The cost of capital figure represents the Board's estimate of the average rate of return needed to persuade investors to provide capital to the freight rail industry. Calculated annually, it “is an essential component of many of the agency’s core regulatory responsibilities,” STB said. “The Board uses the cost-of-capital figure in evaluating the adequacy of an individual railroad’s revenues each year. It also uses the figure when determining the reasonableness of a challenged rail rate, considering a proposal to abandon a rail line, or valuing a particular railroad operation.”
The Board's decision in Docket No. EP 558 (Sub-No. 20) can be downloaded at the link below.