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We Energies files suit against Union Pacific

“There’s really only one railroad for most businesses. That monopoly-type authority has allowed the railroad industry over the last two years to really reduce the level of service they provide.”

Pat Schillinger
President
Wisconsin Paper Council

Madison – We Energies filed a federal lawsuit against Union Pacific Corp. on
Tuesday accusing the railroad of overcharging the utility by millions of dollars
for transporting coal to its plants in Wisconsin and Michigan.

The utility
said the overcharges have contributed to higher electric prices for Wisconsin
consumers — a claim disputed by rail advocates.

The filing reflects dissatisfaction
among some Wisconsin utilities and other businesses with the rail industry, which
they claim has consolidated into a near-monopoly.

The U.S. House railroad
subcommittee was scheduled to hold a hearing Wednesday in Washington on the nation’s
railway capacity.

“There’s really only one railroad for most businesses,”
said Pat Schillinger, president of the Wisconsin Paper Council. “That monopoly-type
authority has allowed the railroad industry over the last two years to really
reduce the level of service they provide.”

The council is a member
of Badger-Cure, a coalition of utilities and forest-product companies that formed
to counter railroad pricing policies.

Railroad advocates insist utilities
and other businesses are looking for a scapegoat for their own rising prices.

“Who
do they complain about?” said Tom White, a spokesman for the Association
of American Railroads. “They’re going to complain about the railroad.
There’s no sense in that at all.”

According to the lawsuit, filed
in U.S. District Court in Milwaukee, We Energies had a contract with Union Pacific
that called for the railroad to ship coal from Wyoming and Colorado to the utility’s
power plants in Michigan and southeastern Wisconsin.

Hit to consumers

But
Union Pacific, the nation’s largest railroad, failed to deliver nearly 700,000
tons of coal from 2003 to 2005, according to the lawsuit.

We Energies sent
a letter to the Omaha, Neb.-based company in 2004 telling the railroad its delivery
shortfalls forced the utility to spend $2.6 million in 2003 alone to find and
transport coal from elsewhere.

The railroad claimed its performance was
affected because its agreements to move iron ore to Utah fell through and it would
have to apply higher rates for coal, according to the lawsuit.

The complaint
challenges the railroad’s rate decision and seeks about $23 million in reimbursement,
We Energies spokesman Barry McNulty said. He blamed the railroad for helping to
drive up electric rates.

“This is part of the drivers that have led
to increased costs for Wisconsin consumers,” McNulty said.

Union Pacific
spokesman Mark Davis said he had not seen the lawsuit and declined to comment.

PSC
investigating

The Wisconsin Public Service Commission, which regulates
energy prices in the state, launched a probe last month into rising rail rates
for coal transportation and delivery reliability. According to the PSC, the rail
industry has consolidated so much since the 1980s that only four major railroads
now provide most of the nation’s rail transportation.

Most of the coal
Wisconsin relies on to produce electricity comes from Montana, Wyoming and the
Appalachians, according to the PSC.

White said the price of coal has more
than doubled in recent years. According to the Wisconsin PSC, a ton of coal that
went for about $6 in 2003 costs as much as $20 per ton today.

“Their
real problem is not the railroads. The real problem is the cost of energy has
gone up,” White said.

Chuck Baker, executive director of the National
Railroad Construction and Maintenance Association, which represents railroad contractors,
said the allegations of monopoly-style prices are exaggerated and designed to
create cheaper rates.

Railroads are forced to put much of their profits
back into maintaining tracks and cars to provide better service, Baker said.

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