Free The Fine Print: How Big Companies Use "Plain English" to Rob You Blind by David Cay Johnston

electricity consumers, making them pay more each month.
    A little-known STB policy helps further inflate railroad prices and profits. In judging how much railroads should charge for hauling freight, the Surface Transportation Board uses a standard measure called “cost of capital.” But the cost the STB applies is a fifth higher than what Wall Street analysts use. Inflating the cost of capital distorts economic decisions. Ultimately, artificially inflated costs destroy jobs in industries that depend on goods shipped by rail, including chemicals, coal and grains.
    For much of the twentieth century railroad executives complained about union work rules, which they said forced them to retain people whose jobs were no longer necessary. The railroad companies called it worker “featherbedding.” Now we have, by government policy, what might be called “capital featherbedding.” But you won’t hear the railroad executives gripe about that.

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Railroaded
    Federal government policies force us to pay monopoly prices.
    —Terry Huval, 2012
    4. In the heart of Cajun country, Lafayette Utilities System should be able to negotiate a competitive price with the rail companies. From Kansas City on south, two railroads, the Kansas City Southern and the Union Pacific, rumble across Arkansas, delivering Wyoming coal to Louisiana. The presence of rolling stock competing for business would seem to suggest that negotiating with the two railroads would produce a good price. Unfortunately, the game of monopoly has advanced too far for that to happen.
    Although both railroads trace the eastern shore of the Red River to Lafayette, the utility’s power plant is twenty miles back upstream on the west side of the river. As it happens, the west bank is Union Pacific’s exclusive province. Well, you might say, why can’t Lafayette negotiate competitive rates from Wyoming to the Lafayette rail yards, then pay Union Pacific a monopoly rate to haul its coal the last twenty miles to the parish’s Rodemacher power plant? Sadly, it doesn’t work that way, and Lafayette pays a monopoly rate for the entire 1,520-mile trip.
    “We are a classic captive customer,” said Terry Huval, who runs the Lafayette Utilities System. “On ninety-nine percent of the route we have competitive rail service, so we would like to negotiate for competitive rates on that portion, but we cannot.” The reason is the “bottleneck” decision of the Surface Transportation Board.
    In 1996, the STB ruled, in essence, that if any portion of a trip is on amonopoly rail line, the monopoly rail can charge monopoly prices not just to the nearest junction with another railroad, but all the way. One implication is that bottlenecks become a good thing for railroads. In the case of coal, two-thirds of which moves under this monopoly-pricing rule, bottlenecks have become a very good, very profitable policy for the carrier, but not the customer.
    As usual, the implications are broad. Across America nonprofit electric utilities like Lafayette’s, as well as corporate-owned utilities, pay higher freight charges because the government rule favors monopolies (Warren Buffett surely understood this when he willingly paid a premium price to own all of the Burlington Northern Santa Fe). And what of the customers of the utilities that burn coal? The costs get passed on to them because, under rules that apply to corporate-owned utilities, the rates customers pay may include any reasonable amount paid for fuel, making these utilities largely indifferent to how much the railroads charge to deliver coal.
    You’re probably wondering what this means to your monthly electric bill. Thanks to Congress, you’re not really allowed to know that.
    Recall the Staggers Rail Act, the 1980 law that was going to bring competition to the railroad industry. Under the terms of the legislation, railroads do not have to publish the prices they charge to haul freight the way that, say, Amtrak and passenger