5.3. ERMUSR 02-12-2008 - Laserfiche WebLink

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customers is not re-regulation but merely a national rail policy that will ensure reliable rail transportation and reasonable rates for all rail customers, particularly for those without access to competitive transportation alternatives. There are a number of examples of the adverse impact caused by the lack of railroad competition on joint action agencies and Minnesota municipal electric utilities. Missouri River Energy Services (MRES), supplying wholesale power to 23 member utilities in Minnesota, is a co-owner/participant in the coal-fired power plant near Wheatland, Wyoming know as the Laramie River Station (LRS). Burlington Northern Santa Fe Railway Company (BNSF) currently transports some 8.3 million tons of coal per year 175 miles from coal mines in Wyoming's Powder River Basin to LRS in rail cars owned by the LRS participants. After along-standing contract for that service expired in 2004, BNSF published new "common carrier" rates for the same service that more than doubled the prior rate, increasing costs to LRS participants by about $1 billion over 20 years. Believing that the imposition of these unreasonably high rates was the result of the exertion of monopoly power, the coal providers and the plant operator filed a complaint with the STB in 2004 on behalf of LRS, spending more than $6 million and three years on the case. After all filings were submitted, the STB put the case on hold while it developed a new rulemaking on captive shipper cases and then decided to retroactively apply the rule to the case, rejecting the complaint finally in 2007. The STB did provide the LRS partners the opportunity to appeal for a rehearing at the STB based on analysis performed by the LRS partners in consideration of the new STB rules. The LRS partners have recently filed that appeal. Unfortunately this process will likely cost the LRS partners another million dollars, and a decision on the appeal could be another year away. While LRS is paying significantly higher rates, service levels from BNSF have been erratic. As was widely reported, in 2006, coal reserves at the LRS site dropped to dangerously low levels that necessitated the development of a plan to curtail the operation of the plant. At one point, on-site coal reserves dropped to a five-day supply and plant owners were hours away from curtailing operation at LRS by 20 percent. Because turn-around time from BNSF has increased from 37 hours to more than 50 hours per train, the LRS owners decided to acquire a fourth unit train at an additional cost of $1.9 million per year with no long-term guarantee that BNSF would sufficiently schedule the additional train to improve the coal reserve pile at the plant. Southern Minnesota Municipal Power Agency (SMMPA) supplies wholesale power to 18 member municipal utilities in Minnesota. It is a 41% co-owner of Sherco 3, an 884 MW coal-fired power plant near Becker, Minnesota. SMMPA buys coal from the Absaloka mine in Montana. That coal is delivered by the BNSF to the Sherco 3 site. BNSF is the only railroad that serves Sherco 3. Recently SMMPA was informed by BNSF officials that coal transportation rates to Sherco 3 would increase 55 percent. Minnesota Municipal Utilities Association February 2008