Sponsors of a railroad deregulation bill withdrew it from the House floor yesterday after they lost a key vote on an amendment that would sharply limit railroads' ability to set freight rates without government interference.
The amendment, which passed on a vote of 204 to 197, ran counter to the thrust of the measure and would insure increased regulation of the already-too-heavily-regulated railroads, not less, according to the bill's chief House sponsors, Reps. James J. Florio (D-N.J.) and Edward Madigan (R-Ill.).
Sponsored by Reps. Bob Eckhardt (D-Texas) and Nick Rahall (D-W.Va.), the amendment had the support of shippers who contend they are "captive" and will be forced to pay exorbitant freight rates if the railroads are given rate-setting flexibility. Support came from coal producers and major utilities that use coal, grain interests and shippers of heavy farm equipment and automobiles.
Generally, the amendment would circumscribe the rate-setting freedoms the bill's sponsors and the industry feel are necessary if the railroad industry is to get back on its feet.
The amendment would retain Interstate Commerce Commission jurisdiction if a railroad increased rates to a level more than 160 percent of its variable costs -- the out-of-pocket costs of actually transporting the goods.
The bill itself would have held railroads to rate increases of 10 percent a year plus inflation for the first two years after enactment.
After that, the ICC would retain jurisdiction over rates only if there were no effective competition in the market or if a railroad raised its rates beyond a formula that allowed railroads recovery of their fixed and variable costs. This is estimated to be about 200 percent of the actual cost of transporting the goods. When the rate was beyond the cost-recovery percentae, the ICC would decide whether it was reasonable and could go into effect.
Eckhardt maintained the amendment would protect shippers subject to monopoly power of railroads, but the bill's sponsors maintained it would insure continued deterioration of the nation's railroads since they haven't as an industry been earning enough to make needed capital improvements. In fact, most railroad rates are already above the percentage that would trigger ICC involvement under Eckhardt's amendment, the bill's sponsors pointed out.
"This amendment will determine whether we want to go forward . . . or whether we want to continue with a system of regulation that has yielded us a railroad industry with a 2 percent rate of return on investment, two bankruptcies this year, the loss of 10,000 miles of lost opportunities for shippers, a $15 billion capital shortfall and $11 billion in federal subsidies," Florio said during the debate.
Immediately after the amendment was narrowly adopted -- following three and a half hours of debate on the measure -- Florio pulled the bill from further consideration.
He said later he anticipates taking the bill up again next week and asking for a reconsideration of the vote on the amendment, which will be in order when the rest of the bill is completed. He predicted some members will change their votes after further consideration of the esoteric issues and when they realize that the vote means more regulation and an abandonment of some provisions of the measure that were meant to give relief to some captive shippers.
In a fairly low-key criticism of the administration's role, he said its efforts were "not as helpful as they could be." In attempting to negotiate a compromise, the administration allowed time to elapse, and the delay allowed utilities to lobby for their position, he said.
An administration spokesman said the White House will continue to push for a deregulation bill.