OTTAWA – December 29, 2015 – In a decision issued today, the Canadian Transportation Agency ruled that revenues of the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) have exceeded their Western grain revenue entitlements for crop year 2014-2015.
- CN's grain revenue of $745,068,906 was $6,866,595 above its entitlement of $738,202,311.
- CP's grain revenue of $724,045,774 was $2,137,168 above its entitlement of $721,908,606.
CN and CP now have 30 days to pay the amount by which they exceeded their 2014-2015 revenue entitlements, in addition to a five percent penalty of $343,330 for CN and $106,858 for CP. Regulations stipulate that such payments must be made to the Western Grains Research Foundation, a farmer-financed and directed organization set up to fund research that benefits Prairie farmers.
CN and CP moved over 7.4 percent more grain this crop year
In the 2014-2015 crop year, 41,306,191 tonnes of Western grain were moved—7.4 percent more than the volume moved during the previous crop year. The average length of haul of 947 miles was two miles, or 0.2 percent higher, than the previous crop year.
Agency defers decisions on two adjustments requested by CN
In submissions made this fall, CN asked the Agency to accept a total of six adjustments that it applied to the preliminary Grain Traffic Database (GTDB) CN had originally filed in June 2015. After examining the details of CN's request, CN was informed that four of the six proposed adjustments were routine and would be accepted.
Two of the requested adjustments were more complex and constitute material changes that require more detailed examination. They are therefore not considered in this year's determination.
Given the potential significance of the changes requested, the Agency intends to first consult with industry stakeholders, including railway companies, grain shippers, producer groups and associations, provincial governments, and municipal associations.
Determining the Maximum Revenue Entitlement
The Canada Transportation Act requires the Agency to determine each railway company's annual maximum revenue entitlement and whether each entitlement has been exceeded. The maximum revenue entitlement is a form of economic regulation that enables CN and CP to set their own rates for services, provided the total amount of revenue collected from their shipments of Western grain remains below the ceiling set by the Agency.
Entitlements are calculated using a formula containing numerous elements which are established by the Act. The Volume-related Composite Price Index (VRCPI) is one of these elements and is determined by the Agency, no later than April 30 every year. The VRCPI is an inflation index which reflects forecasted price changes for railway labour, fuel, material and capital purchases by CN and CP, the two federally-regulated railways. The index, along with the actual tonnage of grain that was hauled and the average length of haul during the crop year for each railway, is used to determine the annual entitlements.
The Canadian Transportation Agency is an independent administrative body of the Government of Canada. It performs two key functions within the federal transportation system:
- As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including accessibility issues for persons with disabilities. It operates like a court when adjudicating disputes.
- As an economic regulator, the Agency makes determinations and issues authorities, licences, and permits to transportation carriers under federal jurisdiction.
For more information on the Agency's maximum revenue entitlement determinations since 2000-2001, please see the Western Grain Maximum Revenue Entitlement Statistics Backgrounder.
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