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STB rejects railroads' petition to consider indirect competition in coal rate cases


From the March 25, 2013 issue of Public Power Daily

Originally published March 25, 2013

By Robert Varela
Editorial Director
Siding with shippers, the Surface Transportation Board has rejected a petition by railroads to reintroduce indirect competition (from other products such as natural gas) and geographic competition (shipments from a different origin) as factors in market dominance analyses for coal rate cases. In a March 19 decision, the board said the Association of American Railroads "has not presented evidence of rail rates that have been constrained by indirect competition or even offered a workable process for presenting and analyzing evidence of indirect competition."

AAR had cited competition from abundant, low-cost natural gas as a primary reason for reintroducing indirect competition. "Merely asserting that rail transportation of coal is subject to indirect competition by demonstrating that some coal-fired generation has been displaced by gas-fired generation in certain circumstances is not sufficient to determine whether effective indirect competition exists," the STB said.

APPA, the Edison Electric Institute, and National Rural Electric Cooperative Association jointly opposed AAR’s petition. They said AAR failed to offer any specific evidence of indirect competition that has reduced even a single rail rate. They also said the railroad group’s proposed "simple" approach to determining if indirect competition exists would likely result in costly, protracted litigation that would entail substantial discovery and complex analysis of non-transportation matters. Consumers United for Rail Equity noted that many of its members have experienced an increase in rail rates, despite AAR’s allegations of increased indirect competition.

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