ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Saturday, January 4, 1997 TAG: 9701060047
SECTION: BUSINESS PAGE: A-6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: HOWARD S. ABRAMSON BLOOMBERG BUSINESS NEWS
CUSTOMERS OF RAIL SHIPPERS say they will oppose any deal to acquire Conrail - by Northern Southern or CSX - that cuts out competitive rates.
A victory for the U.S. railroad industry this week in a regulatory case involving shippers served by only one carrier may intensify the fight over the sale of Conrail Corp. and fuel a movement to force more competition in the rail freight business.
The railroads won a case brought by three electric utilities against three carriers before the Surface Transportation Board, the successor agency to the Interstate Commerce Commission. The Association of American Railroads estimated an adverse ruling could have cost the industry $2.4billion in annual profits.
The ``bottleneck case'' involves situations where more than one railroad serves a coal mine, but only one carrier has a line directly to a power plant. While the utilities said they could gain more favorable rates from the mine to the end of a competing railroad's line, the carrier controlling the track to the power plant charges such high rates there is no alternative but to let that carrier control the entire shipment.
The utilities asked the Surface Transportation Board to order the railroads to eliminate excessively high rates for the final leg of the trip to a captive customer and bring those more in line with the rates for the rest of the trip.
While most rail rates are deregulated, carriers are required to charge ``reasonable'' rates in case involving ``captive shippers'' - those served by only one carrier.
Board commissioners unanimously rejected the utilities' request, saying it wasn't the agency's role to interfere with railroads' ability to set rates and routes, beyond requiring them to be reasonable, generally defined as 180 percent of the railroad's costs.
Several rail executives and customers said the ruling was sure to have an impact on the ongoing battle for the right to buy Conrail, the carrier that controls most of the Northeast. Norfolk Southern Corp. and CSX Corp. are locked in a bidding war for the right to acquire Conrail.
An official of Pennsylvania Power & Light Co., the lead utility in the bottleneck case, said Friday that it will oppose any Conrail merger that doesn't include ``conditions that give shippers in the Northeast competitive rail options.''
Michael Snovitch, PP&L's manager of fossil fuel supply, said the utility was prepared to pursue a more complicated companion case it filed with the Surface Transportation Board along with its bottleneck petition.
He said PP&L will try to prove that the rates charged by all three railroads from the mines to the power plants were unreasonable under applicable law. ``We're sure that we'll have no problem proving that our rates should be substantially lower,'' he said.
PP&L, he said, is Conrail's largest coal shipper, moving some 8million tons a year to its four power plants in eastern Pennsylvania.
Norfolk Southern has maintained that allowing it to acquire Conrail would result in fewer captive shippers than if CSX buys the carrier, although both suitors have said they will sell some lines to create more competition if they acquire the railroad.
The ruling is being used to find support for a renewed drive on Capitol Hill to trim the railroads' authority by either reregulating some freight rates or by opening the nation's track system to all carriers.
Indeed, board Commissioner Gus Owen warned that ``without a negotiated settlement among the parties, this issue likely is headed for the lap of Congress, where solutions too often are hastily drawn, politically motivated and, for a long time afterward, insulated from change even by private agreement of the parties who had the dispute.''
LENGTH: Medium: 73 linesby CNB