(The following article by Desiree J. Hanford was circulated by Dow Jones Newswires on October 3.)
CHICAGO — The big four railroads have urged restraint regarding the Surface Transportation Board’s proposals focused on fuel surcharges, with Union Pacific Corp. saying the board’s “core conclusion” that rate-based surcharges are an unreasonable practice “is fundamentally flawed.”
Comments, including filings from the railroads, were due Monday on the STB’s fuel-surcharge proposals, which stemmed from a public hearing it held in May that focused on surcharge practices used by railroad companies. Specifically, the board wanted to know about surcharges being computed as a percentage of base shipping rates and the means used to measure increases in railroads’ cost of fuel.
Fuel surcharges are typically put in place when a customer contract is negotiated or renegotiated. Railroads have employed hedges to protect against volatile fuel prices, but in the past couple of years, they have turned more to surcharges to cover the additional costs.
The STB proposed the measures in August, saying it wanted railroads to develop a way of computing a surcharge that more closely links it to the actual increase in fuel costs.
The board also said then that it wanted to end “double dipping,” whereby railroads charge customers for the same increases in fuel costs for the same shipment both through a fuel surcharge and the use of what is called a rate escalator. The escalator is based on an index that may include a fuel-cost component.
In addition, the STB wants railroads to use one uniform index for measuring increases in fuel costs. It would also have the railroads submit monthly reports, showing actual total fuel costs, total fuel consumption and total fuel surcharge revenue.
The railroads argued in their filings that, generally, the proposals would be time-consuming and difficult to achieve. They want more clarity on the proposals, and they questioned the STB’s legal authority to regulate fuel surcharges.
“The board has made some general, yet sweeping, proposals that are inconsistent with law and impractical to implement,” said Union Pacific, the largest of the Class I railroads by revenue, in its filing. “If the STB wants to pursue the proposals, it should do so with a more complete understanding of the facts.”
Regulation of fuel surcharges would put railroads at a competitive disadvantage, Norfolk Southern Corp. said. Norfolk Southern added that other modes of freight transportation have fuel surcharges yet there aren’t any government regulations regarding what those companies can or can’t do with the surcharges.