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Thu, Aug. 22

State: Arizona utility takes on big railroads, wins $63M

PHOENIX - A small power cooperative in Arizona has won a major victory over two big railroads it accused of gouging it on coal-shipping rates.

BNSF Railway and Union Pacific Railroad will have to issue refunds or lower rates by about $63 million through 2018 to Arizona Electric Power Cooperative, Inc. under the Nov. 23 ruling by the federal Surface Transportation Board, which resolves railroad rate disputes.

The in-house lawyer for the nonprofit utility, known as AEPCO, said the battle against the railroads was a rare win for a customer trying to prove it was being gouged.

"It is a real victory for a captive shipper to obtain this kind of relief," attorney Skip Whitley told The Associated Press on Saturday.

A BNSF spokeswoman, Lena Kent, said the railroad is reviewing the ruling and can't comment. UP spokesman Tom Lange says his company is disappointed with the decision.

The utility filed a complaint in late 2008 after BNSF doubled its coal-shipping rates. It said it had no other way to get coal to its Apache Generating Station in Cochise - an unincorporated community in Southern Arizona's Cochise County - and was a so-called "captive shipper."

To win, it had to prove that it would be cheaper to build and run its own profitable railroad than to pay the rates the railroads were charging.

The Surface Transportation Board ordered refunds for 2009, 2010 and 2011, plus interest, and lower rates through 2018, totaling about $63 million. The net result will be an average rate reduction of 37 percent over the 10 years.

The utility says it will now be able to buy cheaper coal and avoid power rate increases or actually lower rates, which were driven to the highest in Arizona partly because of the high coal shipping coasts.

Most of the coal it now uses comes from mines in New Mexico, but it also gets some coal from Montana, Wyoming and Colorado mines.

The utility expects the lower shipping rates it won will allow it to use more coal from the Powder River Basin in Montana and Wyoming, which it believes will be cheaper because mines will compete for the sales.

"Because our rates were so high, we couldn't procure coal from a place like the Powder River Basin economically," Whitley said. "So the lower rail rate rates will give us access to (coal) that we did not have access to the last three years."

AEPCO uses its 390 megawatt plant to send electricity to its five member-owner co-ops serving about 142,000 mainly rural customers in southern and western Arizona. It also supplies a cooperative in Pahrump, Nev., and one in Anza near Palm Springs, Calif.

AEPCO had $207 million in revenues in 2010 and posted an operating margin of $9.5 million.

"For us, it's a wonderful ruling," said Reuben McBride, a board member for Graham County Electric Cooperative who also sits on the AEPCO board. "We are just tickled to death, you cannot believe it."

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