| CRBJ Charter Member: |
|
|
| CRBJ Home > April 2006 | |||||
The railroads hold utilities and consumers captiveBy John Sumi
Recently reported disruptions in coal deliveries, deteriorating service and huge freight rail rate increases for transporting coal to power plants in our state present a growing threat that could significantly increase electricity rates. Wisconsin consumers and businesses need to be aware of the impact that railroad costs and limited rail options will have on rates and should join the fight against exorbitant shipping charges by large, Class I railroads that deliver fuel to power plants. In 1980 the United States had 40 major railroads. Now, just four own more than 90 percent of the nation's track miles. The concentration of rail service among fewer railroads has led to more "captive shippers," customers with no alternative but to pay increasing rates for poor service. In the case of shipments of cleaner burning western coal from the Powder River Basin in Wyoming, a lack of rail alternatives has left two railroads in control of coal deliveries with no incentives to keep rates reasonable and service adequate. Electric power producers serving Wisconsin residents are among the rail customers affected by the declining service and higher costs. In 2004, the railroads' failure to deliver more than 25 percent of shipments scheduled for La Crosse-based Dairyland Power Cooperative caused a 10 percent spike in its fuel budget. Further delivery failures in 2005 -- and expected this year -- are holding other Wisconsin utilities' coal supplies below the levels needed, forcing more expensive spot-market purchases of wholesale electricity to backstop the utilities' own generation capacity. Milwaukee-based We Energies estimates the possible added cost of replacing power it couldn't produce at its own coal-fired plants because of reduced fuel supplies at $45 million to $60 million. A Green Bay private utility, Wisconsin Public Service Corp., has reported to state regulators at the Public Service Commission that its purchased-power bill could go up $23 million to $40 million because of rail-related coal supply problems. Other utilities serving Wisconsin are filing similar information. The fact that much of the electricity sold on the spot market is generated in gas-fired power plants further aggravates the situation. Less-than-reliable rail deliveries of coal have the backdoor effect of driving up demand for the expensive natural gas that heats most of our homes. While reduced coal deliveries contribute upward pressure on the costs of both electricity and natural gas, steep rail rate increases threaten on yet another front to increase electric rates for Wisconsin residents and businesses. For example, Dairyland Power's outlays to the Union Pacific and Burlington Northern railroads will double in 2006, adding up to about $80 million in shipping charges to deliver about $35 million worth of coal. No power producer has the ability to absorb all those costs; they will ultimately be paid by individual consumers. Shippers and consumers are right to wonder if current federal rail policies and the concentration of ownership within the rail industry are producing good results. Most businesses need no reminder that when they fail to offer the service their customers need and charge unreasonable prices, customers go elsewhere. In the case of railroads, unless our laws can be made to work for both railroads and captive shippers, it looks like consumers are going to bear the brunt of higher rates. Pro-consumer legislation pending in Congress could help. The Railroad Competi-tion Act (S. 919 and H.R. 2047) would create stronger customer safeguards and prod the Surface Transportation Board to enforce laws meant to prevent market abuses by dominant rail carriers. A second important bill, the Railroad Antitrust and Competition Act (H.R. 3318) would eliminate the railroads' antitrust exemption, a privilege now shared only by Major League Baseball, clearing the path to fight back against anticompetitive practices. Customers First! is a broad-based alliance representing Wisconsin customer, environmental, labor, business and low-income groups, Wisconsin municipal and cooperative utilities and Madison Gas & Electric Company. We believe that the stranglehold of the rail industry on coal shipments, and the high rail freight rates that result, jeopardize affordable electricity. We urge citizens to join the fight to rein in the market power of the nation's largest railroads by asking members of Congress to support legislation that can end the exploitation of shippers by railroads. madison.com ©2009 Capital Newspapers. All rights reserved. |
|
||||