Copyright 2002, Traffic World Magazine
Arizona Electric Power Cooperative Inc. likely will take into consideration the Surface Transportation Board's decision in another rate-reasonableness decision involving cross-subsidy issues that was released on the same day as the STB's ruling in its own case.
In the other decision the board found that rates charged by Burlington Northern and Santa Fe Railway for coal shipped between the Powder River Basin and PPL Montana LLC's power plant in Billings, Mont., had not been shown to be unreasonably high. The board said the hypothetical railroad designed by PPL in its stand-alone cost test "would in fact depend upon an improper cross-subsidy."
According to a submission to the STB, the SAC test PPL designed would involve a hypothetical railroad consisting of two distinct parts: a high-density north-south line and a lower-density western line. The hypothetical railroad could not charge PPL Montana a lower rate without a subsidy from traffic moving only over the north-south part of the system, BNSF argued.
"In reviewing the evidence in this case, the board gave PPL Montana the benefit of the doubt on nearly all of those disputed issues," the STB stated. "But even so, the board found that the western leg of PPL Montana's hypothetical railroad would not earn sufficient revenue to cover the costs of that part of the system, but instead would need to be cross-subsidized by the more intensively used north-south portion of the railroad. "
While conceding that the hypothetical railroad shouldn't be required to cross-subsidize facilities from which it receives no benefit, PPL argued that there is no comparable prohibition in the SAC test against other traffic subsidizing its traffic.
The board disagreed. "Permitting cross-subsidies from traffic not using many of the facilities needed by PPL Montana's traffic would fundamentally undermine the SAC principle that traffic carried by a hypothetical, efficient railroad would pay its own way," the STB stated. "Therefore, the board found that PPL Montana had not shown that BNSF's rate is unreasonable."