239048 
                                                        
                                                        ENTERED 
                                             Office  of  Proceedings 
                                                   August 18, 2015 
                                                          Part of  
                                                     Public Record 
         Staff Paper P15-5                             August 2015 
                            Staff Paper Series 
         Constrained Market Pricing and Revenue Adequacy: 
         Regulatory Implications for Shippers and Class I U.S. 
         Freight Railroads
                          
                           Gerard J. McCullough 
                                     
                                     
                                     
                                     
          
          
          
         Author Contact: Gerard J. McCullough, gmccullo@umn.edu, 612-624-2210  
              
         USDA Contact:  Adam Sparger, Adam.Sparger@ams.usda.gov, 202-720-0194 and 
                    Bruce Blanton, Bruce.Blanton@ams.usda.gov, 202-690-0435 
          
         Recommended Citation: McCullough Gerard J.  Constrained Market Pricing and Revenue 
         Adequacy: Regulatory Implications for Shippers and Class I U.S. Freight Railroads. Staff Paper 
         P15-5 at University of Minnesota. Posted at http://apeclib.cfans.umn.edu/dbtw-
         wpd/new2000.htm 
         Acknowledgements:  This work was supported by Cooperative Agreement Number 14-TMXXX-
         MN-0030, with the U.S. Department of Agriculture’s (USDA) Agricultural Marketing Service 
         (AMS).  
         Disclaimer:  The opinions and conclusions expressed do not necessarily represent the views of 
         the U.S. Department of Agriculture, the Agricultural Marketing Service, or the University of 
         Minnesota. 
          
         Copyright ©2015 by Gerard J. McCullough.  All rights reserved.  Readers may make copies of 
         this document for non-commercial purposes by any means, provided that this copyright notice 
         appears on all such copies. 
                                     
          
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                    Constrained Market Pricing and Revenue Adequacy: 
                    Regulatory Implications for Shippers and Class I U.S. 
                    Freight Railroads 
                     
                    Contents 
                    1.       Introduction  
                    2.       The origins of constrained market pricing 
                             2.1 Staggers Rail Act of 1980 
                             2.2 Coal Rate Guidelines of 1985 
                             2.3 Ramsey pricing 
                             2.4 Stand-alone cost 
                             2.5 Ramsey pricing and constrained market pricing 
                    3.       Constrained market pricing since the Guidelines 
                             3.1 Rail rate behavior since the Guidelines 
                             3.2 STB rate proceedings under the Guidelines 
                             3.3 Constrained market pricing in federal court 
                             3.4 STB alternatives to constrained market pricing 
                    4.       Constrained market pricing and revenue adequacy 
                             4.1 Revenue adequacy as a general regulatory concept 
                             4.2 Alternate views of railroad revenue adequacy 
                             4.3 STB application of revenue adequacy 
                             4.4 Constrained market pricing and revenue adequacy 
                    5.       Conclusion 
                     
                    Appendix A.  Estimated empirical effects of revenue adequacy 
                    Appendix B.  Synopsis of Comments in Ex Parte 722