The U.S. Surface Transportation Board (STB; Washington, D.C.; www.stb.dot.gov) announced two initiatives to explore ways to further protect captive shippers from unreasonable rail rates. First, the Board proposed to reform its rules on how it resolves rate disputes to ensure that all captive shippers have a meaningful way to challenge rates. Second, the Board is taking steps to consider a proposal submitted by the National Industrial Transportation League (NITL) to increase rail-to-rail competition.
The centerpiece of the Board’s rate rules proposal removes the limitation on relief for cases brought under the Simplified-Stand Alone Cost alternative. “Our 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 STB wrote in a recently issued decision posted in Rate Regulation Reforms, EP 715.
Captive shippers have long stated that they do not bring rate disputes to the STB because of the high litigation costs associated with the Board’s complex Stand Alone Cost test, traditionally used to resolve major rate cases. To provide rail customers with a lower-cost, expedited alternative to this test, the Board created simplified evidentiary procedures, but because the methods used in the simplified procedures are less precise than those used in full SAC cases, the Board capped the amount of relief available under them.
However, during a hearing in June 2011, STB heard concerns from stakeholders that current limits on relief for simplified alternatives dissuaded parties from using those procedures to bring rate disputes to the agency. Therefore, the centerpiece of Rate Regulation Reforms is to remove the limitation on relief for cases brought under the Simplified SAC alternative. STB also proposes to double the relief available to shippers under its other simplified approach, the Three-Benchmark method; to make technical changes to the Full-SAC and simplified rate procedures; and to raise the interest rate that railroads must pay on reparations to shippers if the railroads are found to have charge unreasonable rates.
In addition to these immediate proposals, the STB is beginning a proceeding in Petition for Rulemaking to Adopt Revised Competitive Switching Rules, EP 711, to explore a competitive-access proposal submitted by NITL. “We continue,” said the Board, “to explore whether there are policy changes the Board could adopt that would promote more rail-to-rail competition and thereby allow competition and the demand for services to establish reasonable rates for transportation by rail, and thus minimize the need for Federal regulatory control.” Under NITL’s proposal, certain shippers located in terminal areas that lack effective transportation alternatives would be granted access to a competing railroad, if there is a working interchange within 30 miles.