Arizona Electric takes coal rail rate complaint back to board

Arizona Electric Power Cooperative told the U.S. Surface Transportation Board that the Union Pacific and BNSF Railway railroads are still trying to charge it too much for coal transportation, despite a Nov. 22, 2011, board order.

Arizona Electric Power (AEPCO) on Jan. 9 petitioned the board to order BNSF Railway and Union Pacific to comply with the board’s directives in the Nov. 22 decision to establish and maintain joint through rates in accordance with the decision. AEPCO asked the board for expedited review since it is already paying rates under tariffs that do not comply with the decision.

“BNSF/UP have failed to comply with the board’s directive to publish rates in accordance with the decision,” said the cooperative. “Indeed, they have turned what should have been a simple matter into an unnecessary problem….”

In December 2008, AEPCO brought a maximum reasonable rate case against BNSF/UP. The rates that were challenged were single factor, joint through rates from New Mexico origins, northern Powder River Basin (Wyoming and Montana) origins and the Signal Peak deep mine in Montana, all served exclusively by BNSF, to AEPCO’s Apache plant, which is served exclusively by UP.

In its Nov. 22 decision, the board determined that the joint through rates being charged were unlawful and ordered BNSF/UP to publish and maintain rates at 180% of the carriers’ combined variable costs.

Following the decision, the parties awaited the board’s issuance of the 2010 Uniform Railroad Costing System (URCS) calculation, which is data needed to calculate the appropriate rates for the first quarter of 2012. The board published the 2010 URCS data on Dec. 9, 2011. AEPCO said it expected that BNSF/UP would promptly publish the appropriate joint through rates. To its “surprise,” on Dec. 28, 2011, AEPCO received proportional rates for UP’s portion of the respective movements rather than single factor, joint through rates from BNSF/UP. BNSF published corresponding proportional rates on Dec. 30, 2011. The proportional rates from both railroads are effective as of Jan. 1.

URCS is the board’s railroad general purpose costing system that is used to estimate variable and total unit costs for Class I U.S. railroads, including UP and BNSF.

UP’s “purported rationale” for the change is that it simplifies future administration in light of the pendency of a Western Coal Traffic League (WCTL) petition for declaratory order regarding the purchase accounting treatment for the Berkshire Hathaway acquisition of BNSF and it would be easier to establish and update quarterly two rates from the different interchanges rather than separate rates for each BNSF origin, AEPCO said.

AEPCO responded to UP’s email on Dec. 29, 2011, noting that BNSF/UP previously established joint through rates, AEPCO successfully challenged those rates, and the board prescribed the maximum reasonable levels for those joint through rates. A proportional rate is simply not a joint through rate, regardless of whether BNSF establishes a corresponding proportional rate for the origins, the cooperative wrote. AEPCO then urged BNSF/UP not to continue with the publication of proportional rates. “BNSF/UP ignored AEPCO’s request, and BNSF published its proportional rate one day later, December 30, 2011,” said the cooperative.

“BNSF/UP did not comply with the board’s decision,” AEPCO added. “AEPCO challenged single factor, joint through rates, not proportional rates. BNSF/UP do not have the authority to change the form of the common carrier authority once the board has prescribed the applicable rates. Moreover, BNSF/UP offer no reasonable basis for changing to proportional rates. Specifically, the acquisition premium issue [in the WCTL case] would simply require a ‘true-up,’ and the administration of rates going forward, as the board itself recognized in its decision, is not simplified by proportional, Rule 11 rates. AEPCO respectfully requests, for the reasons detailed below, that the Board order BNSF/UP to publish single factor, joint through rates in accordance with the decision.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.