Consumers Energy, CSX tussle over document issues in coal rate complaint

Consumers Energy on April 13 filed a couple of replies at the U.S. Surface Transportation Board to CSX Transportation requests related to a Consumers Energy complaint over rates that CSXT is charging for rail hauls of coal to the utility’s J.H. Campbell power plant in Michigan.

Consumers Energy in one filing replied to a motion to dismiss a revenue adequacy claim that CSXT filed on March 24. “CSXT premises its Motion primarily upon the Board’s annual, industrywide revenue adequacy decisions in the Ex Parte No. 552 series, but those ‘snapshot’ findings are not determinative for purposes of applying the Revenue Adequacy Constraint of the Coal Rate Guidelines, even under CSXT’s own cited precedent. CSXT’s contention that it cannot discern the basis for Consumers’ Revenue Adequacy Claim is makeweight. The Board does not require detailed factual showings in a maximum railroad rate complaint, and Consumers presented its revenue adequacy claim in the same manner as its stand-alone cost (‘SAC’) claim, specifically invoking the standards of 49 U.S.C. § 10704(a)(2) and (3) and the Coal Rate Guidelines. This easily satisfies the Board’s pleading requirements.

“Under the Board’s standards and procedures for litigation under the Coal Rate Guidelines, Consumers is not required to provide a preview of its evidence before discovery is concluded and its opening evidence is due. Nevertheless, even at this early stage there is ample, publicly available evidence that CSXT should be considered revenue adequate for purpose of the Guidelines’ constraint, under either an Ex Parte No. 552 analysis that employs a realistic cost of capital or a multi-factor test. Likewise, the financial and investment communities already correctly perceive CSXT to be revenue adequate on a long-term basis, which also is grounds for invoking the Revenue Adequacy Constraint against increases to captive shipper rates under the case-specific approach endorsed by the Board’s predecessor, and applied in prior cases.”

Consumers Energy also said in an April 13 filing that CSXT’s efforts to gather documents from Consumers are overly broad. CSXT’s first set of requests principally were focused on two topics: the likely volume of coal that would be transported to the Campbell Station by rail over the ten-year Stand Alone Cost (SAC) analysis period; and whether coal transportation to Campbell, which has always taken place via CSXT and has been subjected to a rate approaching 450% of the variable cost of service, nevertheless enjoy “effective competition” from other rail carriers or modes of transport.

“In pursuit of information related to these topics, CSXT served six (6) Requests for Admission; thirty-two (32) Interrogatories (many of which had sub-parts); and twenty-three (23) Requests for Production (which also had sub-parts),” said Consumers. “In its Responses, Consumers provided the information sought by CSXT in the vast majority of its discovery requests, and agreed to broad document production, which already has begun. Included within the information and documents already provided or to be provided to CSXT are comprehensive data regarding current and future expected coal use at Campbell, which is generated and retained by Consumers in the ordinary course of business, and non-privileged documents from 2007 to the end of 2014 that relate to Consumers’ consideration and study of hypothetical alternatives to CSXT service for coal deliveries to Campbell, a subject that has been of interest to Consumers in light of the persistently high rates demanded by CSXT for rail transportation.

“Notwithstanding Consumers’ informative responses and timely document production, CSXT – first by letter and then through its Motion – has sought to increase the discovery burden on Consumers with demands for additional documents that are irrelevant, redundant, and/or beyond the scope of reasonable discovery in a case like this. … Under applicable Board precedent and upon a fair consideration of the lack of any demonstrated need on CSXT’s part for the additional production in question, it is clear that the carrier’s Motion is without merit and should be denied.”

CSXT denied the Consumers Energy complaints in early round of this proceeding

CSXT on Feb. 2 filed at the board a paragraph-by-paragraph denial of this Jan. 13 Consumers Energy complaint. Said CSXT in one example passage: “In response to the unnumbered paragraph on pages 1-2 of the Complaint, CSXT denies that Consumers has paid or will pay common carrier rates in excess of a reasonable maximum rate for CSXT’s transportation of the movement set forth in that initial unnumbered paragraph of the Complaint (the ‘issue movement’), denies that the Board has jurisdiction over the CSXT rail transportation rate for the issue movement, and denies that Consumers is entitled to any of the relief it seeks in this proceeding.”

Consumers Energy filed Jan. 13 at the board this complaint over what are just and reasonable rates, rules and other terms for unit train coal transportation service in shipper-supplied railcars to J.H. Campbell. This service is from CSXT’s established railroad interchange with BNSF Railway in the vicinity of Chicago, Illinois.

Over 75% of Consumers’ base load system capacity is comprised of coal-fired assets, of which Campbell, at 1,455 MW, is the largest. Annually, Campbell consumes as much as 5,500,000 tons of low-sulfur coal from origins in the Powder River Basin of Wyoming, and has the capacity to burn well in excess of 6,000,000 tons each year. Campbell also uses about 500,000 tons of higher-Btu coal each year from origins east of the Mississippi River.

Since 1992 and through the present, PRB coal bound for Campbell has been transported from mine origins to CSXT-served interchange tracks near Chicago by BNSF, pursuant to a series of separate, private contracts between Consumers and the originating railroad. CSXT delivers the shipments from the interchange to Campbell by separate arrangement. Eastern coal moves to Campbell in direct, single-line CSXT service from CSXT-served mine origins.

Said the Jan. 13 complaint: “In anticipation of the need for unit train coal service after 2014, and consistent with its internal planning and budgeting requirements, well over a year ago Consumers initiated discussions with CSXT regarding terms and conditions for a new contract for coal deliveries to Campbell. Despite conscientious effort and multiple, alternative proposals advanced by Consumers, however, the parties were not able to reach agreement on reasonable terms either for an extension of CSXT-C-84720 or for a new contract.”

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.