
United States.
(3) On the basis of the standards and procedures
described in paragraph (2), the Board shall annually
determine which rail carriers are earning adequate
revenues.
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Federal Register / Vol. 79, No. 66 / Monday, April 7, 2014 / Proposed Rules
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which rail carriers are revenue adequate
by comparing a carrier’s rate of return
with the cost of capital.2 Since the
issuance of Standards for Railroad
Revenue Adequacy in 1981, adjustments
have been made to the agency’s
methodology in order to improve the
agency’s ability to determine accurately
revenue adequacy. See, e.g., Use of a
Multi-Stage Discounted Cash Flow
Model in Determining the R.R.
Industry’s Cost of Capital, EP 664 (SubNo. 1) (STB served Jan. 28, 2009); R.R.
Revenue Adequacy—1988
Determination, 6 I.C.C.2d 933 (1990),
aff’d sub nom. Ass’n of Amer. R.Rs. v.
ICC, 978 F.2d 737 (D.C. Cir. 1992);
Supplemental Reporting of Consol. Info.
for Revenue Adequacy Purposes, 5
I.C.C.2d 65 (1988); Standards for R.R.
Revenue Adequacy, 3 I.C.C.2d 261
(1986), aff’d sub nom. Consol. Rail Corp.
v. United States, 855 F.2d 78 (3d Cir.
1988).
*
*
*
*
*
The concept of revenue adequacy is
also a component of the Board’s
standard for judging the reasonableness
of rail freight rates, as set forth in Coal
Rate Guidelines, Nationwide (Coal Rate
Guidelines), 1 I.C.C.2d 520 (1985), aff’d
sub nom. Consol. Rail Corp. v. United
States, 812 F.2d 1444 (3d Cir. 1987).3
Coal Rate Guidelines established a set of
pricing principles known as
‘‘constrained market pricing,’’ which
imposes three main constraints on the
extent to which a railroad may charge
differentially higher rates on captive
traffic: Revenue adequacy, management
efficiency, and stand-alone cost. Id. at
1 Section 10704(a) of title 49 states with respect
to adequate revenues:
* * * * *
(2) The Board shall maintain and revise as
necessary standards and procedures for establishing
revenue levels for rail carriers * * * that are
adequate, under honest, economical, and efficient
management, to cover total operating expenses,
including depreciation and obsolescence, plus a
reasonable and economic profit or return (or both)
on capital employed in the business.* * * Revenue
levels established under this paragraph should—
(A) provide a flow of net income plus
depreciation adequate to support prudent capital
outlays, assure the repayment of a reasonable level
of debt, permit the raising of needed equity capital,
and cover the effects of inflation; and
(B) attract and retain capital in amounts adequate
to provide a sound transportation system in the
United States.
(3) On the basis of the standards and procedures
described in paragraph (2), the Board shall annually
determine which rail carriers are earning adequate
revenues.
2 The Board annually publishes the annual rates
of return of each Class I railroad, as well as the cost
of capital experienced by the rail industry, in subnumbered proceedings of Dockets No. EP 552 and
EP 558, respectively. See, e.g., R.R. Revenue
Adequacy—2012 Determination, EP 552 (Sub-No.
17) (STB served Oct. 17, 2013) (summarizing Class
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14:40 Apr 04, 2014
Jkt 232001
534.4 With respect to the revenue
adequacy constraint, the ICC observed
[The] revenue adequacy standard
represents a reasonable level of profitability
for a healthy carrier. It fairly rewards the rail
company’s investors and assures shippers
that the carrier will be able to meet their
service needs for the long term. Carriers do
not need greater revenues than this standard
permits, and we believe that, in a regulated
setting, they are not entitled to any higher
revenues. Therefore, the logical first
constraint on a carrier’s pricing is that its
rates not be designed to earn greater revenues
than needed to achieve and maintain this
‘‘revenue adequacy’’ level.
Id. at 535.
As the Board has explained, the
revenue adequacy constraint ‘‘employ[s]
a ‘top-down’ approach, examining the
incumbent carrier’s existing
operations.’’ W. Texas Utils. Co. v.
Burlington N. R.R., 1 S.T.B. 638, 655
(1996). ‘‘If the carrier is revenue
adequate (earning sufficient funds to
cover its costs and provide a fair return
on its investment), or would be revenue
adequate after eliminating unnecessary
costs from specifically identified
inefficiencies in its operations, a
complaining shipper may be entitled to
rate relief.’’ Id.
The Board has not yet had the
opportunity to address how the revenue
adequacy constraint would work in
practice in large rail rate cases. Nearly
all large rate reasonableness cases to
date have relied upon the stand-alone
cost constraint. The few revenue
adequacy-based complaints have either
settled or involved other transportation
modes. See S. Miss. Elec. Power Ass’n v.
Norfolk S. Ry., NOR 42128 (STB served
Aug. 31, 2011) (proceeding in which
revenue adequacy constraint raised in
complaint was subsequently settled); CF
Indus., Inc. v. Koch Pipeline Co., 4
S.T.B. 637 (2000) (finding rate increases
for pipeline transportation unreasonable
under 49 U.S.C. 15501 using revenue
adequacy constraint), aff’d sub nom. CF
Indus., Inc. v. STB, 255 F.3d 816 (D.C.
Cir. 2001).
Both the structure of the rail industry
and the flow of commerce have
continued to change substantially over
the past decade. In the last several years,
questions have been raised regarding the
agency’s methodology for determining
revenue adequacy and whether it
appropriately measures the financial
condition of the railroad industry. These
questions cover a range of issues, such
as the viability of the Board’s current
methodology and possible alternative
4 A fourth constraint—phasing—can be used to
limit the introduction of otherwise-permissible rate
increases when necessary for the greater public
good. Coal Rate Guidelines, 1 I.C.C.2d at 546–47.
PO 00000
Frm 00016
Fmt 4702
Sfmt 4702
19043
methodologies, what it means to be
revenue adequate and how such a
finding should impact the railroads, and
how to apply the revenue adequacy
constraint in regulating rates, among
many others.
At this point, the Board believes an
examination of revenue adequacy is in
order. The Board will now institute a
proceeding to address the issues
discussed above. This proceeding is
intended as a public forum to discuss
the Board’s methodology in fulfilling its
statutory mandate to determine railroad
revenue adequacy, as well as the
revenue adequacy component of the
Board’s standard for judging the
reasonableness of rail freight rates, with
a view to what, if any, changes the
Board can and should consider. The
Board is providing an opportunity for
any person or entity that wishes to
participate to file written prepared
comments. Subsequently, the Board will
hold an oral hearing at the agency to
explore the issues in more depth.
The Board also recently instituted a
rulemaking proceeding in Docket No. EP
664 (Sub-No. 2) to address how it
determines the railroad industry’s cost
of equity capital.5 The cost of capital
calculation is a component of the
methodology that the Board uses to
determine revenue adequacy, and the
Board therefore stated that it would
coordinate the processing of these two
proceedings. Accordingly, the Board
now invites any person or entity who
wishes to participate in EP 664 (Sub-No.
2) to submit written comments
addressing the cost of capital
calculation in that proceeding, pursuant
to the schedule set forth below.
Decisions and notices of the Board,
including this notice, are available on
the Board’s Web site at
‘‘www.stb.dot.gov.’’
This action will not significantly
affect either the quality of the human
environment or the conservation of
energy resources.
It is ordered:
1. Comments in both dockets are due
on July 1, 2014. Reply comments are
due on August 15, 2014.
2. A public hearing will be announced
in a subsequent Board decision.
3. This decision is effective on the
date of service.
Decided: April 1, 2014.
5 Petition of the W. Coal Traffic League to
Institute a Rulemaking Proceeding to Abolish the
Use of the Multi-Stage Discounted Cash Flow Model
in Determining the R.R. Industry’s Cost of Equity
Capital, EP 664 (Sub-No. 2) (STB served Dec. 20,
2013).
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19044
Federal Register / Vol. 79, No. 66 / Monday, April 7, 2014 / Proposed Rules
By the Board, Rachel D. Campbell,
Director, Office of Proceedings.
Derrick A. Gardner,
Clearance Clerk.
[FR Doc. 2014–07722 Filed 4–4–14; 8:45 am]
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]]>Agencies
[Federal Register Volume 79, Number 66 (Monday, April 7, 2014)]
[Proposed Rules]
[Pages 19042-19044]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-07722]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Surface Transportation Board
49 CFR Chapter X
[Docket No. EP 722; Docket No. EP 664 (Sub-No. 2)]
Railroad Revenue Adequacy: Petition of the Western Coal Traffic
League To Institute a Rulemaking Proceeding To Abolish the Use of the
Multi-Stage Discounted Cash Flow Model in Determining the Railroad
Industry's Cost of Equity Capital
AGENCY: Surface Transportation Board, DOT.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: The Surface Transportation Board will receive comments in
Docket No. EP 722 to explore the Board's methodology for determining
railroad revenue adequacy, as well as the revenue adequacy component
used in judging the reasonableness of rail freight rates. The Board
will also receive comments in Docket No. 664 (Sub-No. 2) on how it
calculates the railroad industry's cost of equity capital. The Board is
seeking written comments on these matters, as described below, and
later will hold a hearing to address these issues.
DATES: Comments in both dockets are due on July 1, 2014. Reply comments
are due on August 15, 2014. Following receipt of comments, the Board
will schedule a public hearing at the Board's headquarters located at
395 E Street SW., Washington, DC, to allow participants to appear and
discuss the submissions that were made. The Board will provide more
details regarding the hearing in a future decision.
ADDRESSES: All filings may be submitted either via the Board's e-filing
format or in the traditional paper format. Any person using e-filing
should attach a document and otherwise comply with the instructions at
the ``E-FILING'' link on the Board's ``www.stb.dot.gov'' Web site. Any
person submitting a filing in the traditional paper format should send
an original and 10 copies of the filing to: Surface Transportation
Board, Attn: Docket No. [EP 722 or EP 664 (Sub-No. 2), as the case may
be], 395 E Street SW., Washington, DC 20423-0001.
Copies of written submissions will be posted to the Board's Web
site and will be available for viewing and self-copying in the Board's
Public Docket Room, Suite 131. Copies of the submissions will also be
available (for a fee) by contacting the Board's Chief Records Officer
at (202) 245-0236 or 395 E Street SW., Washington, DC 20423-0001.
FOR FURTHER INFORMATION CONTACT: For EP 722: Scott Zimmerman at (202)
245-0386; for EP 664 (Sub-No. 2): Amy Ziehm at (202) 245-0391.
Assistance for the hearing impaired is available through the Federal
Information Relay Service (FIRS) at (800) 877-8339.
SUPPLEMENTARY INFORMATION: In Section 205 of the Railroad
Revitalization and Regulatory Reform Act of 1976, Public Law 94-210, 90
Stat. 127, Congress mandated that the Board's predecessor, the
Interstate Commerce Commission (ICC), promulgate--and thereafter revise
and maintain--standards and procedures for establishing railroad
revenue adequacy. Four years later, in the Staggers Rail Act of 1980
(Staggers), Public Law 96-448, 94 Stat. 1895, the agency's rail
transportation policy was revised to include, among other things,
``promot[ing] a safe and efficient rail transportation system by
allowing rail carriers to earn adequate revenues, as determined by the
[agency].'' Additionally, Section 205 of Staggers required the ICC to
begin determining annually ``which rail carriers are earning adequate
revenues.'' To implement this requirement, the ICC began a proceeding
to adopt standards for determining railroad revenue adequacy. In that
proceeding, the ICC concluded that ``the only revenue adequacy standard
consistent with the requirements of [Staggers] is one that uses a rate
of return equal to the cost of capital.'' Standards for R.R. Revenue
Adequacy, 364 I.C.C. 803, 811 (1981), aff'd sub nom. Bessemer & Lake
Erie R.R. v. ICC, 691 F.2d 1104 (3d Cir. 1982).
These statutory requirements, now codified at 49 U.S.C. 10704(a)(2)
and (3),\1\ still govern, and the Board (like the ICC before it)
annually determines
[[Page 19043]]
which rail carriers are revenue adequate by comparing a carrier's rate
of return with the cost of capital.\2\ Since the issuance of Standards
for Railroad Revenue Adequacy in 1981, adjustments have been made to
the agency's methodology in order to improve the agency's ability to
determine accurately revenue adequacy. See, e.g., Use of a Multi-Stage
Discounted Cash Flow Model in Determining the R.R. Industry's Cost of
Capital, EP 664 (Sub-No. 1) (STB served Jan. 28, 2009); R.R. Revenue
Adequacy--1988 Determination, 6 I.C.C.2d 933 (1990), aff'd sub nom.
Ass'n of Amer. R.Rs. v. ICC, 978 F.2d 737 (D.C. Cir. 1992);
Supplemental Reporting of Consol. Info. for Revenue Adequacy Purposes,
5 I.C.C.2d 65 (1988); Standards for R.R. Revenue Adequacy, 3 I.C.C.2d
261 (1986), aff'd sub nom. Consol. Rail Corp. v. United States, 855
F.2d 78 (3d Cir. 1988).
---------------------------------------------------------------------------
\1\ Section 10704(a) of title 49 states with respect to adequate
revenues:
* * * * *
(2) The Board shall maintain and revise as necessary standards
and procedures for establishing revenue levels for rail carriers * *
* that are adequate, under honest, economical, and efficient
management, to cover total operating expenses, including
depreciation and obsolescence, plus a reasonable and economic profit
or return (or both) on capital employed in the business.* * *
Revenue levels established under this paragraph should--
(A) provide a flow of net income plus depreciation adequate to
support prudent capital outlays, assure the repayment of a
reasonable level of debt, permit the raising of needed equity
capital, and cover the effects of inflation; and
(B) attract and retain capital in amounts adequate to provide a
sound transportation system in the United States.
(3) On the basis of the standards and procedures described in
paragraph (2), the Board shall annually determine which rail
carriers are earning adequate revenues.
---------------------------------------------------------------------------
* * * * *
---------------------------------------------------------------------------
\2\ The Board annually publishes the annual rates of return of
each Class I railroad, as well as the cost of capital experienced by
the rail industry, in sub-numbered proceedings of Dockets No. EP 552
and EP 558, respectively. See, e.g., R.R. Revenue Adequacy--2012
Determination, EP 552 (Sub-No. 17) (STB served Oct. 17, 2013)
(summarizing Class I rail carriers' return on investment in Appendix
A); R.R. Cost of Capital--2012, EP 558 (Sub-No. 16) (STB served Aug.
30, 2013) (finding industry cost of capital to be 11.12%).
---------------------------------------------------------------------------
The concept of revenue adequacy is also a component of the Board's
standard for judging the reasonableness of rail freight rates, as set
forth in Coal Rate Guidelines, Nationwide (Coal Rate Guidelines), 1
I.C.C.2d 520 (1985), aff'd sub nom. Consol. Rail Corp. v. United
States, 812 F.2d 1444 (3d Cir. 1987).\3\ Coal Rate Guidelines
established a set of pricing principles known as ``constrained market
pricing,'' which imposes three main constraints on the extent to which
a railroad may charge differentially higher rates on captive traffic:
Revenue adequacy, management efficiency, and stand-alone cost. Id. at
534.\4\ With respect to the revenue adequacy constraint, the ICC
observed
---------------------------------------------------------------------------
\3\ Smaller rate cases can be evaluated under the Three-
Benchmark methodology, which includes a benchmark (Revenue Shortfall
Allocation Method) that is tied to the Board's annual revenue
adequacy calculations. See Simplified Standards for Rail Rate Cases,
EP 646 (Sub-No. 1), slip op. at 5 (STB served Mar. 19, 2008).
\4\ A fourth constraint--phasing--can be used to limit the
introduction of otherwise-permissible rate increases when necessary
for the greater public good. Coal Rate Guidelines, 1 I.C.C.2d at
546-47.
[The] revenue adequacy standard represents a reasonable level of
profitability for a healthy carrier. It fairly rewards the rail
company's investors and assures shippers that the carrier will be
able to meet their service needs for the long term. Carriers do not
need greater revenues than this standard permits, and we believe
that, in a regulated setting, they are not entitled to any higher
revenues. Therefore, the logical first constraint on a carrier's
pricing is that its rates not be designed to earn greater revenues
---------------------------------------------------------------------------
than needed to achieve and maintain this ``revenue adequacy'' level.
Id. at 535.
As the Board has explained, the revenue adequacy constraint
``employ[s] a `top-down' approach, examining the incumbent carrier's
existing operations.'' W. Texas Utils. Co. v. Burlington N. R.R., 1
S.T.B. 638, 655 (1996). ``If the carrier is revenue adequate (earning
sufficient funds to cover its costs and provide a fair return on its
investment), or would be revenue adequate after eliminating unnecessary
costs from specifically identified inefficiencies in its operations, a
complaining shipper may be entitled to rate relief.'' Id.
The Board has not yet had the opportunity to address how the
revenue adequacy constraint would work in practice in large rail rate
cases. Nearly all large rate reasonableness cases to date have relied
upon the stand-alone cost constraint. The few revenue adequacy-based
complaints have either settled or involved other transportation modes.
See S. Miss. Elec. Power Ass'n v. Norfolk S. Ry., NOR 42128 (STB served
Aug. 31, 2011) (proceeding in which revenue adequacy constraint raised
in complaint was subsequently settled); CF Indus., Inc. v. Koch
Pipeline Co., 4 S.T.B. 637 (2000) (finding rate increases for pipeline
transportation unreasonable under 49 U.S.C. 15501 using revenue
adequacy constraint), aff'd sub nom. CF Indus., Inc. v. STB, 255 F.3d
816 (D.C. Cir. 2001).
Both the structure of the rail industry and the flow of commerce
have continued to change substantially over the past decade. In the
last several years, questions have been raised regarding the agency's
methodology for determining revenue adequacy and whether it
appropriately measures the financial condition of the railroad
industry. These questions cover a range of issues, such as the
viability of the Board's current methodology and possible alternative
methodologies, what it means to be revenue adequate and how such a
finding should impact the railroads, and how to apply the revenue
adequacy constraint in regulating rates, among many others.
At this point, the Board believes an examination of revenue
adequacy is in order. The Board will now institute a proceeding to
address the issues discussed above. This proceeding is intended as a
public forum to discuss the Board's methodology in fulfilling its
statutory mandate to determine railroad revenue adequacy, as well as
the revenue adequacy component of the Board's standard for judging the
reasonableness of rail freight rates, with a view to what, if any,
changes the Board can and should consider. The Board is providing an
opportunity for any person or entity that wishes to participate to file
written prepared comments. Subsequently, the Board will hold an oral
hearing at the agency to explore the issues in more depth.
The Board also recently instituted a rulemaking proceeding in
Docket No. EP 664 (Sub-No. 2) to address how it determines the railroad
industry's cost of equity capital.\5\ The cost of capital calculation
is a component of the methodology that the Board uses to determine
revenue adequacy, and the Board therefore stated that it would
coordinate the processing of these two proceedings. Accordingly, the
Board now invites any person or entity who wishes to participate in EP
664 (Sub-No. 2) to submit written comments addressing the cost of
capital calculation in that proceeding, pursuant to the schedule set
forth below.
---------------------------------------------------------------------------
\5\ Petition of the W. Coal Traffic League to Institute a
Rulemaking Proceeding to Abolish the Use of the Multi-Stage
Discounted Cash Flow Model in Determining the R.R. Industry's Cost
of Equity Capital, EP 664 (Sub-No. 2) (STB served Dec. 20, 2013).
---------------------------------------------------------------------------
Decisions and notices of the Board, including this notice, are
available on the Board's Web site at ``www.stb.dot.gov.''
This action will not significantly affect either the quality of the
human environment or the conservation of energy resources.
It is ordered:
1. Comments in both dockets are due on July 1, 2014. Reply comments
are due on August 15, 2014.
2. A public hearing will be announced in a subsequent Board
decision.
3. This decision is effective on the date of service.
Decided: April 1, 2014.
[[Page 19044]]
By the Board, Rachel D. Campbell, Director, Office of
Proceedings.
Derrick A. Gardner,
Clearance Clerk.
[FR Doc. 2014-07722 Filed 4-4-14; 8:45 am]
BILLING CODE 4915-01-P
