5.7. ERMUSR 03-13-2013 - Laserfiche WebLink

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HSMNILf IVIIVIU Position Statement •Minnesota Municipal Utilities Association Rail Shipping: The Need for Reform Background Railroad transportation is the principal method of delivering coal to the electric generation X ' -- facilities that provide power to 5 ,* Minnesota municipal utilities imi I �/ ' and their customers. This heavy k', I reliance on rail has left these .f I �' I� 1', I l utilities vulnerable to significant ��11 market power abuses caused by �� b the absence of competitors in the � �h i ' =a r - ■( I railroad industry. Utilities and -' IT, ' ' -- ■ _ i -,_ . other rail commodity shippers, I -:-k including those who are served by only one railroad and are often referred to as captive shippers, are facing significant rate increases due to the lack train photos by Jim Ramnes of competition in the railroad industry. number of Class I railroad companies in the United States was reduced from 42 to 4. This has resulted Freight railroads have been exempt from the in a duopoly of two major railroads serving the nation's antitrust laws since the mid-20th century, western regions of the U.S. and a similar duopoly of but until 1980 they were subject to tight regulation two railroads serving the East. by the Interstate Commerce Commission. By the late 1970's, the industry was in poor financial The lack of real competition in the railroad condition with an excess of capacity. In an effort industry, coupled with an absence of effective to revive the rail industry, Congress in 1980 regulation of industry operations, has significantly deregulated competitive rail service and allowed undermined the operations of many Minnesota the railroads to shed their excess capacity. municipal utilities. Shipping costs are skyrocketing Railroads were free to shed marginal routes as current contracts expire and unreasonably high and enter into long-term shipping contracts. new rates are set with virtually no negotiation. Unfortunately, in 1980, Congress failed to remove Furthermore, even as the railroads dramatically the industry's antitrust exemptions. increase their rates, in a number of cases their service has actually declined. The consolidation of the railroad industry that has occurred over the last 30 years has been stunning. While the railroads argue that any rail customer When Congress passed the Staggers Rail Act in legislation is an attempt at re-regulation, the goal 1980, the resulting industry deregulation was of rail customers is not a return to the regulation of supposed to usher in a new era of competition the 1970's, but rather a national rail policy that will that would benefit customers. Unfortunately, the ensure reliable rail transportation and reasonable legislation spawned a new era of unprecedented rates for all rail customers—particularly for :onsolidation rather than competition, as the continued on next page 2013 Federal Position Statements/ 9