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5/20/2008



Rail News: Rail Industry Trends

STB orders UP to provide $30 million in rate relief to K.C. utility


The Surface Transportation Board (STB) will grant an estimated $30 million in rate reductions and reparations to Kansas City Power & Light Co. (KCPL) per its decision in a maximum rail rate case against Union Pacific Railroad.

The utility filed the case with the board in October 2005 to challenge the reasonableness of UP's rates to transport coal from Powder River Basin mines in KCPL's Montrose Generating Station near Ladue, Mo.

The STB determined that UP's rates all exceed 180 percent of the variable cost of providing the transportation service. The parties had agreed that the maximum lawful rate should be set at 180 percent of the variable cost. Therefore, the board ordered UP to establish and maintain rates that don't exceed 180 percent of the variable cost through 2015, and pay reparations to KCPL, plus interest, for monies previously collected for rates charged above the 180 percent of variable-cost level.

The board applied a railroad cost-of-capital determination (issued last month) and used a 2006 cost-of-capital figure to estimate that UP's reparations, with interest, will total about $2.9 million, an 8.3 percent reduction from KCPL's total transportation charge incurred in '06, the STB said. KCPL will obtain about $30 million in total rate relief, according to the board.


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