STB Sets 3Q24 Rail Cost Adjustment Factor
Written by Marybeth Luczak, Executive Editor
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The Surface Transportation Board (STB) has adopted for third-quarter 2024 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.”
The 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 STB’s predecessor], the calculation of which is currently based on a five-year moving average.” According to the STB, the five-year moving geometric average of productivity change for U.S. Class I railroads from 2018-2022 is 1.011 (1.1% 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 the STB, the RCAF-5 for third-quarter 2024 uses a productivity trend for the years 2017-2021, which is 1.028 (2.8% per year).
The STB, in a June 14 decision, reported that it has reviewed AAR’s submission and adopted the RCAF figures for third-quarter 2024: unadjusted RCAF, 0.950 (down 3.7% from second-quarter 2024’s 0.986); adjusted RCAF, 0.372 (down 3.9% from second-quarter 2024’s 0.387); and RCAF-5, 0.353 (down 4.3% from second-quarter 2024’s 0.369).
Table A shows the index of railroad input costs, unadjusted RCAF, adjusted RCAF, and RCAF-5 for second-quarter and third-quarter 2024:
Table B shows the first-quarter 2024 index and the RCAF calculated on both an actual and forecasted basis (the difference between the actual calculation and the forecasted calculation is the forecast error adjustment):
