Opinion ID: 396142
Heading Depth: 2
Heading Rank: 3

Heading: Possible Disruption of Rate Structure

Text: 30 The railroads' final objection to the decision of the Board is that it failed to consider the disruptive effect that a reduction in the Terre Haute rate might have on the railroads' overall earnings. 31 In declining to find assailed rates unreasonably high the Commission has occasionally relied upon its prediction that prescribing a lower rate would disrupt rate structures and undermine the railroads' ability to earn revenue and thus provide services to the shipping public. 42 An inappropriate reduction would have this effect, the Commission has stated, either because the reduction would provoke destructive price competition or because it would lead to successful demands for rate reduction from other complainants in the same transportation group. 43 32 In their appeal to the Review Board the railroads asserted that 33 Anaconda's rates fit into the established Transcontinental rate structure on aluminum ingots, and granting the relief it seeks here threatens a well established and successful rate structure. The rate reduction Anaconda seeks cannot be confined to Anaconda alone, and as defendants' witness Cobb explains, the cascading effect from granting Anaconda the relief it here seeks would cost the railroads millions of dollars annually. 44 The Board addressed this concern: 34 Nor will an adjustment in the Conkelley-Terre Haute rate require a complete adjustment of all Pacific Northwest rates with a corresponding decrease in overall revenues. The rate structure has already been disrupted by the lower combination rates which can be constructed over the Southern Freight Association points from Washington origins. Greater distances are also involved from those origin points which would justify a higher rate. Therefore, we do not find defendants' revenue need arguments persuasive. 45 35 Read in context, the Board's statement refers to routes originating in Washington and terminating in Indiana and points east. Those were the routes the railroads had unsuccessfully urged as comparable routes. The Board's explanation that the rates for those routes would not be subject to any domino effect emanating from a Terre Haute rate reduction was rational and the railroads do not contend otherwise. 36 The railroads do contend, however, that the Board's consideration of the effects of rate reduction was inadequate insofar as it totally ignores the disruption which will be caused in the transcontinental freight structure from Pacific Northwest origins to the destinations west of Terre Haute in Western territory. 46 Counsel for the Commission submit that all in the Board's phrase complete adjustment of all Pacific Northwest rates must include rates restricted to the Western territory. 47 As we have noted, however, the most natural reading of the Board's statement is that only the destinations in the vicinity of Terre Haute were considered. 37 Counsel for Anaconda submit that its plant at Conkelley is the only aluminum smelter in Montana, a fact that makes the Terre Haute rate sui generis. The rates that the railroads brought to the Board's attention all involve aluminum plants situated 500 or more miles to the west of Conkelley. Anaconda suggests that the greater distance and more difficult terrain applicable to routes originating from Pacific Coast states would make the Terre Haute rate a poor candidate for a rate comparison in any proceeding challenging the rates for these routes. Indeed, Anaconda continues, the inherent difference between routes originating in Pacific Coast states and those originating in Montana explains why their respective rates are placed in two different tariffs. Finally, Anaconda contends that the evidence submitted by the railroads on routes ending in the Western Territory was inadequate because only the rate for a minimum of 60,000 pounds per carload was shown whereas the Terre Haute rate in question applies on a minimum weight of 180,000 pounds. 38 However persuasive Anaconda's explanations may be, they are post hoc explanations of counsel and cannot substitute for the agency's own explanation. The Board did not address the possibility of rate disruption as to routes ending west of Terre Haute, although the railroads produced some evidence concerning it. The Board will have an opportunity to supply its explanation as to those rates on remand. 39 In supplemental briefs filed following the enactment of the Staggers Act, 48 the parties have discussed whether it should apply retroactively to this case, which was pending appeal when the Act became law. The railroads argue, among other things, that the Act deprived the Commission of jurisdiction because (1) the ALJ and Board in determining the market dominance of the railroads relied exclusively upon the showing that the rate's revenue-variable cost ratio exceeded 160 percent, a showing that triggered a rebuttable presumption of market dominance under 49 C.F.R. § 1109.1(g) (1979) and (2) that regulation was clearly at odds with the Staggers Act and has now been repealed. Counsel for the Commission and Anaconda respond that the Act should be applied prospectively only, and that in any event it would not affect the result here. 40 As we have done on other occasions, 49 we decline to address the applicability vel non of the newly-enacted statute, and leave its initial application to the Commission on remand. 41 Judgment accordingly.