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Q: How does railroad monopoly power affect the average consumer? A: Monopoly rail charges are like a hidden tax on all kinds of consumer goods. Railroad monopoly power also hurts America’s ability to compete in a global market, which ultimately means lost wages and lost jobs for Americans. Arkansas Electric Cooperative estimates that its use of natural gas and other alternatives to coal caused by the rail delivery problems cost its customers more than $100 million over the last year – an average of $15 to $20 per month for each of its electricity customers. back to topQ: What are some of the common service complaints about railroads? A: Reliability. Rail deliveries are often late, or cars carrying vital goods such as grain or coal, disappear for months at a time. To compensate for this, rail customers often have to ship more goods or parts - thus compounding the problem. The railroad companies have not invested in their infrastructure or even done appropriate maintenance, creating a variety of service problems and lack of capacity now contributing to this crisis. At the same time, there has been a growing demand for coal, consumer and other goods shipped by railroads. back to topQ: If there are so many problems with the railroads, why don’t shippers just take their complaints to the STB? A: The STB is broken. It has been impossible for shippers to get any reasonable relief from the STB. The rate challenge process is so complex, costly and time consuming that it provides no protection. An October, 2006 report by the Government Accountability Office confirms this. The STB has refused to hold the railroads accountable when they fail to provide service. STB rulings actually have allowed the railroads to block customer access to competition. Q: What legislation are you supporting? A: The Railroad Competition and Service Improvement Act of 2007 (S. 593) would overturn three ICC/STB decisions that allow railroads to block rail customer access to competition, improve the existing Surface Transportation Board rate challenge process and eliminate excessive fees for filing rate cases. Additional legislation, the Railroad Antitrust Enforcement Act of 2007 (S. 772 and H.R. 1650), repeals the railroad exemptions in the antitrust and transportation statutes, so that antitrust law fully covers railroads just as it covers other industries. back to topQ: What is the likelihood that CURE-supported bills will be passed? A: CURE represents a wide variety of rail customers including public utilities; rural electric co-ops; investor-owned utilities; farmers; chemical, ethanol, agriculture, cement and other manufacturers; forest and paper companies; and all their customers. Every member is dedicated to ending unrestrained railroad monopoly power that is adversely affecting rail customers and the nation. Q: What types of freight are subject to rail monopoly power? A: Coal, agriculture, paper and paper products, logging and construction products, steel and other manufacturing supplies, chemicals, plastics and many other items that cannot be shipped by truck or, in some cases, cannot by law move on the nation’s highways. About 20 to 35 percent of the nation’s rail freight relies on “captive” routes served by only one rail carrier for all or part of the movement. Q: Isn't there data showing that shipping rates have dropped over the last 20 years, not increased? Moreover, the rail industry statistics on "shipping rates" do not capture the costs that have been shifted to the rail customer by the railroads over the last 25 years. These enormous costs must be added to the rates to determine the true cost of shipping by rail. In fact, the GAO report verified that much of the "cost" of rail transportation that was previously built into the "rate" (the cost of train sets, maintenance, loading and other trackside facilities) has been shifted onto the backs of their customers. These increased costs are not captured in the graphs and charts provided by the freight rail industry. back to topQ: I’ve heard complaints about railroad fuel surcharges. Don’t they have the right to pass on fuel price increases like every other industry has? A: A recent analysis by economic firm Snavely King Majoros O’Conner and Lee of the fuel surcharges being paid by captive shippers revealed the charges are unreasonable. They are not based on actual fuel consumption on the movement in question, are inappropriately linked to freight rates (not the actual fuel costs), and are often recovered through other means (such as the Rail Cost Adjustment Factor) so that the railroads are double recovering for these costs. The study estimates that the railroads have collected almost $1 billion in unjustified fuel surcharges in 2005 alone. Because these fuel surcharge excesses have been allowed to continue until at least April 25, 2007, the railroads probably have pocketed almost $3 billion in excessive fuel surcharges from its customers since 2004. Wall Street analysts have even praised some of the railroad companies for turning their fuel surcharges into a strong profit center! On January 25, 2007, the Surface Transportation Board found that the railroads were over-charging customers through their fuel surcharges and ordered them to cease these practices within 90 days. Interestingly, the STB did not order the railroads to refund the excess charges! back to topA: “Captive” rail refers to the estimated 20 to 35 percent of the nation’s freight movements that are served by only one rail carrier, providing no competitive transportation option for the rail customer. Although railroad deregulation has given the railroad industry new life, monopolistic control over key parts of our nation’s rail routes has led to unfair pricing and poor service in the transportation of vital goods such as coal, grain, and chemicals. In 1980 there were 41 Class I railroads. Only seven remain today, with four – two in the east and two in the west – carrying about 95 percent of all rail freight. back to topQ: How much more does captive rail cost than competitive rail? A: A study by Escalation Consultants, Inc. of Gaithersburg, Maryland (using 2003 Surface Transportation Board "Revenue Shortfall Allocation Methodology" data) found the railroads charge more than 75 percent more to ship freight on captive rail than they do on competitive rail.
Q: Why does it cost more to ship by captive rail than competitive routes? A: The cost to the railroad of a comparable competitive and captive movement is the same. But the simple truth is that where the railroad has monopoly power, in the absence of effective oversight by the Surface Transportation Board, the railroad can charge whatever it wants. Obviously the rail companies need to be profitable and need to have capital to invest in expanding the nation’s rail system. But this economic reality does not justify unrestrained monopoly power that allows the railroad to extract whatever it wants from defenseless and dependent captive rail customers.
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