Legislation imperils utility and rail earnings

Carbon-reduction legislation approved by the House of Representatives in late June and ready for consideration by the Senate could sharply erode the earnings of coal-fired power generating plants and, by extension, the railroads that deliver their fuel. A Standard & Poor's report suggested that H.R. 2454, the American Clean Energy and Security Act of 2009 ("ACES"), could cut utility earnings by 20 percent. The importance of coal for rail profitability is indicated by the fact that coal accounts for more than 40 percent of rail traffic and around 20 percent of revenues. Economists say that a reduction in the earnings of either utilities or railroads could have ripple effects on their customers, including cuts in capital investment that would affect service and capacity.

Source: Railway Age