Media Kit » Try RailPrime™ Today! »
Progressive Railroading
Newsletter Sign Up
Stay updated on news, articles and information for the rail industry



This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.




railPrime
View Current Digital Issue »


RAIL EMPLOYMENT & NOTICES



Rail News Home Federal Legislation & Regulation

May 2008



Rail News: Federal Legislation & Regulation

STB computes railroads’ cost of capital in ’06, makes other procedural moves



advertisement

Last month, the Surface Transportation Board (STB) calculated the rail industry’s cost of capital for 2006 using a methodological change for the first time. The board determined the industry had an after-tax cost of capital of 9.94 percent, a 2.26 percent drop from 2005’s 12.2 percent.

In a final decision issued in January, the STB changed its method for calculating the industry’s cost of equity, a key cost of capital component. The board now uses a capital asset pricing model instead of a single-stage discounted cash flow method applied since 1982.

The STB uses a cost of capital figure to evaluate the adequacy of individual railroads’ revenues each year. The board also uses the figure in various regulatory proceedings, such as determining the reasonableness of a challenged rail rate.

Decisions, decisions

Meanwhile, the board adopted a procedural schedule to review the U.S. Department of Energy’s (DOE) proposed 300-mile Yucca Mountain line in Nevada and issued a final scope of study decision, enabling its Section of Environmental Analysis to begin preparing an Environmental Impact Statement regarding Canadian National Railway Co.’s acquisition of a major portion of the Elgin, Joliet & Eastern Railway Co.

The DOE line would connect to a Union Pacific Railroad line near Caliente and be used to transport spent nuclear fuel and other radioactive waste to a geologic repository.

The STB also merged the offices of compliance/consumer assistance and governmental/public affairs, and created a new office of public assistance, governmental affairs and compliance. The office will house governmental affairs, communications and compliance functions, as well as internal operations, such as rail operations analysis, tariffs, a library and mediation coordination.



Keywords

Browse articles on cost of capital Surface Transportation Board STB revenue adequacy

Contact Progressive Railroading editorial staff.