Are Railroads Cashing in on Fuel Surcharges?

For background on this issue, see the Surface Transportation Board Rail Fuel Surcharges Decision Document.

Source: Electric Co-op Today

By Steven Johnson | ECT Staff Writer
Published: October 29th, 2014

Electric cooperatives and rail customers say freight railroads are padding their profits with millions of dollars in excess fuel surcharges, and they want regulators to do something about it.

In an ongoing case at the Surface Transportation Board, a coalition of shippers argued that three major railroads—BSNF Railway Co, Union Pacific and CSX Corp.—collected $460 million in surcharge profits in 2013, just by relying on inaccurate and outdated data.

“The board is at a crossroads,” NRECA and other members of a group known as “allied shippers” said in an Oct. 15 filing with the STB. “The only way the board can prevent continued carrier abuse of fuel surcharges is to adopt a comprehensive set of reform measures along the lines suggested by allied shippers in their comments.”

The rail customers’ salvo is the latest in a long-running dispute over the way freight railroads calculate fuel surcharges that affect the price of electricity because of the cost of hauling coal to power plants.

The STB provides immunity for railroads from fuel surcharge challenges, as long as they use highway diesel fuel  prices in their surcharge tables.

However, shippers told the board that the slender gap between highway diesel fuel prices and the actual prices railroads pay has become a chasm, reaching nearly 24 cents a gallon earlier this year.

“When this happens, the railroads’ surcharge programs falsely presume that their fuel costs are higher than they actually are,” the shippers said. By that calculation, BNSF collected more than $593 million in extra profits, and Union Pacific more than $253 million, from 2011 to 2013.

The shippers want more stringent regulation of fuel surcharges. Failing that, the board should phase them out, they said.

Joining NRECA in the comments were the Western Coal Traffic League; American Public Power Association; Edison Electric Institute; Hattiesburg-based South Mississippi Electric Power Association and Consumers Energy Co.

Also filing a comment was Little Rock-based Arkansas Electric Cooperative Corp., which is active in STB matters. AECC advocated new procedures it said would more fairly and accurately allocate carriers’ fuel costs.

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