5.3. ERMUSR 03-14-2006 - Laserfiche WebLink

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~A~~~.~~ „"~/ Position Statement Minnesota Municipal Uti/ities Association The Lack of Railroad Competition Railroad transportation is the principal method of delivering coal to the electric generation facilities that provide power to Minnesota municipal electric utilities and their customers. This heavy reliance on rail has left these utilities vulnerable to market pressures caused by the absence of competitors in the railroad industry. Utilities and all railroad customers facing these unchecked market pressures have become known as captive shippers. The consolidation of the railroad industry that has occurred over the last twenty-five years has been stunning. When Congress passed the Staggers Rail Act in 1980, the resulting industry deregulation was supposed to have ushered in a new era of competition that would benefit customers. However, instead of experiencing the intended result, shippers endured a period of unprecedented consolidation as the number of class I railroad companies in the United States was reduced from 42 to 4. The federal government has been ineffective in its effort to control these uncompetitive rail transportation practices. In 1995 Congress abolished the Interstate Commerce Commission and gave the newly created Surface Transportation Board (STB) authority over mergers, rate and service disputes, construction, and operation and abandonment of railroad lines. Since that time, the STB has declined to use its existing legal and regulatory authority to protect railroad customers from the monopolistic practices of the railroad industry. The lack of real competition in the railroad industry, coupled with an absence of effective regulation of industry operations, has had a negative effect on many Minnesota municipal utility customers. Reviewing recent rail rate activity, it is becoming increasingly obvious that shipping costs will more than double as current contracts expire and new rates are set. Meanwhile, service continues to deteriorate dramatically. Missouri River Energy Services (MBEs), supplying wholesale power to 23 member utilities in Minnesota, is a co-owner of the Laramie River Station (LRS), a coal-fired power plant near Wheatland, Wyoming. Upon expiration of the long-term rail shipping contract LRS had with Burlington Northern and Santa Fe Railway Company (BNSF), MRES and its partners experienced an immediate doubling of rail shipping rates charged by BNSF to transport coal the 175 miles to Laramie River from mines in Wyoming's Powder River Basin. (BNSF is the only rail service.) Today, these transportation rates are more expensive than the coal itself. MRES and its partners believe that BNSF is unlawfully exerting its monopoly power over these captive shippers, increasing costs to the plant by an estimated $1 billion over the next 20 years. Western Fuels Association, a cooperative supplying coal to its members, and Basin Electric Power Cooperative, operator of the Laramie River Station, have filed a request for rail shipping rate relief