CURE Files Written Comments to STB as Revenue Adequacy Hearing Starts
For Immediate Release: July 21, 2015
Contact: Ann Warner 202.465.8716
WASHINGTON, DC —David Sauer, president of Consumers United for Rail Equity (CURE) today praised the Surface Transportation Board (STB) for holding a public hearing on railroad revenue adequacy (Docket No. EP 722).
In announcing the hearing in May, then-Acting Surface Transportation Board Chair Deb Miller stated that, “given how much the financial situation has improved for the railroad industry over the last 30 years, it is also time that the Board gave meaningful consideration to what it means for a railroad to be revenue adequate.”
“CURE couldn’t agree more,” Sauer said.
The two-day STB hearing will explore how the Board should regulate rail carriers that are revenue adequate. The Board determines annually whether Class I carriers are revenue adequate, a concept that describes whether a carrier is earning sufficient revenue to cover its costs and earn a reasonable return sufficient to attract capital. The Board’s predecessor, the Interstate Commerce Commission, declared that once a railroad has become revenue adequate over a period of time, shippers should be able to challenge the railroad’s rates on the ground that the railroad is financially healthy and thus does not need to charge such high rates. However, the ICC and the Board have never fully defined the process for challenging a rate on this basis.
As a coalition of rail shippers, CURE is committed in helping to promote rail competition, Sauer said. “To that end, CURE is particularly concerned that the promotion of effective rail competition and implementation of effective rate regulation has been impeded by the unfounded perception that the railroad industry has not achieved revenue adequacy on a long-term basis,” Sauer stated in written comments filed with the Board today.
“One of the goals of the Staggers Rail Act of 1980 (P.L. 96-448) was to restore financial stability to the U.S. rail system. By all accounts, this goal has been achieved, as demonstrated by the industry’s continued high levels of capital investment and shareholder returns including dividends, buybacks, and stock appreciation,” Sauer stated.
“CURE has long been concerned that the STB’s annual determinations of the ‘revenue adequacy’ for Class I carriers does not reflect the true health of the industry and its members,” Sauer stated. “CURE believes that the carriers’ falsely perceived lack of adequate revenues has served to shield the railroads’ exercise of their monopoly pricing power from STB scrutiny and prevented shippers from obtaining appropriate relief. For that reason, CURE continues to support elimination of the statutory requirement for the annual determinations.”
Sauer added, that “CURE strongly opposes railroad efforts to evaluate revenue adequacy on the basis of replacement costs. The replacement cost issue has been examined repeatedly, including by the Railroad Accounting Principles Board, and the use of replacement cost methodologies has always soundly been rejected. Given the financial strength of the railroads today, including publicly available information indicating that the railroad industry is revenue adequate, there is no plausible basis for the STB to adopt a replacement cost approach to evaluate revenue adequacy or limit the availability of rate relief.”
CURE’s complete statement for the record can be found at www.railcure.org.
The mission of CURE, and its successor organization, is to obtain changes in Federal law and policy that will provide all freight shippers with reliable rail service at competitive prices.