Promote Investment in Our Nation's Freight Rail Network, CSX
CFO Fredrik Eliasson Urges STB
JACKSONVILLE, Fla. - July 22, 2015 - Railroads that are
revenue adequate and earn their cost of capital should not be punished by
capping their shipping rates, which would discourage the substantial and mostly
private investment in the nation's critical rail transportation infrastructure,
Fredrik Eliasson, CSX executive vice president and chief financial officer,
told the Surface Transportation Board.
"Revenue adequacy should be a benchmark of railroad
health, and not a tool for re-regulation," Eliasson said. "To apply
revenue adequacy to companies in competitive markets as a rationale to cap
rates is to diminish incentives to aspire to innovation, efficiency and quality
service. Railroads today are healthier and benefits are flowing to customers,
shareholders, employees and the communities we serve. Let's keep it that
way."
Eliasson urged the Board to promote re-investment in
locomotives, freight cars, terminals, and tracks, and to make railroads more
attractive to shareholders, who own the publicly traded companies and invest in
them with the expectation of a competitive return.
The Staggers Act that partially deregulated railroads in
1980 balanced regulation and free market incentives, which gave U.S. railroads
the ability to re-invest and today are "the envy of the world." At
the same time, shipping rates on an inflation-adjusted basis declined. That
makes rail attractive to customers and policy makers, who see public benefits
in converting freight from congested highways to fuel-efficient rail.
The STB evaluates each railroad's revenue adequacy, or its
ability to earn a return equal to the industry's average cost of capital.
Eliasson urged commissioners to consider four pillars of any revenue adequacy
policy:
* Measure progress, don't constrain it: any regulatory
policy that employs revenue adequacy should view it as a barometer of industry
health and regulatory policy success - not an arbitrary basis to limit pricing
and investment.
* Address replacement cost imperative: value rail assets on
the basis of what it would cost to replace them, not their depreciated value.
Eliasson cited a Mississippi
rail bridge, built in 1967 and valued at $2 million, which cost CSX more than
$75 million to replace when destroyed by Hurricane Katrina in 2005.
* Promote differential pricing: Preserve railroads' ability
to price based on the marketplace value of service, which all successful
businesses do.
* Ensure free market results to foster re-investment: CSX
has devoted an average of 60 percent of its discretionary cash to
infrastructure and equipment upgrades over the last 10 years to support freight
movement from U.S.
manufacturers to consumers here and abroad.
The pillars "form the underpinnings of any successful
business," Eliasson said. "Absent any of the four, we cannot be
successful. It is our contention that any sound regulatory policy must
incorporate these pillars."
About CSX
CSX, based in Jacksonville ,
Florida United States , where nearly
two-thirds of the nation's population resides. It also links more than 240
short-line railroads and more than 70 ocean, river and lake ports with major
population centers and farming towns alike. More information about CSX
Corporation and its subsidiaries is available at www.csx.com. Like us on
Facebook (http://facebook.com/OfficialCSX) and follow us on Twitter (http://twitter.com/CSX).
Contact:
Gary Sease
(904) 359-1719