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Rail News: Federal Legislation & Regulation

STB denies AAR's petition to consider indirect competition as a coal rate factor


The Surface Transportation Board (STB) on Tuesday rendered a decision denying a petition filed by the Association of American Railroads (AAR) in November 2012 that requested the board institute a rulemaking to consider reintroducing indirect competition as a factor in determining the reasonableness of coal rates.

The AAR wanted the STB to reinstitute the practice of considering product and geographic competition to determine if the board has jurisdiction to hear rate cases involving coal transportation by using readily available public information. The STB has jurisdiction over rail rates only where a carrier does not face effective competition; current law allows the market to determine the level of rail rates where railroads face competition.

Since 1998, the STB has not considered indirect competition in rate cases because it was too difficult or burdensome to find the information necessary to determine the effect indirect competition had on rail rates, according to the AAR.

The board has devoted extensive consideration to its policy for limiting its market dominance inquiry to only evidence of direct competition, and the AAR has not persuaded the STB to depart from its existing policy and reconsider evidence of product and geographic competition, board members said in the decision.

"We find that AAR's proposal fails to provide a practical means of determining the absence or presence of effective competition for coal transportation. Nor does the AAR's proposal overcome the administrative burdens that underlie the board's rationale for excluding indirect product and geographic competition from its market dominance determinations," they said.

The AAR asserts that there is ample public information available today to help the STB determine what indirect competition exists in wholesale power markets. In its petition to the board, the AAR noted that nearly two-thirds of all rate cases over the past 15 years involved coal and, therefore, justified the need to reassess today's energy market and fuel sources when deciding whether or not to review coal rail rates.

"We simply do not understand how the STB can refuse to acknowledge that the way Americans are getting their electricity is changing. The electric generating marketplace is undergoing a powerful transformation that the STB decision doesn't take into account," said AAR President and Chief Executive Officer Ed Hamberger in a prepared statement. "The availability and low price of natural gas are greatly influencing what kind of energy is being used today by electric utilities."

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