Regulator Examines Railroads for Hitting Customers With Late Fees
02 1월 2019 - 12:29AM
Dow Jones News
By Paul Ziobro
Federal regulators are scrutinizing fees imposed by Norfolk
Southern Corp., Union Pacific Corp. and other railroads that are
meant to get their customers on board with new procedures to
operate more efficiently.
The large U.S. railroad operators are overhauling operating
plans to streamline the movement of locomotives and railcars across
their networks, emulating the turnaround plan implemented during
the past two years at CSX Corp., which operates a rail network in
the Eastern U.S.
To encourage customers to go along, railroads are imposing fees
when customers take too long to unload railcars, don't have their
facilities ready to pick up shipments and take other actions that
could cause slowdowns on the rail network.
The Surface Transportation Board, which oversees freight rail
service and rates in the U.S., is examining the practice.
Chairwoman Ann Begeman said that while the body understands the
need to improve service, it questions the fairness of a system in
which shippers can get hit with fees but railroads aren't penalized
when their service is subpar.
"I just want to make sure they're commercially fair to the
shippers they're serving," Ms. Begeman said at a recent industry
conference.
The railroads say they do offer credits to shippers when they
are late to pick up railcars.
But the STB plans to track the fees more closely. Ms. Begeman
has requested that all of the large railroad operators provide
quarterly reports on how much they've tallied from the fees.
The STB has followed the spread of so-called precision scheduled
railroading since Chief Executive Hunter Harrison began
implementing the strategy at CSX before he died in 2017. The abrupt
changes to the Jacksonville, Fla.-based railroad operator --
including layoffs, closed facilities and idled equipment --
initially caused gridlock across the network that delayed
deliveries and disrupted the operations of some factories.
The STB fielded complaints from shippers about service, held
regular meetings with railroad executives and convened a hearing in
October 2017 about the problems and CSX's response. CSX's service
has improved over the past year, as it has moved more product at
faster speeds with fewer assets.
However, other railways, notably Union Pacific, have struggled
with additional volumes and crew shortages that have caused service
issues and congestion on parts of their networks.
Now they are following CSX with their own plans to improve
service. Union Pacific, based in Omaha, Neb., in October began a
new operating plan based on precision scheduled railroading.
Norfolk Southern, which competes with CSX in the Eastern U.S.,
in February plans to detail operational changes as well.
But as those changes take place, shippers have questioned the
fees, which some view as a way to make money rather than improve
service.
Paul Verst, chief executive of Verst Logistics Inc., a provider
of warehousing and transportation based in Walton, Ky., reached out
to the STB after Norfolk Southern, which provides rail service to
his warehouses, proposed cutting the amount of time to unload cars
from 48 to 24 hours before a $150-a-day fee would kick in.
Previously, the fee was $100.
He saw the new fee structure, which went into effect Jan. 1, as
purely a way to generate revenue. Sometimes he may need more time
to unload cars because the railroad will drop off more cars than
expected, he said.
"What they're asking us now is not fair and reasonable," Mr.
Verst said.
In a letter to the STB, Norfolk Southern CEO James Squires said
the new fee structure is intended to encourage quicker unloading of
railcars so they can be put back in use and keep the railroad
running smoothly. He said Norfolk Southern will increase the
credits it will provide customers if the railroad experiences
problems.
"We are demonstrating to them our increased confidence in our
service product, which should in turn cause them to further improve
asset utilization, creating a virtuous cycle," Mr. Squires
wrote.
Other rail shippers say the higher fees are an undue burden,
given the problems they have endured, and they are encouraged by
the STB taking a closer look.
Shippers "have not yet really seen the benefits to these
operational changes but they certainly have suffered the service
problems and are seeing new costs being added on," said Jeff Sloan,
senior director of regulatory and technical affairs for the
American Chemistry Council, a trade group. "It seems awfully
one-sided."
Write to Paul Ziobro at Paul.Ziobro@wsj.com
(END) Dow Jones Newswires
January 01, 2019 10:14 ET (15:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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