Rate Factors Affecting Western Railroad Coal Transportation

Events of the mid-1970's have materially affected US coal production and transportation by railroad. Coal, as a replacement or substitute for petroleum fuels, has been hauled in significantly increased tonnages. Concurrent with the new demand, the railroad regulatory environment has undergone major changes, especially in "deregulation" activity. Those two events have produced considerable Litigation regarding coal rates. This paper discusses the factors involved with railroad rates and topics such as revenue adequacy, Ramsey Pricing, stand-alone cost, and differential pricing. In addition, an update on the western railroad merger situation and the implications for coal transportation are presented. The paper concludes with an evaluation of the current regulatory climate and future prospects.