ROANOKE TIMES 
                      Copyright (c) 1997, Roanoke Times

DATE: Wednesday, January 15, 1997            TAG: 9701150098
SECTION: BUSINESS                 PAGE: B-6  EDITION: METRO 
DATELINE: WASHINGTON
SOURCE: ANICK JESDANUN ASSOCIATED PRESS

RAIL MERGER CONCERNS SHIPPERS

For Michael Snovitch, who buys 8million tons of coal a year for a Pennsylvania utility, Friday's showdown over the future of Conrail goes beyond what's best for Wall Street investors.

Almost all the coal that fuels Pennsylvania Power & Light's generating plants gets there on rail cars.

And like other shippers captive to the rail industry, Snovitch is worried that a Conrail merger with either CSX Corp. or Norfolk Southern Corp. would allow railroads to charge more and force his utility's 1.2 million electricity customers to pay higher prices.

Snovitch has joined several producers and consumers of grain, chemicals and other rail-shipped commodities in keeping a wary eye on the fight for control of Conrail.

``We are not necessarily against a merger, but we feel that if there is a merger, we have to ensure that shippers get fair and competitive rates,'' said Snovitch, PP&L's manager of fossil fuel supply.

He fears a spike in the company's $70 million annual transportation costs if the utility is forced to rely on a single railroad to keep its five coal-fired plants running.

Although both CSX and NS have promised to grant access rights or sell tracks to competitors, Snovitch is not convinced.

Conrail's takeover by another East Coast giant would create the nation's third-largest freight company. The railroad left out of the merger may link up with a West Coast partner, creating a transcontinental railroad and further diminishing direct competition.

The fight so far has been limited to Wall Street, with Conrail shareholders to decide in a special meeting Friday whether to let CSX purchase an additional 20percent of Conrail and move ahead with its proposed $9billion takeover.

NS, which has made a $10.3 billion hostile bid, has been unsuccessful in its legal challenges to the Conrail-CSX deal, the combination preferred by Conrail's board of directors.

With several recent mergers involving large railroad companies, the number of markets served by more than one major railroad is dwindling. By Norfolk Southern's calculations, its merger plan would eliminate competition in 38 cities, compared with 64 under the CSX plan.

Some shippers can shift their products to trucks, which have the advantage of reaching the 77 percent of communities that are not served by rail, but railroads are cheaper for moving bulk goods over long distances.

Nevertheless, a few shippers accept the rail companies' argument that a merger will lead to better prices, as the railroads trim excess trackage and operating costs.

Robert Neuschel, a Northwestern University professor of transportation, backed the companies' position but said the shippers' concerns were understandable.

``I don't want to suggest their fears are unfounded, but they are going to find competition won't be curtailed as much and services will be improved,'' he said.

LENGTH: Medium:   65 lines
ILLUSTRATION: PHOTO:  AP. A coal car (left) drops a load of coal at 
          Pennsylvania Power & Light. The utility worries that a Conrail 
          merger with either CSX or Norfolk Southern would let railroads 
          charge higher prices. color.