Commission is granted the power under section 15(1) to determine and prescribe the just and reasonable rate. The Commission is not bound either to approve or disapprove in toto the new rates that are proposed. It can modify the proposal in any respect and require that the proposed rates as modified or wholly different rates be substituted for the present ones. That has been the view of the Commission since the beginning; and we think it is the correct one. [Footnotes omitted.]

In prescribing maximum reasonable rates under section 15(1), the Commission traditionally has looked to certain established criteria which provide a basis for determination of a maximum reasonable rate or change of rates. Complainant on brief states that the applicable criteria are: (1) comparison of the rate under consideration with established rates for comparable shipments in the territory involved; (2) the relationship between the rate and the cost of providing the service; and (3) the economic effects of the particular rate on communities. We agree with the criteria set out above, but in addition we are charged under the national transportation policy to recognize and preserve the inherent advantages of all modes of transportation. This means that we are not to prescribe rates that will be confiscatory and add to the burdens faced by rail carriers in recent years. Nor should we prescribe rates which are based only on variable costs. We agree with defendants that rates on a particular commodity should cover not only variable costs but also should yield enough above such costs to cover the carriers' constant costs of performing the service. See Investigation of Railroad Frt. Rate Structure-Coal, 345 I.C.C. 493, 504. Accordingly, as will be hereinafter discussed, we have developed fully allocated costs to assist us in prescribing a just and reasonable rate for the proposed movement.

In applying the first criteria enumerated by complainant, we recognize that unit-train movements must be compared with rates for similar movements. In this instance, numerous rate comparisons are of record. Two of these comparisons are particularly apt in that they involve the same origin point as the subject movement, Belle Ayr, Wyo., but vary in the length of haul. All three move in unit trains of at least 100 shipper-owned cars, carrying approximately 100 tons per car.

While complainant's proposed movement, in the overall sense, is similar to the two compared movements, there are significant differences. The length of haul and the annual volume makes it more attractive from a revenue standpoint to the carrier and should be accorded recognition at the rate level. We must, therefore, conclude that the rate proposed by defendants, on a comparative level, is excessive. It must also be recognized, however, that the involvement of an additional carrier reduces the revenue to be retained by the BN system.

Defendants attempt to explain away the disparity in rates between the above movements by stating that the rates to Pueblo and Amarillo are depressed because of competition from Colorado and New Mexico coal mines. Defendants further state that when the Commission recognizes the cost adjustments to Rail Form A utilized in the subject proceeding, they anticipate making related adjustments to the existing Pueblo and Amarillo movements and seek renegotiation of the rates to these two points. These statements, without supporting detail, do not justify the disparity which has been shown. Moreover, as discussed in the appendix, we have not accepted many of defendants' proposed adjustments.

Turning now to the relationship between the proposed rate and the cost of providing the service, we find this as the most convincing reason to find defendants' proposed rate unjust and unreasonable. Our restatement of complainant's costs, which appear to be the best costs of record for reasons noted in the appendix, shows that defendants' erroneous adjustments contribute an additional $3.63 per ton in variable costs ($11.66 as opposed to $8.03). This results mainly from additives for locomotive and caboose capital costs, for plant capacity expansion and for additional maintenance-of-way costs. Defendants compute a capital cost factor of 15.5 percent for locomotives which are to be purchased at some future time. We do not question the need to acquire additional locomotives and cabooses as a result of the proposed transportation, but we are unable to accept a capital cost factor of 15.5 percent when recent equipment trust certificates are based on 8.5 percent and the current rate for outstanding equipment obligations is only 6.37 percent.

In addition, defendants' inclusion of the entire amount of $117.16 per carload for plant capacity expansion is improper. A large portion of this expense for plant expansion is not even predicted to be expended until 1980. Also, even if these expenses were incurred solely as a result of the subject traffic, it is obvious that the other

traffic handled over the lines, as well as any future traffic which may come on line, will reap the benefits of this plant expansion. For example, defendants contemplate future movements from Wyoming mines to Austin and Corpus Christi, Tex. As a result, it would be unfair to single out only the subject traffic as being responsible for expenditure of these funds.

As to the economic effect on the communities involved, defendants argue that the board's consumers will reap the benefits of defendants' proposed service and the proposed rate in that the average electric bill will be $3.26 less per month than if gas or oil had been used. We fail to see how this analogy would lead us to a conclusion that defendants' proposed rate is just and reasonable. In addition, the theory advanced by defendants in defense of their escalation clause that the board, unlike the defendants, is at liberty to pass on to their customers any increase in costs without the necessity of obtaining specific approval from any regulatory agency does not help us to endorse defendants' proposal. We have more regard for the public interest than such a proposition will allow. In Southern Class Rate Investigation, 100 I.C.C. 513, 605, we stated that protection of the public interest was one of the main reasons for the creation of the Commission.

We have often stated that under the act carriers are free in the first instance to publish rates which in their managerial discretion. seem warranted. We have also stated that so long as such voluntary established rates are reasonable or otherwise lawful, we would not interfere with the carrier's managerial prerogatives. However, in the instant proceeding the evidence discloses that the level of the rate proposed by defendants is unreasonable since defendants would have complainant pay for equipment and improvements that are not required solely as a result of complainant's traffic or that may or may not be acquired at sometime in the future. On the other hand, complainant's traffic will be responsible for some of this additional expense. Under the circumstances presented, the $9 rate it proposes will not make a sufficient contribution to fixed costs.

As further discussed in the appendix, we believe that a rate of $10.16 per ton, is reasonable and should be prescribed. As the evidence demonstrates, there is no suggestion that defendants will incur losses from the traffic in question at that level. The $10.16 rate, which approximates the full-cost level, covers our restated variable costs of $8.03 per ton and provides a contribution of $2.13 towards fixed costs. This amount is greater than that sought by defendants in their proposed rate of $12.70 per ton which included

only $1.04 towards overhead or fixed costs (variable cost of $11.66$12.70). When taking into account the volume of traffic to be carried, over $6 million annually will be realized by defendants.

We are also unable to approve the requirement by defendant that complainant agree to an escalation clause. The fact that BN has had such an agreement for the past 4 or 5 years with other electric generating utilities does not make such a practice mandatory.

Complainant's charge that the unwillingness of defendants to either provide complainant with freight cars or pay an allowance for the furnishing of freight cars is a violation of sections 1(11) and 3(1) is without merit. The cost of equipment was not considered in the rate quoted. In unit-train rates the shipper usually furnishes the cars which are generally of a larger capacity (100 tons) than standard coal cars, thus permitting more efficient and economical operations. See Increased Freight Rate and Charges, 1972, 341 I.C.C. 290. We also find no merit to complainant's charge that defendant's proposed rate would violate sections 2 and 3(1) of the act. In order to support a section 2 violation, it must be shown that another receiver at the same destination point is being accorded a different rate from the same origin. Similarly, complainant does not establish any violation of section 3(1). It is well established that a mere difference in rates standing alone does not demonstrate unlawfulness under that section and that general declarations as to competition or injury unsupported by evidentiary facts, as in the subject proceeding, will not support a finding of undue preference and prejudice, see Koppers Co., Inc., v. Chesapeake & O. Ry. Co., 303 I.C.C. 383, 391.

We conclude that a rate not greater than $10.16 per ton in shipper's cars from the mines in Campbell County, Wyo., to San Antonio, Tex., would be just and reasonable as of October 1, 1975. Since this rate is not subject to the customary escalation clause associated with coal annual volume rates, provision must be made for cost increases which have occurred since October 1, 1975. In our view, this can be accomplished by increasing the rate by the amount of rail general rate increases implemented in this territory between October 1, 1975 and the date of our order herein. Updated to take into account the second stage of the Ex Parte No. 313 increase and the Ex Parte No. 330 increase, the present just and reasonable rate is $10.93.

The public interest requires that, in view of the parties' inability to reach an agreement, a rate be prescribed at this time so that the movement may commence. As actual experience is gained, the

parties may petition for modification of the prescription if circumstances warrant.

Although complainant also requested the prescription of rules and regulations for the subject coal traffic, we do not see the necessity for prescribing specific rules in view of the fact that a unit-train coal tariff incorporating the agreed upon tonnage requirement and furnishing of equipment, referred to on this record, has now been filed with the Commission. These rules appear appropriate for use in connection with the prescribed rate, and should be used by the parties absent agreement with regard to substitute tariff provisions. We find that the presently effective class rates which defendants maintain on bituminous coal traffic moving from mines in Campbell County, Wyo., to Elmendorf, Tex., are unreasonable as they apply to complainant's proposed coal traffic and are unlawful in violation of section 1(5) of the Interstate Commerce Act.

Considering the evidence of record, including rate comparisons and cost evidence, in light of the criteria previously discussed, we further find that in the exercise of our authority under section 15(1) of the act that we require defendants to offer complainant unit-train service from mines located in Campbell County, Wyo., to Elmendorf, Tex., at a rate not greater than $10.93 per ton herein found to be just and reasonable.

And we further find, that this decision is not a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969.

It is ordered, That defendants be, and they are hereby, notified and required to establish on or before 5 days from the date of service of this report and order upon not less than 1 day's notice to the Commission and to the general public by filing and posting in the manner prescribed in section 6 of the Interstate Commerce Act and thereafter maintain and apply lawful rates on bituminous coal from mines located in Campbell County, Wyo., to Elmendorf, Tex., in accordance with the findings herein; and that this order shall continue in full force and effect until the further order of the Commission.

355 I.C.C.