The ICC games

The ICC was an interesting game. Run by lawyers so it made no economic sense. Internally the railroads were sometimes doing a fairly sophisticated job of "incremental" analysis of branchline economics. But the ICC official Form A costs imposed a lot of arbitrary allocations. If I remember correctly revenue was allocated on a mileage basis, and off branch out of pocket cost was assumed to be 50 percent of off branch revenue, so the off branch part was by definition profitable regardless of reality. And since on branch revenues were defined by the mileage allocation, the only variable that was really directly related to the branch was the cost of operations and maintenance. So it was pretty easy for the official ICC calculations that a branch made money to differ dramatically with the railroad's own more detailed analysis of on and off branch costs. And in this rather nonsensical game, the only real thing the railroad had control over was the maintenance expense, so that got fiddled with. But all the public or press ever saw were the official ICC formula numbers which rarely made much economic sense. It was a game of one idiocy being offset by another idiocy, but that was how the rules were set up. What happened to the Placerville Branch was a function of changing times, rate regulation changed a bit faster than line abandonment regulation so when one didn't work the railroad simply used the other.

JBWX



Edited 1 time(s). Last edit at 03/01/2016 03:54PM by John West.