Co-ops worry about railroad supply shocks

Washington (Platts)--16Mar2007

Calling freight railroad networks "fragile," two Arizona cooperative
executives told Platts that they are concerned about any potential disruption
in railed coal deliveries that could wipe out inventories and force the
cooperatives to seek more expensive power from the wholesale market.

Describing the difficulties power plant managers deal with every day in
maintaining adequate supplies of coals for blending at power plants, Arizona
Electric Power Cooperative CEO Donald Kimball and Trico Electric Cooperative
CEO Mark Schwirtz said they remain concerned about railroads' ability to keep
supplies coming if a major disruption occurs.

"It doesn't take that much to cause a problem that disrupts coal supplies, and
any hiccup in the transportation system can have serious consequences for
power generators," Schwirtz said. "If there is a hiccup in the system and our
coal supplies are disrupted, the impact can be great ? we can run out of coal
supply very quickly and we have to go to find more expensive sources to keep
generating electricity."

Schwirtz said a supply disruption does not necessarily need to be on the scale
of the twin derailments on the Powder River Basin Joint Line in summer 2005,
but can be due to "any kind of problems with weather, natural floods or snow."
He said that as a result of such disruptions, "coal supply dwindles very
quickly."

Kimball, the CEO of Customers United for Rail Equity, is leading a lobbying
group of captive railroad customers. He was in Washington on March 15 to lobby
Congress to pass recently introduced legislation that would remove railroad
anti-trust protections that he said allows the major railroads to behave like
monopolies and increase rates as they wish.

-- Marcin Skomial, marcin_skomial@platts.com