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AMERICAN PUBLiC POWER.. ASSOCIATION Powering Strong Communities ISSUE BRIEF January 2017 Rail Competition and Antitrust Enforcement Summary of shippers,from farmers to chemical manufacturers to defense Electric utilities rely on rail transportation to move the vast contractors,have experienced these same problems.In the last majority of coal from mine mouths to power plants.Many few years,utilities have experienced extensive issues receiving coal-burning electric utilities have no choice but to receive their coal shipments on time(as have other commodities groups coal shipments from only one rail carrier,and thus are subject with their products),leading to concerns about electric reliabil- to monopolistic behavior.As a result,these rail customers are ity due to the dwindling size of coal stacks.These service issues are only exacerbated by the railroads'anticompetitive practices. unable to negotiate the terms of their rail transportation in an open and competitive market.These"captive"rail customers are The monopoly power of the railroads over captive shippers charged higher rail rates while customers with more than one vi- has grown dramatically in the last 36 years.Since 1980,the in- able transportation option pay lower,competitively priced rates. dustry has been reduced from 42 major carriers to five,with 95 Over the past several years,rail customers also have experienced percent of the market share dominated by four carriers.In 1995, Congress abolished the Interstate Commerce Commission and numerous service and reliability problems,with no relief. The American Public Power Association(Association or gave the newly created STB authority over the rail industry for APPA)and its members have been active in proceedings at the mergers,rate and service disputes,and construction,operation, Surface Transportation Board(STB) on issues important to and/or abandonment of railroad lines.Since its creation,the STB has failed to use the legal and regulatory mechanisms at its captive shippers.While these proceedings could result in some disposal to protect rail customers from monopolistic practices by regulatory improvements,legislative remedies are still required railroads.As a result,many rail customers have simply foregone to enhance competitive transportation and improve rail custom filing rate cases at the STB due to the low probability of success, er protection mechanisms and enforcement implemented by the STB.Absent congressional action,electric utilities and the com- as well as the high costs of filing and litigation.These problems can be resolved by reforms to the STB process and by subjecting munities they serve will continue to be subject to unnecessarily higher rates and poorer service for coal transportation.In recent railroads to the major provisions of two major federal antitrust Congresses,the Association has supported bills that would have laws,the Sherman and Clayton Acts. Railroads are uniquely placed the railroads under antitrust law and reformed the STB. exempt from the nation's antitrust laws for mergers,consolida- tions,acquisitions,and pooling arrangements approved by the APPA continues to support such efforts. STB.These exemptions give railroads immunity from lawsuits filed by state attorneys general,the Department of Justice,and Background private citizens.These exemptions have allowed for a wide range Thirty-three percent of the nation's electricity is generated from of anticompetitive rail industry practices. coal,the vast majority of which is transported by rail.A substan- tial amount of that coal has only one option for railroad trans- portation for at least a portion of its shipment.Thus,a large Congressional Action amount of the coal used to generate electricity in this country On December 18,2015,President Obama signed into law is"captive"to a single railroad for transportation.The transpor- S.808,the Surface Transportation Reauthorization Act of 2015 tation costs for shipping that coal reflect the monopoly power (PL 114-110).This was the first time that the STB had been of the carrier,and are therefore frequently unreasonably high. reauthorized since 1998.APPA,along with the Freight Rail While public power's interests relate to the movement of coal, Customers Alliance(FRCA),of which the Association is a this issue is by no means restricted to coal shippers.A variety Board Member,was heavily involved in the bill's development PubLicPower.org 35 217