ATR Joins Coalition Warning of New Railroad Price Controls

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Posted by Mike Palicz on Thursday, December 5th, 2019, 5:58 PM PERMALINK

Today, Americans for Tax Reform joined a coalition of free-market organizations warning Congress of potential new government price controls on America’s freight railroads.

In a letter, the coalition emphasized the importance of the upcoming Surface Transportation Board (STB) hearing on railroad revenue adequacy and urged Congress to provide “close oversight of the STB and its remaining authorities.”

Specifically, the signed groups raised concerns regarding the STB’s possible changes to revenue adequacy determinations that may be used to create new heavy-handed railroad regulations. Such changes could allow the government to determine that a railroad is earning excessive revenue and consequently serve as justification for instituting a new price control mechanism to set maximum freight weights. Using revenue adequacy in this manner would run counter to the deregulatory agenda that saved the private railroad industry from the brink of collapse during the 1970s.

The letter's signers point to comments submitted to the STB by authors of a 2015 study produced at the request of Congress. These comments highlighted several concerns with STB’s proposal including:

  • Arbitrary calculations: “The proposal would establish rate increase caps based on the relationship of a shipper’s rates to a benchmark calculated using costs derived from the inherently arbitrary Uniform Rail Costing System (URCS) and arbitrary allocations of profits that exceed the cost of capital.”
  • Divorced from economic reality: “We are deeply concerned that this approach creates a rate increase constraint that is divorced both from economic reality and from a well-articulated goal that the proposal is designed to achieve.”
  • Contrary to stated intent: “This proposal could move STB rate regulation in the direction of public utility regulation rather than the protection of captive shippers.”

 

To see the full content of the letter, please click here.

Photo Credit: Luke Jones

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