Baldwin, Franken Urge Action to Force Rail Competition
In the wake of shipping backlogs that have stranded grain in northern Minnesota and choked coal supplies at Midwestern power plants, U.S. senators from Minnesota and Wisconsin are calling on federal regulators to foster more competition among railroads.
Sens. Tammy Baldwin, D-Wis., and Al Franken, D-Minn., joined this week with David Vitter, a Republican from Louisiana, in urging the Surface Transportation Board to initiate a rule-making process on a practice known as “competitive switching,” which they said would give shippers more options and better service.
Projected record grain and soybean harvests have set the stage for unprecedented disruptions this fall, the senators wrote, which could mean farmers would lose hundreds of millions of dollars. Meanwhile, utilities are entering the winter without adequate coal stores.
“Businesses and consumers throughout our economy’s supply chain stand to be negatively affected by these disruptions,” the senators wrote. “Our states’ shippers desperately need this injection of competition into the market to increase the quality of their rail service.”
While current law is supposed to allow for competitive switching, Baldwin and Franken say no shippers have been able to take advantage of it, suggesting the current rules need tweaking.
Here’s how it would work: If a shipper is served by only one railroad, as is the case in many parts of northern Wisconsin and Minnesota, and there is another class 1 railroad with a junction within a “reasonable distance,” the STB could order a rail carrier to switch a customer’s freight to a competitor’s line.
This would force competition, said Bruce Carlton, president of the National Industrial Transportation League, a trade group representing freight shippers.
“Captive rail shippers are paying a very big premium … because of the lack of competition,” Carlton said. “The railroads — god love them, and we do, because they move a lot of stuff quickly and safely — say we price to the market. What they don’t say is that the market is frequently a monopoly or a duopoly.”
The Association of American Railroads opposes the rule change, saying it would increase costs and reduce efficiency, which in turn would lead to postponed maintenance and upgrades.
“This proposal is a solution looking for a problem,” President Edward R. Hamberger said in a news release. “Railroads already voluntarily switch traffic when it makes economic sense for all parties.”
The question is whether it would benefit Midwestern utilities like Xcel Energy and La Crosse-based Dairyland Power Cooperative, which have struggled this year to get adequate shipments of coal from Wyoming.
Dairyland spokeswoman Katie Thomson said that while shipments to its Genoa plant have improved, the coal pile remains below its target level, and shipments to its Alma plant are inadequate to meet a sustained high demand.
As a result, Thomson said, Dairyland is considering scheduled shutdowns to ensure it has enough coal for the winter.
While Dairyland has not been involved in the competitive switching issue, “we do support in general actions which could result in decreased rail shipment delays,” she said.
Xcel earlier this year said the shipping backlog threatened to shutter its 2,500-megawatt Sherco plant, which produces about a quarter of the electricity Xcel delivers in the upper Midwest.
Spokesman Brian Elwood said the utility is working with carrier BNSF to improve delivery to Sherco, but supports efforts to raise awareness of this issue.
The proposal isn’t going to help anyone this season, as the rule-making process could take up to five years, according to Carlson.
“It won’t improve everybody’s situation,” he said, but it has the potential to help. “We see it as potentially beneficial at both ends of the transaction. And the railroads get paid. We don’t see it as a loss.”
