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Wisconsin Electric Power Suing Union Pacific Over Coal Deliveries

Another electric utility filed suit last month against Union Pacific Railroad Co. (UP) alleging the railroad has failed to honor coal delivery obligations.

Wisconsin Electric Power Co. (WEPCO) is suing UP in federal court, alleging it has been overcharged for coal deliveries, that UP has failed to provide service as agreed and that the railroad has failed to operate in good faith. Earlier in April, Entergy filed suit against the railroad for similar reasons.

WEPCO spokesman Barry McNulty told NGI that damages related to the suit could total about $23 million, representing overcharges and the cost of replacement coal and replacement power. He said UP's actions have driven up the cost of power for Wisconsin customers.

WEPCO, doing business as We Energies, maintains that UP has failed to substantiate a claim of force majeure that the railroad claims excused it from delivering coal to We Energies' plants at "backhaul rates," which were more favorable to the power company. WEPCO claims it has been overcharged by more than $7.3 million between May 1, 2004 and Nov. 30, 2005.

"UP claimed that the Force Majeure was effective May 1, 2004, and that the Backhaul Rates would no longer apply commencing on that date," WEPCO's complaint reads. "UP's purported Force Majeure claim did not include any information pertaining to when it first learned of the event it was claiming triggered the Force Majeure provision, nor did it provide any information concerning what actions, if any, it had taken to mitigate the alleged impacts of the event."

Further, WEPCO, in its suit filed in District Court for Wisconsin's eastern district, maintains that UP failed to deliver all the coal in its "declared tonnage," which it was obligated to deliver, for the years 2004, 2004 and 2005. In 2003, WEPCO says the railroad failed to deliver 158,000 tons; in 2004, 200,000 tons; and in 2005, 337,000 tons. "UP refused and failed to provide sufficient railcars and/or all necessary locomotives to enable WEPCO to transport its declared tonnages in each of the years 2003, 2004 and 2005. UP's refusal and failure to provide sufficient railcars and/or all necessary locomotives and other equipment and facilities resulted in delivery shortfalls under the Agreement that have caused substantial injury to WEPCO."

Finally, WEPCO says that while UP was failing to meet its obligations to the Wisconsin utility company, it was "making deliberate, conscious decisions to use its railcars, locomotives and other equipment and facilities to deliver coal from Colorado origins to other contract shippers, instead of meeting WEPCO's Monthly Shipping Schedules..."

UP spokesman James Barnes said the company could not comment on the suit until its lawyers reviewed the complaint. "UP complied at all times with its contractual obligations," he said.

UP is the only rail carrier that serves WEPCO's Oak Creek Generating Station in Milwaukee County, WI, and it is the only carrier that serves the Colorado mines from which WEPCO gets coal to burn in its Valley Generating Station in Milwaukee County and its Presque Isle Generating station in Marquette County, MI.

Earlier in April, Entergy filed suit against UP, maintaining the railroad failed to abide by an agreement to deliver Powder River Basin coal to two Entergy plants in Arkansas. Entergy has incurred "tens of millions of dollars in damages" due to UP's failure to abide by an agreement related to the delivery of PRB coal to two Entergy power plants in Arkansas, Entergy Arkansas Inc. (EAI) and Entergy Services Inc. (ESI) alleged in an April 11 court filing.

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