Transportation Regulation

New Rail Rules Could Hurt Shippers

By Steven Johnson | ECT Staff Writer Published: November 21st, 2012

Electric cooperatives and captive shippers say a proposal from federal regulators could sharply curb their ability to contest unfair railroad shipping rates.

Shippers, such as electric co-ops, are concerned about a proposal that could undermine their challenges to freight railroad rates. (Photo By: iStockphoto)

Shippers, such as electric co-ops, are concerned about a proposal that could undermine their challenges to freight railroad rates. (Photo By: iStockphoto)

In three separate filings with the Surface Transportation Board, NRECA, several G&Ts and other groups asked the agency to hold off on its proposed revisions to a complex rate challenge process.

“Evisceration of the only viable form of rate relief is especially unwarranted at the present time,” NRECA said in a joint submission with other shippers. “The board should not be proposing to effectively eliminate rate regulation precisely at the time that it is needed the most.”

The changes proposed by the STB relate in part to a procedure in which shippers build an imaginary stand-alone railroad. Regulators then compare the stand-alone railroad’s costs with real-world costs during rate cases.

The stakes are high because the cost of hauling coal affects the price of electricity. That’s especially true for shippers who lack access to competitive service and often pay more for transportation.

“The proposals in effect gut the [stand-alone cost] test,” according to the NRECA filing.

Shippers said if the board’s proposed rules had been in place, they would have wiped out a pair of recent cases in which Arizona Electric Power Corp., Benson, and Western Fuels Association won more than $400 million in combined rate relief.

“It is clear that Congress intended that shippers with meritorious rate challenges should prevail, but the decision of the board seems designed to make such recoveries rare or non-existent,” according to a petition from Consumers United for Rail Equity, a shippers coalition. NRECA CEO Glenn English is chairman of CURE..

In its filing, NRECA joined with the Western Coal Traffic League, Concerned Captive Coal Shippers, Western Fuels Association, Edison Electric Institute, the American Public Power Association and Basin Electric Power Cooperative. Little Rock-based Arkansas Electric Cooperative Corp. also filed a comment on the STB plan.

Instead of adopting the new rules, shippers asked the STB to look for other ways to expedite rate challenge proceedings and make them less costly.

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