RAILROAD & RAIL PRICING / Federal freight rate governance of Class I railroads’ pricing for the Quarter: The U.S. Surface Transportation Board has approved the Association of American Railroads’ (AAR’s) proposed rebasing calculations and the rebased first quarter 2013 rail cost adjustment factor (RCAF) and cost index filed by the AAR.

The RCAF mandate pursuant to which this “Rail cost adjustment factor” is issued is one reason why the reforms of the Staggers Act of 1980 constitute “de-regulation” only by comparison to the more strict Interstate Commerce Commission regulation of freight rates that prevailed before that statute. 

Pursuant to federal statute (49 U.S.C. § 10708) the U.S. STB is required to publish the “Rail cost adjustment factor” no less frequently than each quarter. This “factor” is a fraction whose numerator is “the latest published Index of Railroad Costs … and the denominator of which is the same index for the fourth quarter of every fifth year ….” 

Who is affected?  Those who operate Class I railroad carriers and those who ship on Class I railroad carriers.

(December 26, 2012, Approval of Rail Cost Adjustment Factor ): 

“… A new base level for the index is calculated in the Board’s decision, as the statute requires be done every five years. The first quarter 2013 RCAF (Unadjusted) is 0.997. The first quarter 2013 RCAF (Adjusted) is 0.435. The first quarter 2013 RCAF-5 is 0.411.”

The Staggers Act of 1980 that “de-regulated” rail freight transportation requires that Class I freight charges be adjusted for inflation in accordance with the RCAF. The RCAF is periodically revised in the light of inflation in labor, equipment, etc. and in light of productivity gains of the railroads covered according to a weighted formula. See AAR explanation document here.

The context not elaborated here: Railroad carriers covered by Title 49 U.S. Code (“Transportation”) are not free to charge shippers whatever freight rates they wish. 49 U.S.C. §§ 10701 to 10709. One vital trade-off of such “de-regulation” as the Staggers Act of 1980 provided in freight railroad business is that federal law as administered by the U.S. STB constrains increases by railroads in freight rats charged to their shipper-customers.