Consultation on Cost of Capital Rates

As part of its mandate to support the efficiency of Canada's national transportation system, the Canadian Transportation Agency (CTA) calculates regulated cost of capital rates, which the CTA uses in various rail related determinations – including regulated interswitching and the Maximum Revenue Entitlement (MRE).

The CTA is now holding public consultations on two components of regulated cost of capital rates:

  1. Net Rail Investment; and
  2. Capital Structure.

Based on the input received, the CTA may propose changes to its methodology for calculating cost of capital rates.

Our goal is to ensure that the methodology we use to calculate cost of capital is rigorous, transparent, and fair for rail system users, including shippers, and railway companies. The methodology we use should also treat railway companies consistently. In recent years, the CTA has observed differences in reporting of certain cost of capital elements by the railway companies. As a result, the CTA in Decision No. LET-R-29-2020 and Decision No. LET-R-30-2020 adopted an interim methodology on some of these elements to better align the approaches. As part of our consultation process, we are seeking input on various issues that can help to establish a longer-term solution.

Any changes the CTA makes to the methodology for calculating cost of capital as a result of these consultations could result in a modest difference in rail-related determinations such as regulated interswitching and the MRE.

These consultations build upon a series of initiatives the CTA has taken in recent years to modernize its framework for rail. Recently, the CTA has updated various rail-related regulations (July 2019); extensively reviewed the methodology for determining the cost of common equity rate, leading to Determination R-2019-229 on this issue in December 2019; consulted on regulated interswitching rates, which informed the CTA's 2020 interswitching determination; and, recently began consultations on rail interswitching regulations.

We recognize that these are difficult and unusual times, with people and businesses affected in many different ways by the pandemic. At the same time, we continue to look for and value feedback on important rail sector issues.

Our discussion paper discusses the proposed changes in detail and also asks questions that you can answer about each of them.

Consultation Process

You are invited to submit your input to the questions posed in our discussion paper by November 25, 2020. You are invited to respond to all questions, or simply those questions that are of interest to you or your organization. Your responses to the questions should include a supporting rationale and evidence to allow the CTA to properly assess its validity.

Your initial public submissions will be posted on here on December 2, 2020 in the official language in which they were submitted, along with your name or that of the organization represented.

Stakeholders can provide responses to initial submissions by January 4, 2021.

Public versions of the responses will be posted here by January 11, 2021.

Input can be sent to ferroviaire-rail@otc-cta.gc.ca.

If you wish to submit a video due to accessibility issues, please send an email to ferroviaire-rail@otc-cta.gc.ca with the subject line "Video". We will contact you to coordinate your submission.

Confidential Information

If any document you send us contains information you believe should be treated as confidential, you must give us two copies of it, as follows

  1. One copy (the public version) from which the confidential information has been blacked out.
  2. One copy (the confidential version) in which:
    • each page is marked “contains confidential information” at the top; and
    • you highlight or otherwise identify on each page the confidential information that was blacked out in the first copy. 

We will post the public version on our website, and keep the confidential one for our own use only. However, all input we receive is subject to the Access to Information Act and Privacy Act. We will protect the confidentiality of your information in accordance with these Acts, but those Acts can require us to release information if someone requests it and if it doesn't fall within the legislated exceptions.

Reference material

Milestones

Status
Deadline for submissions: November 25, 2020
Date modified: