(The following report appeared at WyomingBusinessReport.com on September 26.)
BISMARCK, N.D. — Frustrated by the largest increase in rail transportation costs ever faced by a coal shipper, and the apparent unwillingness of the Surface Transportation Board to intervene, Ron Harper, CEO and general manager of Basin Electric, did not mince words during a Sept. 25th meeting of the U.S. House Transportation and Infrastructure.
“I respectfully request that this Committee demand the regulators do their job to block unwarranted and unreasonable rate demands of monopoly railroads,” Harper told committee members. “If the regulators are unwilling to do their jobs, which by all appearances is the case today, Congress needs to take measures to ensure the regulators are not controlled by the industry they are supposed to regulate.”
Harper was testifying in support of H.R. 2125, a bill designed to ensure competition in the rail industry, enable rail customers to obtain reliable rail service, and provide those customers with a reasonable process for challenging rate and service disputes.
Of particular concern is a recent decision by the STB allowing BNSF Railway to more than double its freight rates to haul coal from the Powder River Basin in northeast Wyoming to the Laramie River Station, a coal-based power plant near Wheatland in southwestern Wyoming. Harper explained that Basin Electric, operator of the power plant, had a 20-year contract with BNSF to deliver coal to the plant. That contract expired in 2004. “When our contract expired, BNSF more than doubled this already profitable rate,” he said. “This will cause a $1 billion increase in costs to our member cooperatives (and their consumers) over the next 20 years.”
Harper pointed out that BNSF made $300 million in profits during the term of the original contract. “BNSF made the preposterous claim that the farmers, ranchers, and other consumers served by Laramie River can afford to pay much more and should pay much more for their electricity.”
When the 20-year delivery contract expired with BNSF, Basin Electric asked the STB to intervene because no coal shipper has ever faced a rate increase of this magnitude, according to Harper. The rate case was filed in October 2004. Basin Electric spent about $6 million in preparing the filing. STB denied Basin Electric’s request for rate relief this month.
“STB claims it is an effective regulator that protects the rights of rail customers. However, the STB’s actions don’t match its words. Railroads win. Customers lose. If you do not have dedicated public servants who are willing to adhere to their statutory responsibility and protect the public interest, the process or standards in place do not matter,” Harper said. “Congress must take action and do something immediately to restore balance and fairness in decision-making. Regulators should not be controlled by the industry they are supposed to regulate.”
The House Transportation and Infrastructure Committee is chaired by U.S. Rep. James Oberstar (D-MN).