5.4. ERMUSR 03-20-2007 - Laserfiche WebLink

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i •.- w •~~ American Public Power Association FEBRUARY 2007 Railroad Competition Electric utilities must rely on rail transportation to move the vast majority of coal from the mine mouth to the power plant. While domestic coal is a relative]}' low-cost fuel, its economic benefits for power production are being threatened by the increasingly lower quality and higher costs of rail service resulting in part from railroad industry consolidation and the absence of effective regulatory oversight. Many coal-burning electric utilities can receive coal shipments from only one carrier and are thus subject to t}te monopoly power of the railroads. As a result, these rail customers do not have the ability to negotiate the terms of their rail transportation in an open and competitive market. 'T'hese rail customers are charged higher rail rates while those rail customers vv~rh competitive options are given competitively priced rates. Over the past several years, rail customers have also experienced numerous service and reliability issues. Legislative remedies are required to enhance competitive transportation and improve the rail customer protection mechanisms and enforcement implemented by the Surface Transportation Board (STB). Absent congressional action, electric utilities and the communities they serve will continue to be subject to unnecessarily higher rates and poorer service for coal transportation. ~ 1 1 1 1 ~ 1 Approximately 50 percent of the nation's electricity is generated from coal, the vast majority of which is transported by rail. A substantial amount of that coal has only one available railroad transportation option for at least some portion of its shipment. Thus, a large amount of the coal used to generate electricity in this country is "captive" to a single railroad for ~^ transportation, and the transportation costs for shipping that coal reflect the monopoly power of the carrier and are frequently unreasonably high. The monopoly power of the railroads over captive shippers has grown dramatically in the last two decades. Since 1980, the industry has been reduced from 42 major carriers to five. In 1995, Congress abolished the Interstate Commerce Commission (IGC) and gave the newly created STB authorit}~ over the rail industry for mergers, rate and service disputes, and construction, operation and/or abandonment of railroad lines. Since its creation, the STB has failed to use the legal and regulatory mechanisms at its disposal to protect railroad customers from monopolistic practices by the railroads. As a result, many rail customers have simply foregone filing rate cases at the STB due the low probability of success as well as the high costs of filing and litigation. The filing fee alone at the STB is $160,000 for a coal rate case. By comparison, federal courts only require a $100 filing fee for complaints. www.APPAnet.org In October of 2006, the General Accountability Office (GAO) issued a report titled Freight Railroads: Industry Health Has Improved, but Concerns about Competition and Capacity Should Be Addressed"which validated rail customer concerns. Among other things, a lack of competition in the national railroad industry; the inadequate STB efforts to ensure rail customer access to competition and to protect rail customers from monopoly abuse; the failure of the STB to collect adequate data from the railroads on all of their annual revenues from rail customers; continued ~1