Pennsylvania Power & Light Co. said today (12/17) there should be no merger involving Conrail unless shippers in the Northeast have competitive rail options.
"While both suitors say their merger proposal is 'pro-competitive,' PP&L has seen no indication that combining railroads will provide the price and quality of service benefits that a number of shippers, including PP&L, would realize in a competitive situation," said Michael W. Snovitch, PP&L's manager of fossil fuel supply.
Two companies, CSX Transportation Co. and Norfolk Southern Corp., are pursuing a merger with Conrail.
PP&L, an electric utility with 1.2 million customers, is Conrail's largest coal shipper and one of its 10 largest customers overall. PP&L's coal-fired power plants are served exclusively by Conrail.
Snovitch said he has been in contact with railroad representatives and has not received a substantive proposal — one that would provide competitive options and not restrict PP&L's access to coal markets.
"Norfolk Southern has put forward a set of principles for operating a merged railroad. That's a positive step, but we have to see how the principles would apply to PP&L to assure the benefits of competition," Snovitch said.
He said PP&L is seeking access to low-sulfur coal from mines in West Virginia and Kentucky as part of its strategy to meet Clean Air Act requirements. Those mines are served by CSX and Norfolk Southern.
The utility's concern is that a merger between Conrail and one of those railroads could limit access to mines served by the other, unless a merger approval is contingent upon enhancing competition.
PP&L plans to intervene in Conrail merger proceedings that come before the Surface Transportation Board, the federal agency with jurisdiction over railroad mergers.
Under either merger proposal, the concentration of railroad power over utility coal shipments will increase, Snovitch said. A CSX- Conrail combination would serve 75 percent of all eastern utilities; a Norfolk Southern-Conrail combination would serve 50 percent.
Already pending before the Surface Transportation Board is a PP&L complaint against Conrail. PP&L is seeking relief from Conrail's high rates that prevent access to low-sulfur Appalachian coal.
PP&L ships about 8 million tons of coal annually. To promote efficient coal transportation to its power plants, PP&L has invested nearly $40 million in rail cars and related facilities.
PP&L, based in Allentown, is a subsidiary of PP&L Resources, Inc. Other PP&L Resources subsidiaries include Power Markets Development, a worldwide power company, and Spectrum Energy Services, which offers a variety of energy-related services.
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