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

Heading: Revenue Adequacy Under the Staggers' Act

Text: 28 The railroads also assert the Board's decision contravened the dictates of the new rule of rulemaking, specifically 49 C.F.R. § 1109.25, which states, the need for revenue adequacy will be taken into account and regarded as a highly important factor. 39 According to the railroads, the Board ignored the railroads' need for differential pricing. They contend that, in light of the decrease in the Terre Haute rate as a percentage of the selling price of aluminum ingots, this is the paradigm situation for approval of a rate well in excess of costs to make a contribution to the overall revenue adequacy of the railroads. 40 29 We do not accept the railroads' contention. The legislation which inaugurated the new rule of ratemaking did not strip the Commission of its power and duty to protect shippers from the unreasonably high rates of carriers with market dominance. Thus, while the need for differential pricing is something the Commission cannot ignore, it is not the only factor the Commission is entitled to evaluate. 41 It may continue to consider the factors it has traditionally examined in determining whether the rate of a carrier with market dominance is unreasonably high. In this case the Commission explicitly evaluated the value of the commodity and the need for differential pricing. See note 11 supra and accompanying text. It prescribed a rate that would return 201% of variable cost at the embedded debt level, and 138% of fully allocated cost at the revenue need level. This latter figure reflects differential pricing. Given the Commission's explicit consideration of the relevant factors and a result that is not clearly unreasonable we cannot say that the Board's action was arbitrary and capricious under the standards applicable to this phase of its considerations.