Railroad Rate Hikes Warranted By Costs

An independent study commissioned by the federal Surface Transportation Board (STB) has found that freight railroad rates have been steadily increasing since 2004, with a particularly steep increase in 2008. But Christensen Associates of Madison, Wis., determined that the rate increases were driven by fluctuating fuel prices and other costs and did not appear to reflect a greater exercise of railroad market power over captive shippers—those with access to only one carrier. Legislation approved in December 2009 by the Senate Commerce Committee (S. 2889) would overhaul STB’s procedures and give these shippers more leverage when negotiating contracts with the railroads. Chemical manufacturers and other captive rail customers have long complained that due to lack of competition, railroads have provided poor service and charged excessive rates. But the report found that overall rate increases in recent years are largely in line with increased railroad costs.