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Consultation on the Agency's Regulatory Costing Model (ARCM)

The consultation is closed

This consultation took place between January 9 and February 28, 2017.

We are analyzing the input.

Agency staff is seeking interested parties' views on three underlying issues at the core of the Agency's regulatory costing model (ARCM), which is the broad set of relationships used in determining regulatory costs for all federal railway companies, subject to the Canada Transportation Act.

In a major study culminating in 2015, the Agency updated the proportion of each cost activity that is estimated to vary with changes in traffic volume. In Decision No. 2015-R-91, the Agency directed staff to undertake a more fundamental comprehensive review of the costing model. Specifically, the Decision directed staff to review:

  • the existing aggregations of cost activities;
  • the appropriate traffic-related variables influencing the cost activities;
  • the appropriate data for analyzing the cost and the traffic volume relationships;
  • the appropriate empirical methodologies for analyzing these relationships.

Staff undertook preliminary consultations and discussions with CN and CP to solicit their views, and both railway companies also provided written proposals.

The Agency will rule on the appropriate methodology for regulatory cost applications following consideration of the comments of all parties.

Issues to be addressed

  1. Which approach is more appropriate for regulatory costing purposes?
    1. A more detailed disaggregated costing approach that analyzes all costs at the Uniform Classification of Accounts (UCA) account level against potentially significant traffic variables; or,
    2. A simpler, more aggregated approach that groups selected UCA cost accounts comprising what may be viewed as the most important activities together, assesses the relationships of the selected accounts against potentially significant traffic variables, and treats the remaining UCA accounts as fixed costs to be allocated as a share of the direct costs.
  2. What is the appropriate approach to determine the variable portions of the individual cost accounts?
    1. A data-driven empirical approach; or,
    2. A non-empirical assignment based on railway companies' knowledge and experience.
  3. Are there alternative approaches to determining railway costs that rely on publicly-available railway data?

How to participate

Interested parties are invited to respond to questions in the Agency's discussion document and provide their comments.

To request a copy of the Discussion Document, please e-mail consultations@otc-cta.gc.ca with the subject line: Consultation on Agency's Regulatory Costing Model.

Please note that the consultations close Tuesday, February 28, 2017.

E-mail your submission to consultations@otc-cta.gc.ca

Questions? E-mail consultations@otc-cta.gc.ca

TTY: 1-800-669-5575

Milestones

Status
We are analyzing the input.
Date modified: