STB: Rail Cost Adjustment Factor Set for 4Q23

Written by Carolina Worrell, Senior Editor
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The Surface Transportation Board (STB) has adopted for fourth-quarter 2023 the rail cost adjustment factor (RCAF), defined as “an index formulated to represent changes in railroad costs incurred by the nation’s largest railroads over a specified period of time.”

STB is required by law to publish the RCAF on at least a quarterly basis. The Association of American Railroads (AAR) each quarter computes three types of RCAF figures and submits them for STB approval:

  • Unadjusted RCAF: “an index reflecting cost changes experienced by the railroad industry, without reference to changes in rail productivity.”
  • Adjusted RCAF: “an index that reflects national average productivity changes as originally developed and applied by the ICC [Interstate Commerce Commission], the calculation of which is currently based on a five-year moving average.” According to STB, the five-year moving geometric average of productivity change for U.S. Class I railroads from 2017-2021 is 1.028 (2.8% per year).
  • RCAF-5: “an index that also reflects national average productivity changes; however, those productivity changes are calculated as if a five-year moving average had been applied consistently from the productivity adjustment’s inception in 1989.” According to STB, RCAF-5 for third-quarter 2023 uses a productivity trend for the years 2016-2020, which is 1.025 (2.5% per year).

The STB on Sept. 18 reported that it had reviewed AAR’s submission (download decision below) and adopted the figures for fourth-quarter 2023: unadjusted RCAF, 1.012 (up 3.7% from third-quarter 2023’s 0.975); adjusted RCAF, 0.401 (up 3.0% from third-quarter 2023’s 0.389); and RCAF-5, 0.384 (up 3.2% from third-quarter 2023’s 0.372).

Table A shows the index of railroad input prices, RCAF (Unadjusted), RCAF (Adjusted), and RCAF-5 for fourth-quarter 2023:

Table B shows the second-quarter 2023 index and the RCAF calculated on both an actual and a forecasted basis. The difference between the actual calculation and the forecasted calculation is the forecast error adjustment:

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