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>From the Surface Transportation Board, Washington, D.C.
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The Surface Transportation Board issued a decision today granting an
estimated $100 million in reparations and rate reductions over the next
decade from the Union Pacific Railroad Company (UP) to Oklahoma Gas &
Electric Company (OG&E). The utility serves more than 750,000 customers in
Oklahoma and western Arkansas.
UP has hauled roughly 6 million tons of coal
per year from Wyoming's southern Powder
River Basin to OG&E's Muskogee Station power
plant in Fort Gibson, Okla. under contracts
between the parties. But after the latest
contract expired on Dec. 31, 2008, UP and
OG&E could not agree on a new contractual
rate. So OG&E asked UP for common carrier
rates, which the utility began paying in
January 2009. OG&E then challenged the new
rates in a complaint to the Surface
Transportation Board (STB).
Both OG&E and UP agreed that the Muskogee
Station is captive to UP, meaning that there
is no effective transportation alternative
available to OG&E other than using UP. And
both parties agreed that the January 2009
common carrier rates should not exceed 180
percent of the variable costs of providing
that transportation. The central question
put to the STB in this case centered on how
to calculate the 180 percent
revenue-to-variable cost ratio.
The STB found that the amount of relief owed
to OG&E for the first two quarters of 2009
ranged from $1.66 to $1.91 per ton in
shipper-supplied rail cars, depending on the
particular mine origin. The decision also
ordered UP to set common carrier rates for
the next 10 years at the 180 percent of
variable-costs levels. Assuming historical
volumes of 6 million tons a year, the relief
to OG&E will likely exceed $10 million a
year for the next 10 years.
The Board issued its decision today, July
24, 2009, Oklahoma Gas & Electric Company v.
Union Pacific Railroad, STB Docket No.
42111(
http://www.stb.dot.gov/decisions/readingroom.nsf/WebDecisionID/39918?OpenDocument
)
. That decision is available for viewing and
downloading, via the Board's Web site at
http://www.stb.dot.gov, under "E-LIBRARY,"
then under "Decisions & Notices," beneath
the date "7/24/09."
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