Opinion ID: 403665
Heading Depth: 4
Heading Rank: 1

Heading: Penalties for Inefficiency

Text: 53 The Commission's decision suggests that the effect of a productivity adjustment on railroads with below average productivity performance justifies omitting productivity as a factor in its cost index. The Commission explained that a productivity adjustment would reduce the ability of railroads to recoup their costs even if their below average performance is beyond their control. As a hypothetical example, the Commission posed the case of a productivity breakthrough for bulk commodities. It noted that such a breakthrough would improve industry average statistics, but would be of little benefit to railroads whose traffic was predominantly nonbulk in nature. 364 I.C.C. at 847; J.A. 931. 54 Petitioners argue that the fallout of any statistical average on individual carriers is not a proper concern in developing an index. While we see no need to decide whether the Commission could ever bias its index in favor of those railroads that experience above average costs, we think it noteworthy that the Commission has elsewhere rejected such a biased methodology. In particular, the Commission rejected a proposal by the railroads that would have allowed railroads to increase their rates by either the national index or a regional index. Its ground for rejecting that proposal was precisely the ground urged by petitioners in this case: that such an approach would permit the actual national average level of rates to increase more rapidly than the national average of costs. 364 I.C.C. at 852; J.A. 934. Should the Commission adhere to its penalty analysis, we would expect it to explain why productivity should not be averaged, while disparate regional prices are averaged into the same index. 55