Paying Railroads’ Free Ride

Thanks to an exemption from federal antitrust laws, the nation’s major freight railroads are rolling up big profits?with a chunk of that money coming out of your pocket in the form of higher electric bills. As a result, electric cooperatives are urging Congress to pass legislation that would force the nation’s powerful rail carriers to offer competitive rates and better customer service in shipping critical products like coal.

Currently, around one-fifth of all railroad customers are served by a single line, including many electric co-op coal-fired power plants. This lack of competition, coupled with railroads’ ability (due to their antitrust exemption) to ignore rules that apply to other businesses, leaves many electric cooperatives that rely on coal-based generation “captive” to one shipper and unable to negotiate rates or receive fair treatment, such as ensuring reliable delivery of products.

Freight rail remains the only practical way to transport coal in most parts of the country.

Congress granted railroads a pass on antitrust requirements more than 30 years ago to boost competition and ensure better service at reasonable rates. Since then, the rail industry has consolidated and now four mammoth companies—BNSF Railway Co. and Union Pacific west of the Mississippi River; CSX Transportation, and Norfolk Southern in the East—move more than 95 percent of all domestic freight, including new automobiles, timber and paper products, iron and steel, and farm commodities like grain. That’s a tremendous amount of market clout, but the antitrust exemption lets railroads escape legal consequences for engaging in monopolistic practices that hamper service.

Compounding this situation, the Surface Transportation Board (STB), the federal agency responsible for railroad oversight, has traditionally moved slowly in addressing rail excesses that ultimately smack consumers’ wallets. Shippers seeking relief from high rates charged by railroads must rely on the STB to take action because the U.S. Department of Justice has no jurisdiction over the industry. As things stands, railroads hold all the cards, making legislative reform a must.

Electric co-ops are actively supporting a bill in Congress to repeal the freight railroads’ antitrust exemption and give captive shippers a forum to challenge anticompetitive practices. The Railroad Antitrust Enforcement Act (S. 49), overwhelmingly approved by the U.S. Senate Judiciary Committee, would end antiquated antitrust exemptions and force railroads to obey the same laws as other businesses, says U.S. Sen. Herb Kohl (D-Wis.), the measure’s lead sponsor.

There are also signs of possible action by STB, which is under increasing pressure to examine railroad operations. Recent STB proceedings could set the stage for administrative actions aimed at improving competition. NRECA filed comments urging the agency to revise its policies and tackle anticompetitive railroad behavior.