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6/30/2020



Rail News: Federal Legislation & Regulation

STB withdraws proposal to change cost-of-equity calculation


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The Surface Transportation Board (STB) on June 23 withdrew a notice of proposed rulemaking that would have incorporated a third model in its methodology for calculating the cost-of-equity component of the railroad industry's cost of capital.

Each year, the STB determines the railroad industry's cost of capital, then uses the figure in a variety of regulatory proceedings. In fall 2019, the board issued a notice of proposed rulemaking seeking public comment on its proposal to change its existing methodology for determining that figure.

Specifically, the board proposed incorporating an additional model, referred to as the Step Multi-Stage Discounted Cash Flow Model, to complement its use of Morningstar/Ibbotson Multi-Stage Discounted Cash Flow Model and the Capital Asset Pricing Model in determining the cost-of-equity component of the cost of capital. 

Based on the comments and replies it received in response to its proposal, the board decided to drop it, according to the STB decision.

 



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