The U.S. Surface Transportation Board said last week
that it has begun two initiatives to explore ways to further protect so-called captive shippers who are served by a single railroad from unreasonable rail rates.
The STB proposes to reform its rules on how it resolves rate disputes to ensure that all captive shippers have a meaningful way to challenge rates and, secondly, taking steps to consider a proposal submitted by the National Industrial Transportation League to increase rail-to-rail competition.
The STB said the centerpiece of its rate rules proposal removes the limitation on relief for cases brought under the "Simplified-Stand Alone Cost" alternative. It noted that captive shippers have long stated that they cannot bring rate disputes to the STB because of the prohibitive litigation costs and the tremendous complexity of the rate cases.
The agency said it responded in 1996 and 2007 by creating simplified procedures to reduce the time, complexity, and expense of rate cases. The STB says its goal was to make itself more accessible to the average shipper. But during 2011 board hearings, many stakeholders stated these simplified alternatives were ineffective because of the limitations on relief that the STB placed on those simplified procedures.
The STB has proposed to modify its rules to remove the limitation on relief for one simplified approach, and to double the relief available under the other simplified approach. The board also proposes to make some technical changes to the rate procedures, and to raise the interest rate that railroads must pay on reparations if they are found to have charged unreasonable rates.
"The overarching goal is to ensure that the board’s simplified and expedited tests for resolving rate disputes are more accessible to parties," the STB said.
The stand-alone-cost (SAC) test was called "an expensive, extensive, and time-consuming part of the
regulatory practice" of the STB in an April 2010 paper
written by Russell
Pittman, director of economic research in the Economic Analysis Group of the Antitrust Division at the U.S.
"Worse, a close examination of the history of
its adoption and application suggests only a very tenuous connection with its claimed intellectual
foundations," he said, adding that "it is time
to retire this tool and replace it with something simpler and more effective."
The STB's goal is to "encourage shippers to use a simplified alternative to a Full-(Stand Alone Cost) analysis that is economically sound, yet provides a less complicated and less expensive way to challenge freight rates by discarding the requirement that shippers design a hypothetical railroad to judge a railroad's real world rates," the board wrote in its decision Rate Regulation Reforms, EP 715
, last week.
The board also proposes to double the relief available to shippers under its other simplified approach, the so-called Three-Benchmark method, make technical changes to the Full-SAC and simplified rate procedures, and raise the interest rate that railroads must pay on reparations to shippers if the railroads are found to have charged unreasonable rates.
The NIT League commended the STB's actions, calling them "prudent steps" that "underscore why reforms that enhance competition are so urgently needed, especially by shippers who lack meaningful transportation alternatives."
It said while the STB did not issue a formal rulemaking on its petition "it did begin a proceeding to gather information on the impact of the NITL’s proposal on both shippers and the railroad industry. Use of competitive switching is the only remedy available to many shippers to gain a competitive foothold. However, use of the remedy today for many shippers is simply not practical."
NIT League President and Chief Executive Officer Bruce Carlton said “the board has clearly signaled its intention to respond to the many stakeholders that testified at the board’s 2011 hearings on the state of competition in the rail industry. The League appreciates both of these initiatives, and we will be an active participant in both proceedings. Our members believe strongly that marketplace competition is inherently good and should be enhanced whenever possible. That was the target of our proposal on competitive switching, and we will be focused on that outcome.” - Chris Dupin