A Pennsylvania Power & Light Co. executive said Monday (3/17) that a recent merger proposal involving three major East Coast railroads is structured in a way that would reintroduce competition to rail service in the Northeast.
"Our position from the outset has been that PP&L is more interested in assuring the benefits of competitive rail service than in who ends up owning the tracks," said Frank A. Long, PP&L executive vice president and chief operating officer. "We are pleased that Norfolk Southern, CSX and Conrail have worked out a plan."
He said improvements in rail service competition would have benefits for electricity consumers in Pennsylvania, especially the 1.2 million homes and businesses in central eastern Pennsylvania now served by PP&L.
PP&L power plants currently are captive to Conrail for coal shipments. PP&L depends on rail shipments of about 8 million tons of coal to generate nearly two-thirds of its annual electricity production. PP&L is paying rail rates that are higher than utilities are paying in parts of the country where competitive rail service options exist.
Under the proposed joint merger plan, Norfolk Southern would take over direct rail service to PP&L power plants and to many of the Pennsylvania coal mines that supply PP&L.
Norfolk Southern has demonstrated its interest in increasing competition for rail service in the Northeast and in giving more competitive rates to PP&L, Long said.
"We have reached an understanding with Norfolk Southern that if the joint merger proposal receives regulatory approval with little or no changes, PP&L will be assured of receiving lower rail transportation rates," he said.
Transportation costs are a significant component of the cost of generating electricity with coal. Lower generating costs will improve PP&L's ability to compete for new business when consumers across Pennsylvania are able to choose an electricity provider.
The understanding with Norfolk Southern provides more competitive options for PP&L.
"We have made a lot of headway in forging a good business relationship with Norfolk Southern, which has been willing to cooperate with customers and improve the efficiency of their operations," Long said.
He noted that the joint merger proposal also would benefit other businesses in the state that rely on rail service. For example, shippers between Harrisburg and Philadelphia would have access to both Norfolk Southern and CSX rail lines, creating direct competition that currently does not exist in the state.
"As a company long interested in economic development, PP&L views the new merger proposal as a positive step for the state's business climate," he said. "We support the proposed merger because it appears to enhance competition."