The Surface Transportation Board Thursday issued a decision finding the rate assessed by the Union Pacific Railroad for moving trainloads of coal from the Powder River Basin in Wyoming to the Wisconsin Power and Light Company electric-generating facility at Sheboygan, Wisc. to be unreasonably high. The Board ordered UP to reduce its rate and to pay reparations to WPL.
Under the provisions of Section 10707 of Title 49 of the United States Code, the Board may consider a challenge to a railroad's rates only if the agency first finds that the railroad has no 'effective competition' the traffic to which the rate applies.The STB found that UP's rate exceeds 1800P's variable cost of providing service and that WPL has no effective transportation alternative to the railroad's service for moving coal from Wyoming to Sheboygan.
The Board evaluated the reasonableness of the rate using the stand-alone cost (SAC) test. The SAC test seeks to determine the lowest cost at which a hypothetical, efficient railroad could provide the transportation service needed by a complaining shipper. Under the SAC test, the complaining shipper designs a hypothetical railroad specifically tailored to serve its needs and the needs of other traffic it designates. The costs of building and operating such an efficient railroad are then compared to the revenues that such a system could expect to earn. If, as in this case, the shipper demonstrates that the stand-alone railroad would earn more than necessary to cover all of its costs (including a reasonable return on investment), the shipper is entitled to rate relief.
In this case, the SAC analysis examined the projected earnings and
operations of a hypothetical railroad for the 20-year period, 2000-2019.
The results of that analysis showed that the stand-alone railroad would generate greater revenues than would be needed to cover all the costs that would be incurred in, or assigned to, each year of the 20-year period. The Board therefore ordered UP to reduce the challenged rate to 1800f UP's variable cost of providing service to WPL, the lowest rate level the Board is authorized to prescribe.
The decision can be viewed at the STB's Web site, http://www.stb.dot.gov.