OTTAWA, Ont.– The Canadian Transportation Agency today issued Decision No. 451-R-2014 ruling that the revenues of the Canadian Pacific Railway Company (CP) are under its maximum revenue entitlement and that the Canadian National Railway Company (CN) has exceeded its revenue entitlement for crop year 2013-2014.
In the 2013-2014 crop year, 38,461,953 tonnes of Western grain were moved, which is 18.8 percent higher than the volume moved during the previous crop year. The average length of haul of 945 miles was just one mile, or 0.1 percent higher, than the previous crop year, said the release.
CP’s grain revenue of $623,620,236 was $1,653,714 below its entitlement of $625,273,950.
CN’s grain revenue of $672,110,852 was $4,981,915 above its entitlement of $667,128,937.
CN now has 30 days to pay the amount by which it exceeded its 2013-2014 revenue entitlement, in addition to a five percent penalty of $249,096. Government 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.
The Canada Transportation Act requires the Agency to determine each railway company’s maximum revenue entitlement annually 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 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.
Julia Kuzeljevich is Editor of Canadian Shipper. She has been writing about transportation and logistics issues since 1999. All posts by Julia Kuzeljevich