Michigan Utility Wins Rate Case Against CSX

A Michigan utility company has won a rate case against CSX before the U.S. Surface Transportation Board.

The STB recently sided with Consumers Energy of Jackson, Michigan, against CSX in a case filed in January 2015 that challenged the rates CSX charged to haul coal to the utility’s J.H. Campbell generating plant near West Olive, Michigan.

CSX picked up the Powder River Basin coal from BNSF in Chicago and hauled it 235 route miles to the power plant. The STB agreed with the utility company and set a lower rate.

However, CSX has asked the Board to extend the proceeding to Feb. 20 during which time it will decide whether to ask the board to reconsider its ruling.

Trains magazine cited an unidentified attorney who was said to be familiar with the case as saying that it has become rare in recent years for shippers to win rate challenge disputes.

The attorney said most rate cases have involved chemical companies, but the volumes of cars in question and the varied distribution of chemical products makes it difficult for the STB to determine if the rates charged by the railroads are reasonable.

In the Consumer Energy case, the STB said that CSX was the “dominant” carrier in the market and the utility was a captive shipper.

The STB staff used the “stand-alone cost” method to determine if CSX’s revenue unfairly exceeded the cost of hauling the coal.

In response, CSX argued that Consumers Energy had an alternative to rail, including by water because the generating plant was close to the shore of Lake Michigan.

CSX said that a nearby generating plant operated by Consumers Energy on the lake receives coal by boat.

In rejecting the CSX arguments, the STB determined that the railroad had an unusually high revenue-to-variable cost ratio because of the costs of moving coal through the Chicago gateway and maintaining the rail line along the eastern shore of Lake Michigan.

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