Railroad Regulation:

Changes in Freight Railroad Rates from 1997 through 2000

GAO-02-524: Published: Jun 7, 2002. Publicly Released: Jun 28, 2002.

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The Railroad Revitalization and Regulatory Reform Act of 1976 and the Staggers Rail Act of 1980 gave freight railroads increased freedom to price their services according to market conditions. A number of shippers are concerned that freight railroads have used these pricing freedoms to unreasonably exercise their market power in setting rates for shippers with fewer alternatives to rail transportation. This report updates the rate information in GAO's 1999 report (RCED-99-93) using selected commodities and with effective competitive transportation alternatives. From 1997 through 2000, rail rates generally decreased, both nationwide and for many of the specific commodities and markets that GAO examined. However, rail rates for some commodities and distance categories--such as wheat moving long distances and coal moving short distances--have stayed about the same or increased. In other instances, such as wheat moving medium distances, rail rates stayed about the same or decreased. Overall, the proportion of rail shipments above the Surface Transportation Board's statutory jurisdictional threshold for considering rate relief actions--where railroad revenues for the shipment exceed 180 percent of variable costs--stayed relatively constant at 30 percent from 1997 through 2000. However, the proportion of shipments for which revenues exceeded variable costs by 180 percent varied, depending on commodity and markets.

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