Ottawa, ON — In a determination issued today, the Canadian Transportation Agency (CTA) ruled that revenues of the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) have exceeded their Maximum grain revenue entitlements for crop year 2016-2017.
CN’s grain revenue of $808,213,784 was $5,773,741 above its entitlement of $802,440,043.
CP’s grain revenue of $725,457,448 was $1,078, 947 above its entitlement of $724,378,501.
CN and CP now have 30 days to pay the amount by which they exceeded their 2016-2017 revenue entitlements, in addition to a five percent penalty of $288,687 for CN and $53,947 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 6.9 percent more grain this crop year
In the 2016-2017 crop year, 43,196,615 tonnes of Western grain were moved—6.9 percent more than the volume moved during the previous crop year. The average length of haul of 953 miles was two miles, or 0.2 percent, higher than the previous crop year.
Determining the Maximum Revenue Entitlement
The Canada Transportation Act requires the CTA 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 CTA.
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 CTA, 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.