Three senators call on STB to advance competitive switching rules

U.S. Sens. Tammy Baldwin (D-Wis.), Al Franken (D-Minn.) and David Vitter (R-La.) recently sent a letter to Surface Transportation Board (STB) Chairman Daniel Elliott III calling for rail industry reforms aimed at increasing rail competition and responsiveness.
 
The senators cited concerns and frustration among a broad coalition of freight-rail shippers in their states that are facing serious service problems due to what the legislators characterized as "inconsistencies and a lack of other options to ship goods by rail." The service challenges faced by the shippers are impeding the ability of farmers to get their goods to market and energy suppliers to provide sufficient fuel or propane to prevent another shortage this winter, the senators wrote.

"While railroad service issues are not new, recent projections of record grain and soybean harvests could set the stage for unprecedented disruptions this fall. The losses for farmers left without means to move their goods to market could reach hundreds of millions of dollars," they said in a press release issued by Baldwin's office. "Power companies are facing fuel supply shortages that could result in plants shutting down and increased energy prices this winter. Businesses and consumers throughout our economy’s supply chain stand to be negatively affected by these disruptions."

The STB has been compiling information to improve federal competitive switching regulations since 2011, and should move forward on a competitive switching rulemaking process as swiftly as possible so shippers gain more options and improved rail service, the senators believe.
    
The senators' letter is supported by Badger CURE (Wisconsin Consumers United for Rail Equity), a coalition that includes more than 40 rail shippers and freight-rail constituents. Other rail shipper groups support the measure, as well.

"[Our] members greatly appreciate that [the] senators have urged the STB to move forward now on our proposal for a new rule to govern competitive switching. The absence of normal market competition dramatically raises the cost of shipping by rail for many companies, making their products more expensive and less competitive," said Bruce Carlton, president and chief executive officer of the National Industrial Transportation League. "Captive rail shippers aren’t looking for a free lunch; they simply want the opportunity to obtain a competitive bid for rail service where it is physically possible for another railroad to provide it. It really is time to start the rulemaking process."

Time is of the essence because significant resources are being diverted from research and development efforts, operations, investments, expansions and hiring functions to pay high rail rates, said American Chemistry Council President and CEO Cal Dooley.

"We believe it is now time to pursue reforms at the STB that would help unleash market forces and reduce the need to adjudicate rail disputes," he said. "Adopting sensible reforms like competitive switching would increase access to competitive and reliable freight-rail service."

The senators' effort could help foster real competition in the national freight-rail system, said Scott Reigstad, a spokesperson for Alliant Energy.

"With coal supply disruptions due to congestion on the nation’s freight-rail system continuing on a large scale, Alliant regularly experiences disruptions of delivery to our generation facilities and we continue to work with the railroads on a permanent solution," he said. "Therefore, we encourage the STB to move expeditiously with a strong competitive switching rule to ensure that our customers have sufficient power supplies to not only keep warm this winter, but well into the future."

The Association of American Railroads (AAR) opposes a rulemaking on competitive switching because Class Is could lose revenue and have less of an opportunity to make substantial capital investments in their businesses if such rules are adopted, according to the association.

The switching rules would require far more rail-car switching and handling to move the same amount of goods and could affect millions of carloads annually, reducing revenue for the railroads, AAR officials believe. In addition, mandatory switching could lead to local service disruptions, degraded service throughout the rail system and a decline in rail productivity, requiring more resources to move the same amount of freight, they claim.