Arizona utility wins rate case against UP, BNSF

The Surface Transportation Board announced Wednesday that it had awarded an estimated $63 million in reparations and rate reductions to the Arizona Electric Power Cooperative in a decision that grants AEPCO an average rate reduction of 37% over the period 2009-2018.

STB ruled that BNSF Railway and Union Pacific were overcharging the utility for shipments of coal from New Mexico, Wyoming, and Montana to AEPCO’s power station near Cochise, Ariz. The board also found that AEPCO had no feasible shipping alternative to BNSF and UP for the coal move.

AEPCO applied for relief under the board’s standalone-cost test. The results showed that the maximum reasonable rates were below 180% of the variable costs of providing rail service. “But, by statute, the board cannot order railroads to set rates below the 180% threshold,” said the agency. “Therefore, the board set the maximum rate that BNSF and UP can charge AEPCO at 180%.”

The board held an oral argument in the case on Sept. 28, 2010.

The decision Arizona Electric Power Cooperative, Inc. v. BNSF Railway Company and Union Pacific Railroad Company, STB Docket No. NOR 42113, can be found on the Board’s website at www.stb.dot.gov.