STB Reports 1.5% US Rail Productivity for 2020-2024

WASHINGTON D.C. – The U.S. Surface Transportation Board (STB) yesterday announced a proposal to set the average annual change in railroad productivity at 1.015, or 1.5%, for the five-year period from 2020 to 2024. This figure is used to adjust the quarterly Rail Cost Adjustment Factor (RCAF), which tracks inflation in railroad inputs. The proposed measure represents a 0.1% increase over the average for the preceding 2019-2023 period.

What Does This Regulation Cover?

The proposal updates a long-standing regulatory mechanism used to moderate rail rate increases by accounting for efficiency gains. Since 1989, the STB has been required to adjust the RCAF to reflect long-run changes in railroad productivity, ensuring that shippers benefit from operational efficiencies. The board calculates this figure by comparing the average cost of producing a unit of railroad output year-over-year, using a five-year moving geometric average to smooth out annual volatility. The specific input data and methodology for the 2020-2024 calculation were not detailed in the initial announcement.

Key Regulatory Data

How Does This Compare to Global Standards?

The STB’s use of a multi-year productivity offset against an inflation index is a regulatory tool largely specific to the U.S. freight rail market. While other nations regulate rail economics, their methods differ. For instance, European rail regulation typically focuses on setting non-discriminatory track access charges and mandating the separation of infrastructure management from train operations to foster competition, rather than applying a national productivity factor to an index. (Source: European Commission, 2023). In North America, the Canadian Transportation Agency uses a Revenue Cap Index for grain transport that also incorporates inflation and a productivity factor, but its calculation methodology and scope are distinct from the STB’s broader RCAF application.

Editor’s Analysis

This 0.1% upward adjustment in the productivity factor, while seemingly minor, signals continued regulatory pressure on railroads to translate operational efficiencies into cost benefits for shippers. This occurs as the entire freight sector faces a strategic shift toward intermodal transport to alleviate growing pressures in the trucking industry. (Source: The Loadstar, 2024). As carriers like Norfolk Southern and CPKC expand their intermodal offerings and transnational networks, this STB benchmark will play a subtle but important role in shaping the long-term cost competitiveness of rail against other modes.

FAQ

Q: What is the purpose of the railroad productivity calculation?
A: The calculation creates a figure that is used to offset the Rail Cost Adjustment Factor, which is an index of railroad input costs. This productivity offset ensures that rates paid by shippers reflect both inflation and the industry’s efficiency gains over time.

Q: How will this 1.5% figure affect rail shipping costs?
A: A higher productivity figure acts as a downward pressure on allowable rate increases. By increasing the offset from the previous period’s average, the STB is mandating that a slightly larger share of efficiency gains be passed on, which can moderate future rate adjustments for shippers.

Q: Is this decision related to recent railroad mergers or service issues?
A: The productivity measure is a routine calculation and not directly caused by a specific merger or service complaint. However, it is a key component of the STB’s overall economic oversight of an industry where major mergers and service quality are under constant scrutiny.