Copyright 2008, Traffic World, Inc.
Regardless of what the eyes may see in railroad earnings reports, the U.S. rail industry has been trying to get the Surface Transportation Board to value rail costs differently, under a formula that could show carriers struggling to bring in "adequate" revenue.
The STB''s response? No.
At issue was whether the regulator should count replacement costs of key rail infrastructure, in case carriers are up against to rebuild any destroyed or damaged assets such as bridges and allow them to charge customers accordingly.
The STB chooses not to regulate most rail cargo, including privately negotiated contracts. But it oversees freight rates for the share of shipments still hauled under public tariffs, figuring rail capital costs to determine which carriers are "revenue adequate."
The agency last year overhauled its decades-old formula for railroads'' cost of capital, which was heavily criticized by shippers as too favorable to carriers. Its new er formula ratcheted down the costs railroads could use in their public freight rates. Yet the board softened the blow by accepting some formula changes from the carriers.
In May, the Association of American Railroads asked the board to start yet another rule-making process, and count replacement costs. They reasoned that many rail assets were acquired decades ago with much lower expense, so replacing them with today''s material and labor expense takes many times their depreciated book value.
The three board members unanimously rejected that request, citing earlier rebuffs by other federal agencies.
Utility shippers also weighed in against the idea, saying no other U.S. regulator uses such accounting and that using replacement costs would "adopt a target rate of return that the railroads have never achieved."