March 19, 2018 / 10:03 PM / a year ago

UPDATE 1-U.S. rail regulator tackles railroads over customer complaints

(Adds comments from Canadian National, Norfolk Southern and CSX)

By Nick Carey

March 19 (Reuters) - The top U.S. rail regulator has asked major railroads for information on service levels before meeting disgruntled shippers and other customers over complaints about service delays and higher costs.

In letters to the chief executive officers of the railroads dated March 16 that were posted on the U.S. Surface Transportation Board’s (STB) website on Monday, the regulator requested locomotive and employee numbers, and asked whether the railroads have sufficient numbers of each to meet demand.

The STB said last week it would start meeting with customers next month, signaling the agency could be open to new paths to relieve shipper pain.

The letter signed by STB acting chairman Ann Begeman and vice chairman Deb Miller cites the regulator’s “increasing concerns regarding service across the rail network,” and asks for a service outlook for the near term and for 2018.

“Please discuss your expectations for service demand in 2018, ability to serve this demand, and whether internal projections for demand in 2018 have been accurate based on actual volumes year-to-date,” the letters said, among other requests.

The letters were sent to the CEOs of Union Pacific Corp , Warren Buffett’s BNSF Railway Co, CSX Corp . Norfolk Southern Corp and Kansas City Southern . They were also sent to the CEOs of Canada’s two major railroads, Canadian National Railway Co and Canadian Pacific Railway Ltd, which have significant U.S. operations.

A spokesman for Canadian National said the railroad has “acted aggressively to address service issues... that have developed in the face of significant volume increases across our business.” It said those included leasing locomotives and raising planned 2018 capital expenditures by C$500 million ($385 million) to C$3.2 billion.

A Norfolk Southern spokeswoman said the railroad would “respond directly to the STB.”

CSX has been reporting weekly service data to the STB since August following disruptions last summer and a spokesman said the railroad has consistently shown “significant improvements across all key metrics.”

The other railroads did not immediately respond to requests for comment.

As U.S. economic growth has revved up, railroads and truck fleets have not expanded capacity to keep pace - a decision applauded by Wall Street.

The drive for cost cuts and higher margins at U.S. trucking and railroad operators is pinching their biggest customers, forcing the likes of General Mills Inc and Hormel Foods Corp to spend more on deliveries and consider raising their own prices as a way to pass along the costs. (Reporting By Nick Carey; editing by Grant McCool)

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