STB, Top Story
STB Backs Co-op in Rail Rate Case
Federal regulators have awarded $63 million to an Arizona generation and transmission cooperative that they found was victimized by price gouging from two major freight railroads.
An Arizona G&T has been awarded $63 million because of railroad price overcharges. (Photo By: Index Stock Imagery)
In a ruling released Nov. 22, the Surface Transportation Board found that BNSF Railway Co. and Union Pacific systematically overcharged Arizona Electric Power Cooperative for shipments of coal to a power plant near Cochise, Ariz.
“The evidence shows that the joint rates established by defendants are in violation of federal law,” the three-member board unanimously wrote in a highly technical, 144-page decision.
Benson-based AEPCO will receive reparations and a board-ordered rate reduction that will average about 37 percent through 2018.
AEPCO Corporate Counsel “Skip” Whitley said after the finding that the award will enable the G&T to hold the line on power rates and potentially lower them. AEPCO said the cost implications are considerable, because the Cochise station uses 1.2 million to 1.5 million tons of coal annually to fuel two 175-megawatt units.
The victory, a rare one for shippers at the STB, culminates a complicated three-year process during which the G&T told the board it is a captive shipper with no reasonable option for coal transportation other than the major carriers and their designated routes.
AEPCO initially challenged the railroads’ rates in December 2008, when they unilaterally doubled their charges following the expiration of a coal-hauling contract.
Under the board’s procedures, AEPCO designed a 3,600-mile railroad on paper, called the Arizona and Northern Railroad. That got into such minute issues as executive compensation for officials and customer service staffing at the fictional railroad.
The board used the “stand-alone railroad” test to determine whether the rates BNSF and Union Pacific charged were higher than the amount needed to serve the shipper while fully covering costs, including a return on its investment.
Operating costs of the AEPCO-designed railroad were substantially less than the real-world costs of the BNSF and Union Pacific lines, the board said.
Tags: Captive Shipper, Coal, Railroad Reform, Surface Transportation Board