STB Order Could Curb Rate ChallengesBy Steven Johnson | ECT Staff Writer Published: August 20th, 2013
Shippers groups say it’s already difficult enough to run a costly regulatory gamut and challenge price gouging by freight railroads.
A recent Surface Transportation Board order might have added another hurdle.
The three-member panel has ruled BNSF Railway Co. can include in its asset base an $8.1 billion acquisition premium that investment giant Berkshire Hathaway paid when it bought the carrier in 2010.
Steve Sharp, president of Consumers United for Rail Equity, a shippers coalition, said the decision allows BNSF to inflate its costs artificially and limits its exposure to rate dispute cases from many of its customers, which include electric cooperatives.
“The STB has now made a clear statement that a hugely successful capital fund can buy a major railroad lock, stock and barrel and have at least part of the premium paid for the railroad used, in turn, to shield the railroad from rate challenges by its customers. How is such a ruling in the public interest?” asked Sharp, director of fuels for Arkansas Electric Cooperative Corp. in Little Rock
“No other U.S. regulatory agency would permit this result, especially given that the transaction achieved no efficiency for rail customers and the premium was not even paid by the railroad,” he said.
Shippers and a bipartisan group of U.S. senators had urged the STB to disallow the premium, saying it bore no relation to the railroad’s service, physical plant or operating practices.
The STB directed BNSF to reevaluate its assets during a seven-year period, saying it would reduce the impact of the ruling on shippers who lack access to competitive rail service.
Also, the board’s July 25 order held out the prospect of some relief for specific shippers. It reopened rate prescriptions in two cases, based in part on the failure of BNSF and Berkshire Hathaway to seek STB approval of their deal.
One case includes Western Fuels Association and Bismarck, N.D.-based Basin Electric Power Cooperative. The other involves Arizona Electric Power Cooperative, the plaintiff in a coal-rate complaint case against BNSF and Union Pacific.
“With respect to two prior rate case judgments against BNSF in favor of Western Fuels and Arizona Electric, we are pleased that the STB says it is committed to preventing these judgments from being diminished by this ruling,” Sharp said. “Frankly, however, decisions like this do not reassure rail customers that the STB will be diligent in protecting rail customers from freight railroad excesses.”