Wednesday, October 17, 2012

STB: NS and UP "revenue adequate" in 2011

Written by  Luther S. Miller, Senior Consulting Editor

The Surface Transportation Board announced Wednesday its determination that two of the five major U. S. freight railroads, Norfolk Southern and Union Pacific, were "revenue adequate" in 2011. This means that their return on investment exceeded their cost of capital as determined under an STB formula.

The STB determined the cost of capital in 2011 to be 11.57%.

According to the Association of American Railroads, UP had an STB-determined rate of return last year of 13.01% and NS had a return of 12.87%. A close runner-up was CSX, with a return of 11.54%. Kansas City Southern reported a return of 10.76%, and BNSF, 9.85%.

The Staggers Rail Act of 1980, which substantially deregulated the railroads, directed the regulatory agency to conduct revenue adequacy determinations on an annual basis. That determination can be a factor in rate challenges and other STB proceedings.