WFA, Basin Electric settle coal rate complaint against the BNSF Railway

The Western Fuels Association, Basin Electric Power Cooperative and the BNSF Railway on May 15 jointly asked the U.S. Surface Transportation Board to dismiss a WFA/Basin Electric complaint against the BNSF because the parties have settled this complaint over coal haul rates to the Laramie River power plant.

This long-running case has lately been in front of the board after a remand from the U.S. Court of Appeals for the D.C. Circuit. The parties on Jan. 28 had asked the board to put the proceeding into abeyance while they worked on this settlement. In the May 15 filing, the parties said they have entered into a new “rail transportation agreement” as part of this settlement, but they offered no details about it.

The Western Fuels Association, which buys and transports coal for several public power members, and Basin Electric Power Cooperative had filed June 2014 comments with the board related to the January 2014 appeals court ruling.

“WFA/Basin have spent over ten years, and $10 million, to perfect their right to rate relief in this case,” they wrote in the June 2014 comments. “Much of this expense was incurred after the Board adopted new Stand-Alone Cost (‘SAC’) rules in 2006, and retroactively applied those new rules in WFA/Basin’s then-pending case, an action that required WFA/Basin to retool their entire case. The Court’s remand order calls upon the Board to decide whether it should retroactively apply yet another new SAC rule, this one promulgated by the Board in 2013 – called Alternative Average Total Cost (‘ATC’).”

WFA/Basin said they were filing these comments because the issues raised on remand involve over $328 million in consumer dollars. WFA/Basin requested that the board not retroactively apply Alternative ATC. If the board decides otherwise, WFA/Basin request that it permit WFA/Basin to revise their SAC evidence in a manner that comports with fundamental principles of due process. Both requests are supported by the law as applied to the facts of this case, they added.

In 2004, the BNSF Railway unilaterally imposed massive increases in the rail rates it was charging WFA/Basin to transport their coal in unit train service from the Wyoming Powder River Basin (PRB) to Basin’s Laramie River Station (LRS) located near Wheatland, Wyo., Basin and WFA said. These increases were ultimately borne by the rural consumers served by LRS in nine Great Plains states as part of their monthly electric bills.

WFA/Basin filed a rate complaint at the STB in 2004. That case wound its way through the system over several years. It included WFA/Basin spending substantial amounts of time and effort to develop a hypothetical Stand-Alone Railroad (SARR), a standard board-mandated construct in cases like this, to try and demonstrate what reasonable rates should be.

In a series of decisions served in 2009, the board prescribed maximum reasonable rates in the form of maximum annual revenue-to-variable cost (R/VC) ratios that were in the 250% of variable cost range and ordered BNSF to pay reparations to WFA/Basin.

BNSF appealed the board’s 2009 rate relief orders to the D.C. Circuit. The court rejected all of BNSF’s contentions, except one, holding that the board had not addressed BNSF’s allegation that Modified ATC impermissibly double-counted variable costs.

On remand, the board held in June 2012 that Modified ATC did not impermissibly double-count variable costs, and reaffirmed its use of Modified ATC. BNSF appealed for a second time, this time arguing that the board had erred in not considering whether to retroactively apply a new cross-over traffic revenue allocation method the board adopted in 2013 to replace Modified ATC, called Alternative ATC.

The D.C. Circuit, in a split panel decision, in January 2014 held that the board was legally required to consider whether to apply Alternative ATC in this case. The court’s remand order raised two issues: whether the board can retroactively apply Alternative ATC in this case; and if it does decide to do so, how it should do so.

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.