S.C. agency questioning rail-cost spike
Office of Regulatory Staff seeks meeting with feds about coal-hauling rates

The State
By Chuck Crumbo
March 24, 2009

Seeking to save S.C. consumers millions of dollars in potential electric rate increases, a state agency said Monday it wants to meet with federal regulators about a spike in rail transportation costs.

The Office of Regulatory Staff has requested a meeting with the Federal Surface Transportation Board about 50 percent and 100 percent rate increases it approved for railroads to haul coal to S.C. power plants.

“We are trying to ensure that South Carolina’s electric generating plants that receive coal by rail are not painted into a corner where they have no choice but to pay exorbitant prices for coal transportation,” said Dukes Scott, executive director of the state agency.

 Transportation charges, which represent about one-third of the total cost of coal for the utilities, are passed on to consumers, Scott said.

Columbia-based South Carolina Electric & Gas Co. and Progress Energy have been hit with 50 (percent) and 100 percent cost increases for on expiring five-and 10-year contracts, Scott said.

Scott estimated the increase in rail service could cost consumers more than $100 million.

“We are increasingly concerned that the transportation rates for coal are escalating at percentages that vastly exceed most commonly used and accepted price escalators,” Scott said in a letter to Anne Quinlan, secretary of the federal board.

Railroad is the most practical way for hauling coal to the state’s 26 coal-fired power plants, Scott said. Only three of the plants can be reached by barge.

Hauling coal over the highways would require 650 truckloads to equal the amount of coal delivered by 1½ trainloads daily, Scott added.

“The highway safety and infrastructure issues, additional costs and added carbon emissions that would be involved in trucking the necessary quantity of coal into the state make it a totally prohibitive option,” Scott said.

In late February, SCE&G applied to the state Public Service Commission for a 4 percent rate hike to cover higher rail transportation costs.

If approved, the monthly electric bill of a residential customer using 1,000 kilowatt-hours per month would increase $4.52, going to $118.72 from $114.20 beginning in May.

Progress Energy, which serves about 175,000 customers in the Pee Dee region, said the N.C.-based utility is due to seek a fuel cost adjustment from S.C. regulators in May.

“We support any effort that reduces the overall cost to customers,” said Progress spokesman Mike Hughes.

Progress has one S.C. coal-fired unit in Darlington County.

SCE&G, which serves about 650,000 electric customers in South Carolina, asked state regulators to spread the price increase over two years instead of the usually one-year term.

“It was a case of either having a larger one-year increase or funding this over two years,” said Kevin Marsh, SCE&G president and chief operating officer.

Duke Energy, which has 600,000 electric customers in South Carolina, has a few more years left on its rail transportation contracts and has not been hit with price hikes, Scott said.