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[quote]QUOTE: Originally posted by arbfbe I am not optimistic about restoration of rail competition on the northern tier. The sad fact is the BNSF will donate more money to more candidates to block such legislation than all of the people in Montana and North Dakota will. Guess which squeak will be herad as louder. Search the internet for information about San Antonio Public Utilities and McCarty Farms and thier rate cases against the BN. See how they came out and how little has changed since. The Railroads are big, massive and powerful. They do not like their momentum disturbed by measely powers like the public, the customers or regulatory agencies. Alan [/quote] Alan, you make a good point. It would take a concerted effort by a consortium of states and captive shippers to get any action on this. The interesting thing is that the STB has not enforced the caveats of the Staggers Act that are meant to maintain competition. The railroads have been very persuasive that they cannot make the necessary ROI if they are forced to compete rail to rail for most of their traffic. They claim that the typical competitive rate only brings in revenues that provide 108% of variable costs, that they need to make 180% of variable costs to be considered "profitable", and therefore they are justified in charging their captive customers an average of 237% above variable costs. Clearly, the railroads are engaged in a risky practice of charging half their customers outrageous rates in order to internally subsidize the cut rates of the other half. This practice of robbing Peter to pay Paul has to stop, because it is destructive to the national interests. It is a de facto subsidy for the uncaptive shippers being paid for by the captive shippers, and over time the captive shippers will recede while any new investment in facilities that produce rail shipped items will occur in uncaptive areas, meaning the gravy train will eventually run dry. It also suggests that the rates being charged to uncaptive shippers are not covering the apportioned costs of the maintenance of the tracks they are accessing. As much as I hate to bring it up, the only way to resolve this is either through reregulation (which would have the effect of lowering shipping costs for captive shippers but would raise the shipping costs of uncaptive shippers, and since the rates are set by the beauracracy the net result will be negative), or through some institution of (drumroll, please) open access. If the rail infrastructure was forced to act as a separate company (and probably run as a public utility), they would have to charge rates that cover the costs of maintenance regardless of location. The big difference between this asset separation and outright reregulation is that market forces would still be setting the price in the asset separation case, thus no beauracratic overhead. Of course, there is also the option of direct subsidies to the railroads to lower their capital costs, but there is no reason to think they would pass these savings on to the customer, and any such infrastructure subsidy would have to come out of some kind of trust fund, meaning most likely a railroad diesel fuel tax in the same vein as the highway diesel fuel tax and the waterway diesel fuel tax. Such a tax would be helpless to correct the captive vs uncaptive shipper disparity, since the railroads would continue to exploit one to supplement the other.
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