Opinion ID: 444114
Heading Depth: 3
Heading Rank: 4

Heading: The Alleged Rate Excessiveness

Text: 83 Utah Power also rests on the Utah Commission's alternative holding that the Rio Grande rates at issue were excessive even if the railroads were not revenue adequate. The Utah Commission concluded on the law: 84 17. ... Even if [the Rio Grande and the Salt Lake] did not have adequate revenues, however, they would not be free to charge higher rates for traffic than we have ordered. The rate level we are permitting (181.2% of variable costs) is generous to the railroads, and provides for a considerable subsidy for other traffic. Congress did not intend that a railroad's revenue inadequacy would justify any rate. Staggers Rail Act of 1980, Report of the Committee on Conference on S.1946, H.R.Rep. No. 1430, 96th Cong., 2d Sess. 92 (1980). 85 Utah Commission Report and Order at 20-21 (JA 105-06). This conclusion rests completely on the reasonableness of a rate level permitting a return of 181.2 percent of variable costs of the transportation in question, as those costs were computed by the Utah Commission. On this point the decision of the ICC states: 86 Constant costs do not appear in the [Utah Commission] decision. To reiterate from our earlier observations, we do not endorse [the] approval of the double-rate-of-return device (181.2 percent factor) as applied to the variable cost to determine the maximum rate. 87 ICC Decision, Appendix at 5 (JA 600). While the double-rate-of-return standard might develop a rate that was reasonable under some circumstances, there is no justification for applying it rigidly as the maximum reasonable rate. Clearly, rates in excess thereof can still be found to be reasonable. The Utah Commission thus acted unlawfully when it applied a rigid double-rate-of-return standard --particularly when that standard was used as a device to rule unreasonable a rate that the Utility and the railroads had agreed upon and which the Utah Commission had ordered filed two years earlier. This was not a proposed rate, but was an existing rate that the parties agreed to and without objection the Utah Commission had ordered published. In the Matter of the Application of the Denver and Rio Grande Western Railway Company to Publish Freight Tariff 4166, No. 79-398-07 (Public Service Commission of Utah, 1979); see ICC Decision at 5 (JA 588). 88 Under such circumstances, the issue presented to the Utah Commission was whether the existing rate was unreasonable, not whether the state agency could fashion a lower rate that would in its view be borderline reasonable. In this respect, it seems that the Utah Commission has refused to recognize one lesson that the enactment of the Staggers Act sought to impress upon state agencies with respect to their regulation of intrastate rates: that the old home-town preferential rates that operated to deny railroads adequate revenue, and shift a substantial part of the burden of adequately supporting railroad operations to interstate traffic, were to be abolished. If state agencies in prescribing rates could hold all intrastate rates to mere bare-bones reasonableness--which they might, given the local demands on state agencies--railroads would still face revenue problems as costs and rates became outmoded and rates forced by competition were insufficient. Also, the delay factor in implementing new rates, which will always exist to some degree, could tend to keep intrastate traffic from paying an equal share of the cost of the necessary service it receives. This could lead to acute problems of revenue adequacy for railroads such as the Rio Grande, which apparently derives such a large portion of its revenue from intrastate operations. The Staggers Act mandates that the ICC prevent these abuses. 89 ICC precedents support its decision in this case. The Utah Commission found the rate excessive and ordered its reduction to one embodying 181.2 percent of variable costs. Utah Commission Report and Order at 20 (JA 105). The existing Rio Grande rate, according to the ICC, represented 208.7 percent of variable costs.... ICC Decision at 10 (JA 593). In contrast to the decision of the Utah Commission holding such percentage to provide an excessive return, the ICC has determined that where considerations of revenue adequacy were significant, rates within the area of the Rio Grande's 208.7 percent were reasonable. For instance, a rate of 209-235 [sic 255] percent of variable costs was held reasonable in E.I. DuPont de Nemours & Co. v. St. Louis Southwestern Railway, No. 37014 (1979). 25 While such determinations do not constitute fixed federal standards that must be followed by state agencies in setting every intrastate rate, they do establish a general range of rate reasonableness that must be respected by state agencies. The rates set by the Utah Commission here were substantially below the range of rates found to be reasonable by the ICC and under current ICC decisions were not the maximum reasonable rates as asserted by the Utah Commission. We cannot find unreasonable a rate that is within the range established by applicable federal precedents. Thus, we disagree with the Utah Commission that the rate at issue exceeded a reasonable maximum. Between the approaches of the two Commissions, we find that of the ICC to be more in keeping with the Staggers Act.