Tuesday, November 20, 2012

AAR to STB: Consider nat gas competition for coal rate cases

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The Association of American Railroads (AAR) said Monday it has petitioned the Surface Transportation Board (STB) to initiate a rulemaking that would propose re-introducing indirect competition— specifically product and geographic competition for fuel used to generate power— as a factor to be considered in determining if the STB has jurisdiction to hear rate cases involving the transportation of coal to coal-fired power plants.

AAR stressed that STB "has jurisdiction over rail rates only where a carrier is 'market dominant,' where it does not face effective competition. Where railroads face effective competition, current law allows the market to determine the level of rail rates."

AAR said "ample public information" now exists allowing STB to determine where indirect competition in wholesale power markets exists and whether it effectively puts downward pressure on coal rail transportation rates, particularly given the low price of natural gas in recent years.

"Considering that nearly two-thirds of all rate cases brought before the Board over the last 15 or so years involved coal, we believe the STB should consider the now-easily available evidence in relevant coal rate cases, " said AAR President and CEO Edward R. Hamberger. "Times have changed, and today more information is publicly available. Where indirect competition is present, we believe it should be factored into any Board determination of whether to review the level of rail rates for coal."

Prior to 1998, the STB considered indirect competition in rate cases, but that year decided it was too difficult or burdensome to collect the information necessary to determine the effect indirect competition had on rail rates, AAR said. The STB eliminated consideration of indirect competition, but STB acknowledged at that time indirect competition in many cases did exist and had an effect on rail rates.

"We're hopeful that the STB will take note of the additional data that is now available and of the changes in the energy market and consider the petition and propose a rule that would allow parties to present evidence of indirect competition in individual rate cases," Hamberger said. "The STB has in the past acknowledged that indirect competition can exist, and the AAR believes that it has effectively addressed the concerns the STB has previously raised."