Letter From Doug Glass, Vice President & General Manager - Energy
April 26, 2007
Dear UP Circular 111, Option 2 Customer:
On January 26, 2007, the Surface Transportation Board (STB) issued a decision declaring that, after April 25, 2007, it would be an unreasonable practice for railroads to assess fuel surcharges as a percentage of freight charges on regulated rail traffic. The STB's decision was in response to rail customers' calls for fuel surcharges to be based on the attributes of the shipment, rather than as a percentage of freight charges.
On March 21, 2007, we notified all Circular 111 customers that, in order to conform to the STB ruling, Union Pacific would convert its fuel surcharge to a mileage-based charge on April 26, 2007. This new program is designed to allow Union Pacific to fairly and equitably recover its incremental fuel costs based on mileage. Under the new program, Circular 111 Option 2 customers will see changes in their fuel surcharge payments.
Union Pacific has received a complaint regarding the financial impact and legality of the new mileage-based surcharge program. In order to confirm that we are implementing the Board's decision properly, Union Pacific petitioned the STB on April 26, 2007, for a Declaratory Order clarifying the requirement to replace the rate-based fuel surcharge program for Circular 111, Option 2 customers. A copy of our petition is available here (PDF File) .
Until the matter is resolved by the Board, Union Pacific will continue to apply the percent-of-revenue fuel surcharge program that has been in effect, rather than the mileage-based program announced on March 21, 2007. Union Pacific will hold in reserve all fuel surcharge revenues from Circular 111, Option 2 customers that it collects under the percent-of-revenue program that exceed the amount Union Pacific would have collected under the new mileage-based program. Similarly, Union Pacific expects Option 2 customers who would pay more under the mileage-based fuel surcharge program to pay UP any additional balance that may be due.
We apologize for any inconvenience our decision may create and we have asked the STB to expedite its consideration of this matter. However, we feel it important that this matter be resolved by the STB before proceeding with any changes to our current fuel surcharge program for our Circular 111, Option 2 customers.
The amended Item 300 to UP Circular 111 (PDF File) which incorporates this change is effective today. If you have any questions or concerns, please contact your Account Manager.
