The Interstate Commerce Commission yesterday granted the nation's railroads the authority to raise freight rates 5 percent, effective Dec. 31.
The 5 percent general rate increase is expected to yield the railroads an additional $1.2 billion in revenues nationwide, the ICC said.
Contending the increase was necessary to offset inflationary cost increases, the railroads had filed their request for the across-the-board rate hike just before the deregulation-minded Staggers Rail Act of 1980 became law.
Although the ICC noted yesterday that the law preserves general increases until April 1982 as a means by which rates may be increased collectively, the agency used the occasion to repeat its view that the railroads should begin adjusting to the new competitive environment the Staggers Act contemplates and begin pricing their services independently of one another. The ICC members said their view was unchanged that general rate increases "cannot deal adequately with the complex task of pricing rail services" and were preserved solely for the purpose of covering inflationary cost increases.
"Further, a fair reading of the Staggers Act supports the view that the carriers should rely to the maximum extent practicable on selective rate increases," the ICC said.
The ICC complained about the "flawed" methodology used by the railroads to come up with some of their cost-and-yield estimates, but noted that the next general increase may take place under a cost-recovery index prescribed by the commission under terms mandated by the new law. The commission said it then can compare actual cost data with the projected cost data the railroads used in this case to make any necessary adjustments.
Although it granted the overall freight-rate increase, the commission said it would investigate the increases proposed for recyclables other than scrap iron and steel. Should it find the increases weren't justified, it can order refunds, it noted.
The commission's decision came on a 5-to-1 vote with Marcus Alexis dissenting. He said he would have limited the Eastern rails' increase to 4 percent; according to the ICC decision, based on the figures submitted to the ICC, a 4 percent rate increase would have been adequate to offset Eastern's cost increases.
The last general rate increase was authorized in July.