The Surface Transportation Board (STB) ruled this September that four class I railroads—the BNSF, Norfolk Southern, Union Pacific, and U.S. affiliates of Canadian National—were “revenue-adequate” for 2014 which means they have achieved a rate of return on investment that is at least equal to the average cost of investment capital. Although the “revenue adequacy” discussion is lengthy and complex, it is an important topic for shippers.
Even though the idea was introduced in the 1980 Staggers Act, it still has not been decided how this constraint can work in practice to protect captive shippers. Given that it appears the rail industry may be on the verge of revenue adequacy under existing standards, the STB has a proceeding underway to look at how revenue adequacy is determined and how it should be applied in assessing the reasonableness of freight rates challenged by shippers.
Although it may be years before any definitive decisions are reached, AMTR wants to remind shippers that it is important to stay abreast and stay involved in the discussion as it will definitely impact your bottom lines in years to come.
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