(The Associated Press circulated the following article on June 28.)
CHARLESTON, W.VA. — A settlement over rising rail prices for transporting coal through Central Appalachia leaves unanswered how utilities should pay for steep rate increases.
Norfolk Southern Corp. announced last week confidential agreements with subsidiaries of Duke Energy Corp. and Progress Energy Inc. in their federal Surface Transportation Board rate case. The Norfolk-based rail company said the settlement could boost this quarter’s income $24 million, or 6 cents a share.
Charlotte, N.C.-based Duke Power and Carolina Power & Light Co. – later Progress Energy – filed the complaint in 2001, after Norfolk Southern raised rates from $10 to $15 a carload of coal from West Virginia, Virginia and Kentucky, Duke spokesman Tom Williams said Monday.
The settlement involves an undisclosed cash payment by Norfolk Southern and a multiyear rail transportation contract that keeps rates comparable with 2002 rates, Williams said.
“Keeping rates down is important because this is a pass-through cost to our customers,” Williams said.
A spokesman for Progress Energy, based in Raleigh, N.C., declined to give specifics about his company’s tentative agreement.
The Surface Transportation Board ruled in October that the railroad hadn’t charged the two utilities unreasonable rates for transporting coal. But because of “unusually large rate increases,” the board agreed to consider whether the increases violated how quickly – and by how much – new rates can be phased in.
A “phasing constraint” request had never been sought by a utility before, and the board has never applied one, read Norfolk Southern’s most recent quarterly filing with the Securities and Exchange Commission. That made it uncertain whether the Surface Transportation Board “would find the phasing constraint applicable and, if it did, whether phasing would be ordered retroactively or prospectively or both.”
Norfolk Southern’s first-quarter coal revenues increased $69 million, or 17 percent, compared with the year-earlier period. Total traffic volume was up 4 percent, led by a 19 percent increase in export coal.
For the quarter that ended March 31, average revenue per carload of coal was up 13 percent because of increased rates, more long-haul traffic and a fuel surcharge, Norfolk Southern reported.