MPC
Research Projects (2000-01)

Identifying Number

MPC-201

Project Title

Updating the Uniform Rail Costing System Regressions

University

North Dakota State University

Project Investigator

John Bitzan
Upper Great Plains Transportation Institute, NDSU
(701)231-8949
john.bitzan@ndsu.edu

External Project Contact

Jeff Warren
Surface Transportation Board
Mercury Building, Suite 500
1925 K Street West
Washington, D.C. 20423
(202)565-1533

Project Objective

To re-estimate the Uniform Rail Costing System (URCS) Phase I regressions, using current data. Currently, data is available through 1998 to estimate the Phase I URCS regressions. In addition, we will explore other potential functional forms for these regressions, and consider using railroad effect variables in estimating the percent variable of cost accounts.

Project Abstract

The Uniform Rail Costing System (URCS) is used to estimate individual railroad shipment variable costs for regulatory purposes. It is composed of a three phase process, as follows: (1) in Phase I, regression equations are estimated for 16 individual cost accounts, where output and capacity variables are used as independent variables; (2) in Phase II individual railroad unit costs are estimated by multiplying the percent of each cost account's expenses that are estimated to be variable by the railroad's total cost in that particular account and dividing by the number of service units (the percent of each cost account's expenses that are variable is estimated using the regression coefficients estimated in Phase I, along with individual railroad output and capacity measures); (3) in Phase III the number of service units (e.g. gross ton-miles) are computed from the attributes of the shipment, multiplied by each unit cost, and summed to get total variable cost. The accuracy of the entire URCS process depends on the accuracy of the Phase I regressions, as these are used to estimate the percent of various cost accounts that are variable. The regression coefficients use d to estimate cost variability in URCS reflect 1978-1985 data. Many mergers have occurred since then, and many changes have occurred in the locomotive fleet, traffic control, and other aspects of railroad operations.

Many smaller railroads - including some beltway railroads - were included in the 1978-1985 data set. None of the railroads in the 1978-1985 data set approaches the size of the BNSF, the UP, and the CSX and NS systems of today. Because of the concentration that has occurred since 1985, the Class I industry of today may exhibit different characteristics than the industry of the early 1980s. This study will re-estimate the Phase I URCS regressions using current data.

Task Descriptions

• Task 1 – Review the literature related to "operational railroad costing", including the URCS regression study by Westbrook, the study that attempts to bridge "operational railroad costing" with the estimation of economic cost functions by Waters and Woodland, and other relevant studies.
• Task 2 – Specify operational railroad costing regressions consistent with the original URCS regressions, and consider new specifications that may make the regressions more consistent with economic theory.
• Task 3 – Discuss various specifications with officials at the Surface Transportation Board to obtain advice on the specifications that would be most useful in current operational costing applications.
• Task 4 – Collect data from the R-1 annual reports over a time series.
• Task 5 – Estimate the URCS regressions with current data, using a specification that is consistent with desires of STB officials.
• Task 6 – Write a final report that summarizes previous literature in the area, highlights techniques used and reports regression results, examines specification issues and estimation techniques that may improve the URCS, and provides recommendations for more study.

Milestones, Dates

• Starting Date: August 1, 2000
• Project Milestones:
  • Task 1 - October 1, 2000
  • Task 2 - December 1, 2000
  • Task 3 - January 15, 2001
  • Task 4 - February 1, 2001
  • Task 5 - May 1, 2001
  • Task 6 - July 31, 2001
• Ending Date: July 31, 2000

Yearly and Total Budget

Federal $46,190.00
University Match $18,937.00

Student Involvement

Some student research employment.

Relationship to Other Research Projects

None

Technology Transfer Activities

None

Potential Benefits of the Project

The research potentially could be used by the Surface Transportation Board to update their costing methodology. The updated URCS would be useful for regulatory purposes, for shippers, and for government.

TRB Keywords

Railroads, costs