US rail panel proposes overhaul to rate dispute process

A federal task force has proposed major changes to the way US regulators assess railroad rates, potentially making it easier for shippers to challenge them.

The Surface Transportation Board's (STB) Rate Reform Task Force today issued multiple recommendations for changes to agency's rate review methodologies and processes. STB chairman Ann Begeman formed the panel in January 2018 to suggest improvements to the existing rate review processes. The board has different methods to handle large and small rate cases.

The number of rate challenges before the board has dwindled to zero. The last rate case to go before the STB was filed in January 2015 when Consumers Energy challenged CSX's rates for coal deliveries. The STB decided the case in 2018 and the parties agreed to a final settlement early this year.

Shippers have argued that the cost and time of large and small cases is a deterrent.

"I asked the task force to think boldly and they delivered," Begeman said.

The task force proposed a new methodology for major rate cases, the Incumbent Network Cost Analysis, that would look at the cost structure of the railroad itself instead of a hypothetical stand-alone carrier.

The proposed methodology would be based on the railroad's assets and operating expenses rather than those of a hypothetical new carrier entering the market.

The existing methodology, the Stand-Alone Cost test, would remain in place, but the panel called for changes to a process that it said had "become too complicated, costly and time consuming."

The existing test requires shippers disputing rates to create a hypothetical railroad against which real-world costs are measured, a method that has been sharply criticized by shippers as too complicated.

The task force also called on Congress to pass legislation requiring arbitration of small rate cases. The STB has had a voluntary arbitration process in place for more than two decades, but shippers and railroads have never agreed to participate. The panel pointed to a successful rail arbitration program at the National Grain and Feed Association that applies to rate and non-rate matters such as demurrage, routing and contracts.

Other changes were proposed to small rate case processes. The task force proposed simplifying the Three-Benchmark methodology, under which the reasonableness of a challenged rated is determined by examining that rate in relation to three benchmark figures. The panel suggested removing limitations on the aggregation of claims, improving sampling procedures, and instituting page limits on arguments surrounding other relevant factors.

The task force held "frank, off-the-record conversations" with railroads, shippers, trade groups, academics, lawyers and other interested parties, and also reviewed relevant law and history of rate cases.