WASHINGTON—A final rule issued by the Surface Transportation Board (STB) last month will significantly alter the way in which railroads calculate and apply fuel surcharges.

The STB declared that computing fuel surcharges in a manner that does not correlate with actual fuel costs for specific rail shipments is an “unreasonable practice.” Toward that end, the agency said, it will prohibit railroads from assessing fuel surcharges that are based on a percentage of the base rate charged to customers. Instead, carriers will have to develop a fuel-surcharge computation that is more closely linked to the portion of their fuel costs that is attributable to a specific shipment.

The STB favors a mileage-based charge, but some carriers have said that it would be “difficult, time-consuming, and expensive to implement and administer … but these assertions are largely unsupported,” the agency said.

The ruling also prohibits “double-dipping”—applying both a fuel surcharge and a rate increase based on an index that includes a fuel component, such as the STB’s Railroad Cost Adjustment Factor. In other important provisions in the ruling, the STB dropped a requirement that railroads report ton-mile revenues; declined to make the change in fuel-surcharge calculations retroactive; and proposed that Class I railroads file detailed monthly reports on their fuel costs and surcharge practices.

The ruling is mostly—but not entirely—good news for shippers, said Jay Roman, president of Escalation Consultants, an energy and railroad consultancy. Although he praised the STB’s ruling that applying rate-based fuel surcharges is an unreasonable practice, he found fault with the decision not to apply a new surcharge formula retroactively.

Roman also questioned the decision that Class I railroads will not have to report ton-mile revenues. Without that information, he said, it will be hard for shippers to tell if fuel surcharges are reasonable, because they will not have a single measure for comparing the railroads’ fuel-related expenses and revenues. “Shippers want to critique what a railroad is collecting versus what its expenses are,” he said. “Unless you can do this on a 'per something’ basis … you can’t see and compare how revenue and expenses change.”

Railroads will have 90 days to adjust their fuel-surcharge programs. They may request an extension but must demonstrate why it is necessary.