Canadian Wheat Board

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February 8, 2008

The Canadian Transportation Agency
Ottawa, Ontario
K1A ON9
Attention: Michel Maisonneuve
Transmitted via e-mail: consultations@otc-cta.gc.ca

The Canadian Wheat Board is writing to provide its comments in response to the Agency's request for comments in response to the review of the Railway interswitching Regulations.

The fundamental principle underlying the interswitching regulations is to provide a means of promoting railway competition within regionalized areas where the physical infrastructure for direct competition does not exist. The interswitching provisions are designed to allow shippers located within 30 kilometres of a railway interchange point to access a competing railway with the corresponding rate for this access controlled through regulation. Conceptually, these provisions should reduce the number of shippers that are captive to a single railway. Shipper captivity is an especially important issue for bulk commodities, such as grain, which are inherently captive to a single mode of transportation and which are typically captive to a single railway. The CWB is interested in increasing competition between railways wherever possible because increased competition is likely to have a positive impact on farmers' rail freight costs.

The CWB agrees with the principles and objectives that underlie the interswitching provisions. However, as a shipper, the CWB has firsthand experience with utilizing these provisions and has experienced various operational difficulties in effectively utilizing the interswitching provisions as currently exist.

The interswitching regulations state that the terminal railway is to provide a level of service that is equal to the level of service provided to the terminal carrier's line haul traffic. However, the CWB has experienced difficulty in obtaining an adequate car supply from the railways for traffic that would move under the interswitching provisions. This is especially apparent when interswitching traffic that is destined to particular destinations such as Churchill and Prince Rupert. A lack of car supply is usually combined with a reluctance on the part of the railway to provide adequate service for interswitched traffic. This suggests that monitoring and enforcing railway performance for traffic moving under the interswitching provisions should be improved so as to make the provisions more accessible and effective. These enhancements should extend to the line haul railway as well as the terminal railway.

Incorporating additional requirements relating to the handling of the cars with respect to the timeliness of clearing the interchange point as well as the re-assembly of the interswitched cars into a block shipment would improve the usefulness of these provisions for shippers because railway performance would become more reliable. Establishing quantifiable performance measures, such as requiring the terminal railway to spot the cars for loading within 24 hours of the cars being placed at the interchange point and placing the cars at the interchange point within 24 hours after loading, would enhance the usability of the interswitching provisions.

There are 18 potential interchange points between CN and the CPR within the three prairie provinces. The limited number of interchange points combined with the 30 kilometre limitation for interswitching substantially limits the usefulness of the provisions for the grain industry because relatively few primary grain elevators are located within 30 kilometres of an interchange point. Presently, there are no more than thirty primary elevators that are within the 30 kilometre limit. Expanding the distance limitation beyond the current 30 kilometres would improve the usability of the interswitching provisions. The CWB feels that the interswitching provisions should be expanded to encompass an area within 160 kilometres of an interchange point. An expansion of the interswitching distances of this magnitude would greatly enhance the usability of the provisions. An interswitching limit of 160 kilometres would make the interswitching provisions available to most primary elevators on the prairies, with the most notable exceptions being elevators located in the Peace River district, south-eastern Alberta and south-western Saskatchewan.

The current interswitching rates specify a set of rates by zone for a block of fewer than 60 cars and a corresponding rate for blocks of 60 or more cars. The rates for blocks of fewer than 60 cars are more than three times greater than the rates for blocks of 60 or more cars. Therefore, shippers have a strong incentive to utilize a larger car block wherever possible. However, the threshold of 60 cars appears to be at odds with railway operations. The railways publish incentive rates for multicar block shipments. For CN, these incentives apply for blocks of 50 and 100 cars. For the CPR, the incentives apply for blocks of 56 and 112 cars. While the shipper can capture an incentive rate for a 50 or 56 car shipment, the shipper will pay the higher interswitching rate for this car block. The higher interswitching rate will largely negate the multicar block incentive. it would seem that the threshold for the lower interswitching rate should be set at 50 cars instead of 60. Further, the CWB is of the view that an additional rate increment for interswitching blocks of 100 or more cars should be added to the interswitching rate schedule. This would reflect the railways' practices regarding incentive rates. In addition, it could be argued that an additional rate increment for shipments of 25 to 49 cars should be included within the rate provisions because non-revenue cap grain movements can be organized on the basis of 25 car blocks so as to capture the railways' rate incentives. Expanding the number of rate thresholds should allow the interswitching rates to more closely reflect the railways' costs of providing interswitching services, which should be fairer to shippers.

The CWB thanks the Agency for the opportunity to provide our comments for consideration within its review of the railway interswitching regulations. We are, as always, willing to meet with Agency staff to discuss this matter further.

Sincerely,

Ward Weisensel
Chief Operating Officer

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