Mulvey Seeks Fix to Costing Gauge

The new head of the Surface Transportation Board wants to fix some of the agency's creaky infrastructure.

Acting Chairman Francis P. Mulvey is hoping Congress will allocate up to $4 million for a project that may take three years to complete, in hopes of bringing a key STB formula into the 21st Century. And the STB is taking public comment on the measure now, for an April 30 public hearing.

It's called the uniform railroad costing system, or URCS, and is designed to peg the variable operating costs paid out by Class I railroads. That turns out to be crucial when shippers challenge their freight charges, since carriers can charge at least 180 percent of varying -- as opposed to fixed -- costs before regulators will even consider the issue. So shippers usually wait until they can show the charges go well beyond that 180 percent floor.

"This is the basis of calculating the costs associated with traffic movements, and it's very critical in our rate cases," Mulvey told the Journal of Commerce. The STB uses a ratio of rates relative to variable costs to determine if a railroad has market dominance in a traffic lane, which is a key to judging if its freight rates are too high.

Mulvey said some cost relationships in that URCS gauge go back to the 1920s and '30s, and it was last updated about 20 years ago when there were many more top-tier railroads than today's seven. "Everyone agrees that the URCS data is not terribly accurate and not terribly reflective of modern railroading," he said.

Fixing it is "not a small undertaking," the chairman said, "but I think it's important that if we are going to rely on it so much in these rate cases we ought to get it right." He said it was not clear who an update would benefit in the rate cases, and it can have offsetting effects.

While the board has some technical staff, rebuilding the entire URCS "goes beyond the board's resources to do anything about. We would have to hire more people in-house who have the appropriate econometrics training, or contract it out, or some combination of the two," he said.

The agency's budget for normal operations is under $25 million, and Mulvey plans to ask Congress to cover this project separately. "I think it will be a special line item that we would get into the authorization and appropriations," he said

Contact John D. Boyd at jboyd@joc.com.