Utilities in Arkansas, railroad companies argue over fuel costs
Posted on Friday, May 12, 2006
WASHINGTON — Railroad companies and the shippers that use them argued before federal regulators Thursday about who should pay for the rising cost of fuel. Arkansas Electric Cooperative Corp. and Entergy Corp. told the U. S. Department of Transportation’s Surface Transportation Board, which sees the rates rail companies charge shippers, that they don’t have a problem with railroads recovering the money they spend when fuel costs rise sharply by adding a fuel surcharge to their shipping price.
The problem, they said, is that railroads often “double dip” by increasing fuel surcharges on top of base prices that have already ballooned. They and other shippers called on the board to open up railroad-fuel charges to scrutiny and punish railroads for “unreasonable” charges.
Though fuel surcharges have increased their revenues, railroad companies pointed out that they have not been able to recover all the money higher diesel prices have forced them to spend.
The hearing highlighted the frustration felt by shippers who in many cases are served by only one railway.
“The fuel-surcharge issue is a perfect example of what you get when you don’t have an open, competitive market for freight transportation,” said Steve Sharp, principal engineer at Arkansas Electric Cooperative.
Sharp said surcharges levied by Union Pacific Railroad Co. added $ 8, 000 a train, or $ 3 million a year, to the freight bill for its coal-fueled generation plant in Newark.
Bill Mohl, vice president for commercial operations at Entergy Services Corp., a subsidiary of Entergy Corp., said that BNSF Railway Co. used the on-highway diesel fuel index to calculate its surcharge.
But he said that the index rose 25 percent as BNSF was reporting to its stockholders that the average price of diesel was rising just 14 percent.
Railroad companies, Mohl contended, are able to buy diesel in bulk, at lower prices, and without being subjected to sales taxes.
Members of the rail industry defended the use of the index, saying that the truckers who use it are competing with rail lines for business.
“It is easier to apply and more widely accepted by our customers as an index with which they are familiar,” Rob Knight, the chief financial officer of Union Pacific, wrote in a statement filed with the board.
Union Pacific first added surcharges to soften the blow of sudden price spikes in 2002, when it appeared the increases would be temporary, Knight wrote.
“We did not anticipate that the rising cost of fuel would continue virtually unabated for as long as it has.” Knight contended that, over the past three years, surcharge revenues have not kept up with rising costs. Between 2003 and 2005, Union Pacific has been unable to recover about $ 800 million in additional fuel costs, he wrote.
Knight promised that, “as the price of fuel declines, so will the surcharge.” The board has not set a date by which it will make recommendations.
Entergy Arkansas has filed suit against Union Pacific, charging the railroad has rationed coal to its customers in order to boost profits.
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