Opinion ID: 383816
Heading Depth: 1
Heading Rank: 7

Heading: presumptions

Text: 68 As noted above, the Commission has promulgated four rebuttable presumptions found at 49 C.F.R. 1101.1(f) and (g) to aid it in speedily determining whether market dominance exists. The Commission found that none of these presumptions applied to CP&L's movement; we must review the Commission's action with respect to each. 34
69 CP&L claimed before the Commission that one factor indicating market dominance was that the carriers considered the schedule within their rate bureau, the Southwestern Freight Bureau. Establishing that a rate has been discussed, considered, or approved upon a rate bureau agreement does not establish a rebuttable presumption of market dominance per se. Instead, it establishes a rebuttable presumption that a carrier participating in the rate or in such discussion or consideration does not provide effective competition to the proponent rail carrier for the involved traffic. 49 C.F.R. 1109.1(f). The evidence CP&L placed in the record on this point is admittedly sparse, consisting only of a notice published on July 12, 1977, that the proposed rate had been docketed, inviting interested parties to comment and to request a public hearing, and a subsequent withdrawal of the rate from the public docket on September 26, 1979. (J.A. III, pp. 1622-3). 70 The Commission did not address CP&L's allegation of rate bureau activity. The railroads defend the Commission's failure to address this issue by pointing to the language of the rate bureau presumption which provides that the presumption arises when the evidence addressed establishes that the rate in issue has been discussed, considered, or approved upon a rate bureau agreement. 49 C.F.R. 1109.1(f). The railroads argue that docketing the proposed rate for independent action is not the same as discussion, consideration or approval. 35 71 We are not convinced that the rate bureau presumption should be read as narrowly as the railroads request. In Ex parte No. 320, Interim Report, the Commission stated: 72 Ordinarily, no presumption will attach when a proposal is docketed for independent action pursuant to the rate bureau procedures. We do note, however, that the presumption will apply when two or more carriers which have previously discussed or considered a conference rate later publish the same or similar rates at or about the same time, pursuant to their right of independent action. The circumstances underlying independent action are too varied to permit any uniform inference, and the circumstances surrounding such publication will be considered on a case-by-case basis. 73 353 I.C.C. at 891. The use of the adverb ordinarily implies that in certain circumstances docketing a proposal for independent action pursuant to rate bureau procedures will establish the rate bureau presumption. 36 Also the Commission makes clear that the circumstances underlying independent action within a rate bureau are too varied to permit uniform inference. Significantly, in Ex parte No. 320, Final Report, in which the Commission promulgated the market dominance presumptions, the Commission added to § 1109.1(a) a requirement that a carrier furnish information concerning whether a rate has been docketed, as well as whether it has been discussed, considered or approved. 37 Admittedly, in explaining the reason for this addition, the Commission stated that evidence of docketing procedure would enable it to better determine the existence of tacit collusion where two or more rates are published at or about the same time. Ex parte No. 320, Final Report, 355 I.C.C. at 14. But the Commission did not limit the relevance of a docketed rate to this situation. 74 We read the Commission's regulation together with its comments on the regulation as evidence of its concern that docketing a rate may have some relevance in determining whether the rate bureau presumption has been satisfied. We cannot ascertain the possible implications of docketing a rate with the particular rate bureau involved in this case as there is nothing in the record as to the procedure followed by the Southwestern Freight Rate Bureau. 38 Although § 10706(a)(3)(A) provides that there be a final disposition of a rate docketed with a rail rate bureau by the 120th day after it is docketed, there is no indication as to whether such approval was obtained in this case or whether such approval is automatic in the rate bureau involved. While we defer to the expertise of the Commission to make the initial determination of what relevance docketing a rate may have in this case on market dominance, we conclude that in light of the Commission's own requirement for information concerning docketing of rates, and its statement that circumstances underlying independent action are too varied to permit uniform inference, the Commission should have addressed CP&L's allegation. Cf. Pitre Brothers Transfer, Inc. v. United States, 580 F.2d 140 (5th Cir. 1978). On remand, the Commission shall do so.
75 Under the Commission's market share presumption of market dominance, carriers are presumed to enjoy market dominance where they have handled at least 70% of the involved traffic during the preceding year. 49 C.F.R. § 1109.1(g)(1). Here no traffic has moved in the past from Axial to Coleto Creek, but when it commences, the railroads will have 100% of the market. 39 The Commission found that the market share presumption was irrelevant in this case, noting: 76 In the movement under consideration here, no traffic has existed in the past. Although the utility company has used coal from sources in South Africa, it has not done this on a regular basis. Accordingly, the first presumptive test is not relevant to the situation presented here. 77 (J.A. III, p. 1942). 78 While the Commission is correct in literally reading the market share presumption to be inapplicable to a new movement such as the movement to Coleto Creek, the Commission has in the past weighed the application of the market share presumption in new movements of coal and has found that the market share allegation does merit serious consideration. Kings Mill, 359 I.C.C. at 761. Kings Mill is very similar to this case, involving unit-train movements of coal in shipper-supplied equipment from a mine with which the shipper had contracted for large quantities over a long period of time. It is especially significant for the case at hand because the only stated reason the Commission gave for finding market dominance in Kings Mill was that the shipper's market share allegation had been demonstrated in light of the fact that a long-term commitment to a particular source had been made. Ibid. 79 This same reasoning was used in an even earlier case, Smithers Lake, again involving unit-train shipments of coal in shipper-supplied cars from a contract source. In Smithers Lake, the railroads expressly argued that the market share presumption could not apply since there had been no prior traffic between the origin and destination. 358 I.C.C. at 542. The Commission rejected this reasoning, stating: 80 (A)lthough the market share presumption is literally inapplicable to new movements, the fact that all of the subject traffic will be handled by the respondents is clearly an important factor. No evidence has been presented which would indicate that respondents will control less than 70 percent of the market from Cordero (the mine) to Smithers Lake (the generating plant) once actual movements commence. 81 358 I.C.C. at 555. This reasoning was a significant factor in Smithers Lake as to why the Commission found market dominance. Accordingly, on remand, the Commission shall either adhere to its prior decisions such as Kings Mill and Smithers Lake or explain its deviation.
82 Under the revenue/cost presumption, market dominance is presumed to exist where the rate in issue exceeds the variable cost of providing the service by 60 percent or more. 49 C.F.R. § 1109.1(g)(3). The crucial concept is that of variable costs. All the petitioners allege one or more mistakes by the Commission in calculating the railroads' variable costs for CP&L's traffic. Because this is such a technical subject, a review of the Commission's rules and practices for determining costs will be beneficial before discussion of the substance of the petitioners' objections. 83 In proposing the revenue/cost presumption in Ex parte No. 320, Interim Report, the Commission stated that variable costs are expenses which over a long-term period, fluctuate with the volume of traffic handled. 353 I.C.C. at 911. The Commission noted that such costs include operating expenses, rents, taxes, and an allowance for the cost (apparently to be calculated at the imputed interest level) 40 of equity capital invested in transportation property, plus interest on borrowed capital invested in such property. 353 I.C.C. at 911, n. 44. The Commission has indicated that in establishing variable costs for the revenue/cost presumption, shippers with the responsibility of providing evidence of costs may rely upon a formula known as Rail Form A. 41 Ex parte No. 320, Interim Report, 353 I.C.C. at 913. In justifying the 60% figure used in the presumption, the Commission itself relied upon Rail Form A variable costs. Ex parte No. 320, Clarification, 359 I.C.C. at 738. 84 Rail Form A is a formula by which various levels of carrier costs for a movement may be determined. It can be utilized both to determine the variable cost associated with a particular movement and to allocate a portion of constant costs to a movement. 42 The variable cost incurred by a movement is calculated by Rail Form A on the basis of historical systemwide averages and the volume of the movement in question. It projects an increase in operating expense as well as an increase in fixed plant investment and equipment investment incurred by a movement. Fifty percent of this incremental fixed plant investment and one hundred percent of this incremental equipment investment is deemed variable by Rail Form A. Accordingly, the return on the capital (at the imputed interest level) justified by fifty percent of the incremental fixed plant investment and one hundred percent of the incremental equipment investment is deemed a variable cost and is included in the total variable cost derived by Rail Form A. 85 With respect to unit coal train cases, the Commission has consistently modified Rail Form A in calculating costs for the purposes of rate-making. 43 I & S, No. 9199, Unit Train Rates on Coal-Burlington Northern, Inc., Decided July 13, 1979 (unprinted) (BN-Iowa); Arkansas Power & Light Co. v. Burlington Northern, Inc., 361 I.C.C. 504 (1979) (Arkansas Power), petition for review pending; San Antonio, Texas v. Burlington Northern, Inc., 361 I.C.C. 482 (1979) (San Antonio I ), vacated and remanded sub nom. San Antonio v. United States, 631 F.2d 831 (D.C.Cir. 1980) (San Antonio II ); Annual Volume Rates on Coal-Wyoming to Flint Creek, Arkansas, Docket No. 36970 and Southwestern Electric Power Company v. Burlington Northern, Inc., Docket No. 36980, combined, Decision Served May 25, 1979 (unprinted) (Flint Creek); Kings Mill, supra; Smithers Lake, supra. This modification has taken the form of the use of additives, one for additional equipment and the other for incremental fixed plant investment necessitated by unit coal train movements. These additives are added to the figure derived by Rail Form A to give what the Commission considers to be a more accurate projection of costs. These additives are not based upon systemwide historical averages, but are based upon actual incremental investments necessitated by a movement. These additives calculate both an operating expense portion associated with a movement and an allowance for the cost of the capital investment necessitated by a movement. These costs are directly allocated to a given movement by means of the additive. (J.A. III, pp. 2050-1). Thus, for example, instead of relying on Rail Form A's averages, the additive takes the actual capital investment in fixed plant necessitated by a movement, calculates the cost of that capital investment and directly allocates this cost to the movement. (J.A. III, pp. 2050-1). In order to eliminate a double count on the elements included within the additives, the Commission purportedly removes from the Rail Form A calculation the incremental fixed plant and equipment investments associated with the movement under consideration. 86 The petitioners make several objections to the Commission's modification to Rail Form A, but primarily complain that the Commission's method of removing incremental fixed plant investment from Rail Form A is defective and that a double count of this element remains. Although CP&L objected to the use of the additives, it calculated a cost figure adding the additives to its Rail Form A calculation to arrive at a variable cost figure of $12.12 per ton. 44 (J.A. III, p. 1724). This gives a revenue/cost ratio of 172%, well above the threshold level of the presumption. The Commission, though, rejected CP&L's estimates of some of the inputs into the Rail Form A formula and also rejected CP&L's calculation of the incremental fixed plant investment additive to arrive at an estimate of variable costs of $13.90 per ton. This amount yields a revenue/cost ratio of 150%, a ratio insufficient to establish the presumption. 87 (i) Use of Additives 88 CP&L and Justice argue that any use of additives violates the Commission's rules for determining variable costs in applying the revenue/cost presumption. They contend that both Rules to Govern Assembling & Presenting Cost Evidence, 337 I.C.C. 298 (1970) (Rules for Costs) and Ex parte No. 320, Interim Report, mandate strict adherence to Rail Form A methodology without modification. We believe neither of these proceedings requires such rigid methodology in deriving costs. 89 Rules for Costs was a proceeding in which the Commission discussed methods for determining variable costs in various transportation modes. It explained and noted that parties could rely on the use of Rail Form A to determine variable costs for rail carriers. 337 I.C.C. at 324. The Commission in Rules for Costs, however, was careful to preserve flexibility in the formula to derive variable costs, indicating that circumstances can exist in which the usual methodology for determining costs might be inadequate. The Commission left open the possibility of adapting the usual procedure to a special situation. The Commission emphasized: 90 (T)his proceeding (Rules for Costs) would not determine whether any particular costs are more valid in certain cases than others, and that the parties would still be free to employ other methods of estimating costs. 337 I.C.C. at 300. 45 91 In Ex parte No. 320, Interim Report, the Commission noted that while shippers could rely on Rail Form A, this formula could be adjusted to fit the traffic or movement to which the rate in issue applies. 353 I.C.C. at 913. Thus, Ex parte No. 320, Interim Report, as does Rules for Costs, indicates that flexibility is the watchword in determining the costs of a movement. 92 We conclude that in Rules for Costs and Ex parte No. 320, Interim Report the Commission clearly indicated that Rail Form A could be modified when necessary to determine variable costs. Accordingly, CP&L's and Justice's argument must fail. However, we do not endorse the use of the particular modifications used by the Commission in this case for the reasons stated below. 93 (ii) Rate of Return on Incremental Fixed Plant Investment Additive 94 The incremental fixed plant investment additive is calculated as an annuity spread over a series of equal future payments during the service life of the new investment. (J.A. III, p. 2090). The Commission here, as in prior unit coal train cases, calculated the incremental fixed plant investment additive at what is called the revenue need level, utilizing a weighted average of the cost of equity capital as well as debt capital to determine the cost of capital associated with this additive. 46 (J.A. III, pp. 1968, n.8, and 2090-99). Thus the Commission figured the cost of equity capital at a level somewhere between the traditional return on equity, which includes a profit or incentive for risk of ownership element, and a level we have referred to as the imputed interest level, i. e., the level similar to the cost of debt capital. CP&L and Texas object to the Commission's treatment of the return-on-equity factor in calculating this additive, but for different reasons. We think both objections are valid; we conclude that the Commission erred to the extent it used a return-on-equity factor in excess of the cost of debt capital. 95 CP&L objects that the Commission's calculation of the return-on-equity factor in the additive at the revenue need level violates the Rules for Costs. While we have noted above that the Rules for Costs provides for flexibility in cost methodology, it clearly states that, in determining variable costs, the risk of ownership element in the return on equity is not appropriate, and that a return on equity is an appropriate element of variable costs only to the extent of imputed interest similar to that charged for borrowed capital: 96 Allowances for return on investment ... to the extent that they are admittedly intended to serve as an encouragement and incentive for continued or risk-bearing ownership, are in the nature of so-called pure economic profits and should not be taken into account as an element falling within the restrictive construction given here to costs. This is not to say, however, that such an allowance for profit is not to be considered as a factor in ratemaking-it should if transportation is to remain under private ownership and control ... However, this so-called pure profit should be clearly distinguished from opportunity costs. The latter does include a return on investment, simple, in the sense of, and as the equivalent to, cost of capital, but in no way connected with the risk or incentive of ownership. It is with respect to this limited effect to be given to return on investment as an element of cost that the examiner generally agrees ... as to why equity capital invested in carrier facilities should be treated in the same manner as similar debt capital. Such equity capital is then entitled to receive imputed interest, similar to that charged for borrowed money .... 97 337 I.C.C. at 393. The Commission has repeatedly stated that an allowance for the traditional return on equity investment is not appropriate in determining the variable costs of a service. Flint Creek at pp. 20-21; BN-Iowa at p. 46. When it has utilized a traditional return on equity, it has been careful to emphasize that such an inclusion has been to calculate revenue need costs in the context of rate-making, and not in determination of variable costs. Flint Creek at pp. 20-21; BN-Iowa at p. 46. 47 Because we believe this principle to be well-founded in Commission cases, we conclude that the Commission has acted unreasonably in deviating from this principle of determining variable cost, at least in the absence of full explanation of the reasons for deviating. In light of the Commission's prior norms, we hold that the Commission erred in calculating the cost of equity capital at the revenue need level, rather than at the proper cost of debt capital level. 98 Texas complains that inclusion of a return-on-equity 47a factor was improper in light of the reasoning the Commission used in establishing the 160% ratio in the revenue/cost presumption. Texas rightly notes that the traditional notion of return on equity capital constitutes profit. It notes that in justifying the 160% ratio, the Commission included a factor for profit in estimating the level that would trigger the revenue/cost presumption. 99 We assumed that any percentage test would have to account for both a railroad's constant costs and its variable costs. We first determined from the best available evidence that nationwide railroad fully allocated costs approximated 129 percent of variable costs. Subsequent publications show this as 127 percent at variable costs. 100 We then increased this figure to take into account all railroad expenses and a reasonable profit, as well as to provide a wide margin for error. 101 359 I.C.C. at 737. (footnote omitted). Since a profit factor was incorporated in determining the maximum appropriate spread between variable costs and revenue, we believe it imperative that the Commission adhere to the methodology presupposed by the revenue/cost presumption. That methodology requires the Commission to determine variable costs without incorporating a traditional return on equity in applying the revenue/cost presumption. We do not imply by this holding, however, that the Commission may not impute a return on equity capital similar to the return on debt capital in calculating variable costs for the presumption. We have noted above that Rules for Costs indicates that equity capital is entitled to receive imputed interest similar to that charged for borrowed money. 337 I.C.C. at 393. See also § 202, Staggers Rail Act of 1980. 102 We conclude, both for the reason asserted by CP&L and the reason asserted by Texas, that the Commission, in calculating variable costs for purposes of the revenue/cost presumption, has acted unreasonably to the extent that it utilized a return-on-equity factor in excess of the cost of debt capital. Should the Commission on remand wish to continue utilizing a return-on-equity factor in excess of the cost of debt capital, it must explain why it is deviating from its well-established norm announced in Rules for Costs. Accordingly, we vacate and remand. 103 (iii) Double Count 104 Because with any new movement Rail Form A normally projects an increment in fixed plant investment based on system averages, the inclusion of the incremental fixed plant investment additive would result in a double count unless appropriate adjustments are made to Rail Form A. A recurring argument before the Commission has been the proper methodology for eliminating this double count. See BN-Iowa, Arkansas Power, San Antonio I, Flint Creek, Kings Mill, Smithers Lake. Shippers have consistently maintained unsuccessfully before the Commission that its modifications to Rail Form A calculations are not adequate to alleviate this problem. 105 The Commission in this case admitted that the use of the additives resulted in a slight overstatement of costs to an unknown degree, but added that it believed the overstatement not to be significant because, adopting the methodology of the railroads, it had excluded the incremental fixed plant investment related exclusively to coal traffic from its Rail Form A calculations. It noted that while some remaining system investment is left in Rail Form A, such investment allocated to CP&L is small and CP&L would, in any event, utilize a portion of existing fixed plant. (J.A. III, pp. 1942 and 2050-51). This is essentially the same justification the Commission has given to its methodology in the rate-making context. BN-Iowa, Arkansas Power, San Antonio I, Flint Creek, Kings Mill, Smithers Lake. 106 We are unable to ascertain from the Commission's opinion whether the overstatement it admits results from a double count of incremental fixed plant investment or whether it results for some other reason. 48 Whatever the case, we vacate and remand because we are unable to discern the reasoning of the Commission. 107 A reason sufficient unto itself for our decision is that the Commission admits that its method results in a slight overstatement of variable costs, meaning that the actual revenue/cost ratio is slightly higher than the 150% the Commission calculated. Although we appreciate the fact that it may be difficult or even impossible to precisely calculate the overstatement, 49 we believe that it is possible to provide a better explanation than that now before us. We also hope that the balance of our discussion in this paragraph (iii) will provide guidance as to some of the specifics that can be clarified. Accordingly, the Commission on remand should explain the duplication (including a discussion of the items or categories that are duplicated, and a discussion of how appropriate costs are eliminated from Rail Form A to eliminate the duplication), why it believes the duplication to be insignificant, and why it believes the 160% ratio not to have been exceeded. 108 Our second reason for vacating and remanding on this point is that the Commission has failed to adequately address the serious arguments raised by CP& L that the Commission's methodology results in a double count. To better understand these objections, we need to explain more fully how Rail Form A predicts incremental fixed plant investment, and how the Commission modified Rail Form A in this case. 109 We understand Rail Form A to predict incremental fixed plant investment in essentially the following manner. An average of incremental fixed plant investment per increase in volume of traffic is first established on the basis of historical systemwide data. Then, for a movement in question, a prediction of incremental fixed plant investment is derived by multiplying the projected increase in volume for that movement by the historical average incremental fixed plant investment per volume. Fifty percent of the total predicted incremental fixed plant investment is then deemed to be a variable cost. 110 Because of the Commission's brevity in its explanation of why it rejects CP&L's double count objection, 50 we are not certain that the following accurately describes the modifications to Rail Form A which the Commission adopted. 51 As we understand it, the Commission made a distinction between (i) the incremental fixed plant investment that is occasioned solely by unit coal trains, such as heavier than normal rail, or the addition of ties and ballast necessitated to upgrade a line solely because of CP&L's movement, and (ii) the incremental fixed plant investment necessitated by system traffic, including unit coal trains. (J.A. II, p. 1380). In other words, an attempt is made to segregate incremental fixed plant into that which would not occur but for the special characteristics of coal trains and that which would occur merely because of the increase in volume resulting from the coal train traffic considered as normal traffic. 52 The latter incremental fixed plant investment is that which can be considered to be appropriate for normal traffic. This distinction is thought necessary by the railroads because unit coal trains require capital outlays heavier than the average capital outlay normally resulting from volume increase. By segregating the incremental fixed plant investment necessitated solely by CP&L's movement, the railroads attempt to segregate this heavier than average increment and to attribute it directly to CP&L's movement. Within the additive is included the incremental fixed plant investment occasioned solely by the unit coal train movement, directly calculated without use of Rail Form A, while the Rail Form A calculation would include that incremental investment attributable to the volume increase occasioned by normal traffic, including CP&L's traffic. Because the additive includes incremental fixed plant investment which is greater than average, an adjustment is made to the factor normally used in Rail Form A determining the portion of incremental fixed plant investment which is deemed variable. In this case, the railroads reduced the percentage from 50% to 47.4%. (J.A. II, p. 1382). This reduction in the percentage of incremental fixed plant investment deemed variable by Rail Form A is the only modification to the Rail Form A formula specified in the record. It is presumably this modification the Commission relies upon when it states that the railroads removed the incremental fixed plant investment related exclusively to coal traffic from the Rail Form A calculation. 53 111 Having explained the adjustment to Rail Form A, we can more clearly state CP& L's objection to the Commission's methodology. First, CP&L objected below that in all the prior cases in which the Commission has modified Rail Form A methodology, it has failed to come to grips with the fact that Rail Form A predicts an increment in fixed plant investment for a specific movement on the basis of volume output. 54 The significance of this is that the Rail Form A measurement of increment in fixed plant is proportional to the volume increase of a movement. CP&L maintains that because Rail Form A averages include historical cases of heavier than average outlays, the Rail Form A calculation, by itself and without any additive, is sufficient to predict accurately the increment incurred, even in cases of greater than average investment, as in the instant coal traffic. The thrust of this objection is that because historical averages include cases of greater than average incremental fixed plant investment, Rail Form A's calculation without modification is the most meaningful and representative determination of true incremental fixed plant costs. While the Commission may have a ready answer to this argument, we believe it merits consideration and answering. 112 A second objection by CP&L, and one more directly to the point of a double count, is that the distinction between incremental fixed plant occasioned solely by CP&L's movement and incremental fixed plant occasioned by traffic increase, including CP&L's traffic, is not a workable distinction to eliminate the double count and is a distinction which has not been made. It argues for example that there are no workable criteria to separate ties and ballast utilized on a line which are occasioned solely by a unit coal train and that which is occasioned by volume increase of normal traffic including CP&L's lines. We are not as certain as CP&L that this distinction is meaningless or can never be made to work, but we perceive in the Commission's opinion no reasons as to why it believes the distinction utilized by the railroads, and which it adopted without comment, is appropriate. 55 In adopting the railroads' methodology without addressing this concern of CP&L, the Commission has made it impossible for us to adequately review its findings. 113 We are also concerned that the distinction, if meaningful, was not applied in this case to eliminate a double count. This can be seen, for example, in the handling of the increment along a portion of SP's line from Flatonia to Coleto Creek. Within the additive was included all the ties and ballast necessary to upgrade this line because this line was apparently scheduled for abandonment before CP&L's movement. (J.A. II, pp. 1357 and 1415 and J.A. III, pp. 1717 and 1973). Since all of the cost of the ties and ballast was included in the additive, it would seem that a proper modification of Rail Form A would exclude all the incremental fixed plant investment relating to ties and ballast attributable to the volume increase along SP's line from Flatonia to Coleto Creek. We are unable to determine whether the modification of Rail Form A approved by the Commission accomplished this. On remand, the Commission shall address this point, as well as a similar discussion of other costs included in the additive and a demonstration that Rail Form A has been modified to eliminate any double count with respect to such costs. 114 In Celanese Chemical Co., Inc. v. United States, supra, we recently quoted from San Antonio II and held that the Commission's procedure-adding a fixed plant investment additive to the Rail Form A costs-constituted a double count and, therefore, was erroneous. 56 We follow Celanese and hold that the Commission on remand shall be required to eliminate any double count. We do not require at this time that the Commission abandon its use of additives. It very well may be that additives are necessary to calculate accurate estimates of variable costs with respect to unit coal trains. Instead, on remand, the Commission should explain more fully its methodology, address CP&L's objections so that we may rationally assess the propriety of its method, eliminate the double count, and demonstrate how the elimination has been accomplished.
115 Under the substantial investment test, presumption of market dominance arises when a shipper makes a substantial investment in rail-related equipment or facilities which prevents or makes impractical the use of another carrier or mode. 49 C.F.R. § 1109.1(g)(3). The Commission here found that CP&L has made an investment of $15,500,000 in rail-related equipment. 57 The Commission nevertheless found this presumption inapplicable. 58 The Commission found that: (1) the investment did not preclude, economically or otherwise, the use of competing rail carriers, (2) CP&L was not precluded from using its investment to transport coal from other domestic sources, and (3) CP&L was not precluded from using rail links to Texas seaports, where CP&L was obtaining coal from South Africa for its shakedown operations. The Commission supported these findings with only the general remark that the record demonstrates the existence of considerable competition to supply both the coal and the transportation of coal without specifying where in the record such support occurs. Because we fail to find support in the record for several of the Commission's findings, we vacate these portions of its decision. With respect to other findings, we vacate and remand in order that the Commission may more adequately explain its findings. In paragraph (i) below, we discuss the significance of the fact that Coleto Creek is served by only one terminating rail carrier, SP. Then, in paragraph (ii), we discuss the finding of competing rail lines for the Axial-Coleto Creek movement. In paragraph (iii), the Commission's finding of alternative domestic sources is considered. Finally, in paragraph (iv), we look at the finding of the existence of alternative transportation modes in the form of a sea-rail link to the Coleto Creek facility. 116 (i) Significance of one terminating carrier. 117 Our first reason for vacating these findings of the Commission is a general one relating to the interpretation of the presumption and applies across the board to all three findings of the Commission. It is conceded that SP is the only rail line which can serve the Coleto Creek facility for any movement of coal by rail, and that CP&L would have to deal with SP if it is to use the equipment in which it has invested. The fact that SP has a monopoly position in the termination of any coal movement raises a question in our mind as to whether CP&L can practically look to other carriers in the initial transportation of coal. The language of the presumption states that market dominance is presumed if the investment makes impractical the use of another carrier, using the singular form. We do not perceive in the Commission's analysis an articulated reason as to why the language of the presumption permits a finding that another carrier may be used when the shipper is locked into a terminating carrier. If SP uses its monopoly position to charge monopoly prices for its portion of any movement, then it very well may be that any other movement using rail would be economically unfeasible. This, of course, may depend partly upon the length of the movement by SP which would be necessitated in using other originating carriers and the bargaining power of SP in setting the rate for the movement. On remand the Commission should explain why the monopoly position of SP does not establish this presumption, given CP& L's investments. 118 (ii) Finding of competing carriers for the Axial to Coleto Creek movement. 119 In finding that CP&L was not precluded by its investment from using competing rail carriers, the Commission made a finding not supported by the evidence. 59 As noted above, SP is the only rail line capable of serving the Coleto Creek facility. Similarly, D&RGW is the only line capable of serving the mine at Axial. Accordingly, any competition of competing rail carriers would be found in the segment served by Santa Fe, the bridge portion. We are not sure there is record evidence to support a conclusion that there existed competing rail lines for this segment. 60 Most of the evidence 61 concerning competition consists of cursory descriptions of alleged requests for quotation of rail rates and some quotations, all occurring before CP&L entered its Colowyo contract. (J.A. II, pp. 798, 805, 823-5, 840-1, 857-862, 882-885). This evidence relates to transportation by the railroads here involved, and therefore cannot support a finding that other rail carriers were available competition for the bridge portion of this movement. However, because there is some suggestion of the availability of competition for the bridge portion, 61a we decline at this time to hold flatly that the railroads have failed to carry their burden of showing competing rail service. On remand, the Commission, if it again finds that competing rail carriers are available with respect to the bridge portion of the movement, shall make specific findings which will enable this court to review the sufficiency thereof. Finally, if the Commission on remand does find competition with respect to the bridge portion, it shall demonstrate why such competition is sufficient to rebut the presumption in light of the undisputed fact that there is competition neither on the originating leg, which is served only by D&RGW, nor on the terminating leg, which is served only by SP. 120 (iii) Finding of alternative domestic sources. 62 121 The Commission also found that the investment by CP&L did not bar it from turning to alternative domestic sources. This is an allusion to the availability of geographic competition, an issue we discuss more fully below. 63 The Commission's thinking in looking to alternative domestic sources is that if such sources are available, then a shipper may utilize his rail related equipment in purchasing from these alternative sources, and thus not be locked into one carrier. We vacate this portion of the Commission's decision because, as with its finding of competing rail carriers, its finding is unsupported by evidence in the record. The Commission failed to specify in its decision what alternative sources are available. The only evidence in the record of alternative domestic sources is a brief survey of requests for quotation of rail rates, and some actual quotes, from places other than Axial, all before CP&L entered the Colowyo contract. (J.A. II, pp. 798, 823-5, 840-1, 857-62, 882-5). Such evidence may provide some inference, albeit weak, that CP&L was considering coal from such other places. This inference is bolstered somewhat by other evidence, primarily railroad witnesses' assertions that CP&L acknowledged contacting other mines, suggesting that CP&L was considering other sources of coal. (J.A. II, pp. 798, 859-60, 882-5). However, there is no indication of the extent of negotiation for other coal. There is no indication that these sources offered coal suitable to CP&L's needs, in the quantities required, or otherwise competitive with the Colowyo contract. Nor is there an indication that these alternative sources remained available after CP&L had made its investment in rail-related equipment. There was also an assertion by a railroad witness that CP&L had a 30% interest in a lignite field and that the Coleto Creek unit was capable of utilizing lignite. (J.A. II, pp. 882-5). There is nothing in the record, though, to indicate that this lignite field had reserves, committed or uncommitted, sufficient to serve CP&L's needs or any other information concerning the availability or suitability of the lignite. Given the large amounts of coal required and the unique specifications required, we do not believe it is rational for the Commission to assume on the basis of such thin evidence that alternative sources are available. We conclude that the evidence is insufficient to support a finding of the availability of alternative domestic sources, and therefore the railroads have failed to carry their burden with respect to this particular attempted rebuttal of the presumption. 122 (iv) Finding of alternative modes. 64 123 Finally, the Commission found that CP&L's investment did not preclude it from utilizing a rail link to Texas seaports, thus allowing alternative modes of transportation. The Commission did not specify what in the record supported this finding although it did note that in its shakedown operation, CP&L was using South African coal being imported through the Corpus Christi port. Insofar as the Commission grounded its finding of the availability of a water-mode alternative on CP&L's shakedown operation, this was not an adequate basis on which to find the sea-rail mode feasible. The record clearly indicates that CP&L was using trucks, and not rail, to transport the coal from the harbor to its plant. Use of a truck-sea mode would require abandonment of CP&L's large investment in rail cars. Thus the shakedown operation, i. e., the use of a water-truck mode, does not provide an alternative use for CP&L's rail car investment, and therefore does not rebut the substantial investment presumption. 124 The railroads argue that CP&L has the burden of proving that a shift to a different mode of transportation would result in a substantial economic loss. They argue that CP&L has the burden of proving that it could not lease or resell its rail cars to avoid economic loss. We reject the railroads' argument. Ex parte No. 320, Interim Report indicates that proof that a substantial investment will not result in economic loss is part of the railroads' burden of rebutting the presumption. In the rule making proceedings before the Commission, the railroads argued that a substantial investment presumption was not appropriate because specialized rail equipment was readily marketable. The Commission rejected that argument, and adopted the substantial investment presumption. In Ex parte No. 320, Interim Report, the Commission stated: 125 Shippers must be able to make the choice to use an alternative service without absorbing substantial economic loss. The greater the cost of making a shift in carriers, the greater the chance that the carrier will be in a position to extract substantial premiums without fear of diverting traffic to other carriers. 126 353 I.C.C. at 916. The Commission further stated: 127 It is true that at some point the shipper may attempt to minimize his losses by selling his equipment, but such a change in operations usually cannot be accomplished without a substantial loss to the shipper. 128 Ibid. Finally, the Commission, in noting what rebuttal evidence a carrier may produce, remarked: 129 The carrier could also show that the shipper has not made such a substantial investment that it is effectively dependent on rail transport. 130 353 I.C.C. at 917. 131 There is other evidence in the record, however, upon which the Commission may have been relying in finding the water-mode alternative to exist. A witness for SP indicated that it had quoted a price to CP&L on moving coal from the Corpus Christi port to the generating plant, and was prepared to provide a rail-link if a suitable price could be negotiated. (J.A. II, pp. 865-866) Insofar as the Commission was relying upon this evidence, we must vacate and remand because the Commission failed to address an obvious problem with using a rail link with Texas ports in light of CP&L's purchase of 347 cars. This purchase was for a movement from Axial, Colorado, covering an approximately 2,600-mile round trip, while the round trip distance to and from the Corpus Christi port is approximately 176 miles. 65 Clearly, a rail connection with the Corpus Christi port would require far fewer cars. Yet, the Commission did not determine how many cars would be needed with the rail-seaport mode or how the use of such a mode could avoid substantial economic loss resulting from a surplus of unused rail cars. On remand, the Commission shall explain why it believes reliance by CP&L on a sea-rail mode would not require the mothballing or resale of substantial numbers of the cars purchased by CP&L, and whether a sufficient number of rail cars would have to be abandoned to constitute the abandonment of a substantial investment, sufficient to trigger the presumption. 66