Progressive Railroading.com
July 27, 2009
Last week, the Surface Transportation Board (STB) issued a decision that requires Union Pacific Railroad to
provide Oklahoma Gas & Electric Co. (OG&E) an estimated $100
million in rate “reparations” and reductions over the next decade.
The utility, which serves more than 750,000 customers in Oklahoma and
western Arkansas, has contracted UP to haul about 6 million tons of
coal annually from Wyoming's southern Powder River Basin to a power
plant in Fort Gibson, Okla. However, after the latest contract expired
on Dec. 31, 2008, UP and OG&E could not agree on a new contractual
rate.
OG&E asked UP for common-carrier rates, which the utility began
paying in January. The utility then challenged the new rates in a
complaint with the STB.
Both OG&E and UP agree the power plant is captive to UP and that
the common-carrier rates shouldn’t exceed 180 percent of the variable
costs of providing transportation. But the STB needed to determine how
to calculate the 180 percent revenue-to-variable cost ratio.
The board ruled that the amount of relief owed to OG&E for 2009’s
first two quarters ranged from $1.66 to $1.91 per ton in
shipper-supplied rail cars, depending on the mine origin. The STB also
ordered UP to set common-carrier rates for the next 10 years at 180
percent of variable-costs levels.
The relief to OG&E likely will exceed $10 million annually for the
next 10 years based on volumes of 6 million tons per year, the STB
said.
Posted on
Tue, July 28, 2009
by Crystal Drwenski