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RAIL EMPLOYMENT & NOTICES



Rail News Home Rail Industry Trends

9/28/2007



Rail News: Rail Industry Trends

Sustainable U.S. rail system in jeopardy if 'rail competition' bills cap freight rates, consultant says


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On Tuesday, a number of legislators and rail shippers told House Transportation and Infrastructure Committee hearing attendees why Congress should pass bills that propose to "re-regulate" the rail industry. But an international railroading expert explained why Congress shouldn't.

William Rennicke, a director at international consulting firm Oliver Wyman, testified that U.S. shippers pay lower rail rates than anywhere else in the world and the U.S. freight-rail system is one of the few that doesn't rely on direct government support.

"The U.S. regulatory and carrier model is now seen as a standard benchmark for freight-rail systems worldwide," he said, according to his testimony released by the Association of American Railroads. "The cost to move one ton one mile in the U.S. can be as little as 10 percent of the cost in other countries."

Rennicke believes differential pricing — a practice employed by airlines — is an "effective path to railroad pricing."

"In the airline industry, it is not uncommon to be sitting next to someone who paid three or four times your fare, or to have on the other side of you a person who paid a quarter or a third of your fare," he said.

The Railroad Competition and Service Improvement Act of 2007 (H.R. 2125/S. 953) includes provisions that would cap freight rates, most often at a revenue-to-variable cost ratio of 180, said Rennicke.

"You cannot have a sustainable U.S. rail system, able to support maintenance and growth," with such a cap, he said.