Wisconsin’s electric utilities must rely nearly entirely on rail transportation to deliver coal to their power plants. A significant driver of higher electricity rates is the increasingly lower quality and higher costs of rail service resulting in part from the mass consolidation in the freight rail industry and the absence of effective regulatory oversight.
Since the deregulation of the freight rail industry in 1980, the number of major railroads in the United States dropped from over forty to seven. Four of the major railroads handle 90 percent of the nation’s traffic. Businesses in many areas of Wisconsin are served by only a single railroad for at least some portion of their shipment. The loss of competitive transportation options and an outdated regulatory structure has led to the unrestrained use of market power by the railroads. Utilities have little leverage to obtain transportation service that is efficient and cost effective.
Reduced rail competition costs Wisconsin businesses and consumers big money. Some Wisconsin electricity providers report that rail costs have increased by over 100% the last few years pushing up electricity rates on homeowners, farmers and businesses. Agriculture is highly dependent on transportation to move products to markets and some grain shippers have seen their rail costs more than double. Major Wisconsin employers like the chemical, timber and paper industry have experienced not only steep cost increases to transport products, but unreliable service as well. A Consumer Federation of America report in 2009 found that excessive rail rates cost consumers nearly $3 billion annually in higher prices on everything from their utility bill to their groceries.
Federal policy must ensure effective rail competition
Rail customers have the right to effective rail competition as intended by the deregulation of the railroad industry in 1980. Congress should help ensure this right by repealing the freight rail industry’s broad exemptions from the nation’s antitrust laws and direct the Surface Transportation Board to ensure competitive rail service for all rail shippers.
Wisconsin Freight Rail Customer Alliance
The Customers First! Coalition leads an alliance called the Wisconsin Freight Rail Customer Alliance consisting of Wisconsin businesses and organizations that represent Wisconsin’s major economic sectors including electric utilities, forest and paper companies, chemical companies, agricultural producers, foundry and cast metal industry, and consumer organizations. Wisconsin FRCA follows and supports national efforts to improve our nation’s freight rail transportation policies. For more information on national rail policy reform efforts, visit the FRCA and Rail Customer Coalition websites.