Citing unexpectedly high rates, TMPA re-pursues coal cases against BNSF

The Texas Municipal Power Agency (TMPA) wants the U.S. Surface Transportation Board to reopen two cases where it was pursuing rate complaints about coal haulage against the BNSF Railway, which transports coal to TMPA’s Gibbons Creek power plant.

TMPA said in its April 20 request that it wants to reopen the decisions and orders in cases from 2003 and 2004, and modify the maximum rail rate prescriptions ordered in those cases on the grounds of changed circumstances. Specifically, upon receipt of appropriate, limited additional evidence concerning stand-alone costs (SAC) and updated variable costs for the traffic at issue, the board should revise its schedule of the maximum rates that BNSF can charge for the transportation of coal to TMPA’s Gibbons Creek plant established in a case called “TMPA 2004,” and extend the rate prescription from 2011 through 2021, said TMPA.

“This relief is mandated by changes in circumstances that prove that assumptions in the original prescription regarding future rate levels for the issue traffic, and forecasts of future inflation, transportation revenues, and certain other specific components of the SAC analysis, were seriously inaccurate,” the agency said. “Consistent with precedent, including the Board’s previous handling of similar petitions advanced by rail carriers subject to rate prescriptions on utility coal traffic, the scope of reopening should be limited to consideration of the impact of the revised, post-2010 projection of GCRR stand-alone revenues from the issue traffic on the [discounted cash flow] analysis, and updates of indices and forecasts included in TMPA 2003 and TMPA 2004 that have proven to be inaccurate (e.g., inflation forecasts, equity capital costs, coal traffic and revenue forecasts, etc.). In all other respects, the Board’s evaluation of SAC on reopening should be based on the record and findings in TMPA 2003 and TMPA 2004.”

GCRR is the hypothetical Gibbons Creek Railroad, which the agency had to build on paper, under the board rules, to prove what the competitive costs of these coal moves should be.

The revised Gibbons Creek rate prescription also must take into account the “jurisdictional threshold” of 180% of variable service costs, as U.S. legal code effectively precludes the board from setting a maximum rate below that level, TMPA argued. For purposes of determining a revised prescription on reopening in this case, the variable cost determinations already made by the board in TMPA 2003 should be updated to reflect intervening changes in unit costs, etc., but must be based on the same movement-specific analysis that constitutes the law of the case in this proceeding, TMPA said.

“Updating those costs, however, requires certain data specific to the subject movement that is solely in the possession of BNSF,” the agency noted. “In its order granting this Petition, therefore, the Board should prescribe a relatively short period wherein TMPA can request and BNSF produce 2011 iterations of the same data relied upon in TMPA 2003, so that the parties can address and the Board can determine the jurisdictional threshold level applicable to the revised prescription for 2011. Appropriate Board staff can convene a technical conference should that be necessary or appropriate to expeditiously resolve any data-related issues that arise between the parties.”

The board’s previous decisions assumed that in 2011, BNSF’s rate on the issue traffic would be $25.33 per ton, and would increase gradually to $33.05 per ton by the first quarter of 2021. “However, starting in 2011, the Board’s assumption regarding this key component of the SAC analysis proved to be seriously inaccurate,” TMPA wrote. “Instead of $25.33 per ton, BNSF established a common carrier rate of $29.70 per ton. Conservatively estimating increases in that rate into the future based on forecasted changes in BNSF’s system average costs shows that by 2021, the rate would be $34.38 per ton, rather than $33.05 as assumed by the Board.”

TMPA suggested to the board a schedule for this case, including a May 10 deadline for BNSF to reply to its motion to reopen.

Gibbons Creek burns Powder River Basin coal out of Wyoming that is moved to the plant via BNSF, one of two originating rail carriers in the Wyoming PRB. The other is Union Pacific. The TMPA website noted that the plant initially burned locally-mined lignite, but there was a transition in the 1980s and 1990s to 100% PRB coal, which allowed for higher plant efficiency.

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.