5.3. ERMUSR 02-12-2008 - Laserfiche WebLink

Home Browse Search

Individual municipal utilities have experienced similar problems with coal shipments to their local plants. Hibbing and Virginia, two small communities located on Minnesota's Iron Range, enjoy the benefits of owning and operating their own municipal electric utilities. Unfortunately, both communities have recently been forced to give up their rail service -they have resorted to trucking coal from Superior, Wisconsin to their respective towns to fuel small coal plants rather than deal with prohibitive rail transport costs. The Virginia Department of Public Utilities, for example, now pays upwards of $44 per ton of coal, but only $9 is for the coal itself. The remaining $35 covers the costs of transportation. Willmar Municipal Utilities was informed that a renewed coal and transportation agreement for the years 2006 and 2007 would result in a 39% increase and that the offer was non-negotiable. Legislation to address the concerns of rail customers has be introduced in the 110~h Congress. HR 2125, the Railroad Competition and Improvement Act of 2007 has been introduced by House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-MN) and Representative Richard Baker (R-LA). S 953, the companion bill in the Senate, was introduced by a bipartisan group of Senators led by Senators John Rockefeller (D-WV) and Byron Dorgan (D-ND). This legislation would require railroads to quote rates between any two points on their system where traffic can originate, terminate or be interchanged, and to remove "paper barriers" that prevent short-line railroads from connecting to more than one major railroad (thus allowing short-line carriers that contract with major railroads to engage in competition without being penalized). The legislation also contains a clear statement of the railroads obligation to serve given the essential service they provide to many sectors of the economy and directs the STB to take action to investigate railroad practices that result in abuse of market power. Additionally, the proposed law attempts to develop a workable rate challenge process at the STB. Legislation has also be introduced in both the House and the Senate to eliminate the exemptions from antitrust law that the railroads currently enjoy, including exemptions relating to mergers and acquisitions, collective ratemaking and private antitrust lawsuits. MMUA strongly supports both the antitrust bill and the rail reform bill. In the spring of 2006, the railroads began to express interest in receiving a federal Investment Tax Credit (ITC) of 25 percent to apply to new investment in rail infrastructure. Any additional federal subsidy for infrastructure improvement should not come without guarantees that dollars will be spent to enhance reliability, especially in captive shipper corridors. Minnesota municipal utilities and captive shipper groups like Consumers United for Rail Equity (CURE) support an ITC for the railroads only if STB reforms are enacted at the same time that provide relief for rail customers. The captive shipping issue is not limited to utilities and affects many other large segments of our economy including agriculture, wood products and chemicals. This is best illustrated by the list of organizations supporting rail competition reform. Supporting organizations include: Minnesota Municipal Utilities Association February 2008