CP under and CN over Western Grain Revenue Entitlements for Crop Year 2013-2014
OTTAWA – December 18, 2014 – 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.
CN and CP moved over 18 percent more grain this crop year
In the 2013-2014 crop year, 38,461,953 million 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.
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 they exceeded their 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.
Determining the Maximum Revenue Entitlement
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.
The Canadian Transportation Agency is an independent administrative body of the Government of Canada. It performs two key functions within the federal transportation system:
- As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including accessibility issues for persons with disabilities. It operates like a court when adjudicating disputes.
- As an economic regulator, the Agency makes determinations and issues authorities, licences and permits to transportation carriers under federal jurisdiction.
For more information on the Agency’s revenue cap determinations since 2000-2001, please see the Western Grain Maximum Revenue Entitlement Statistics Backgrounder.
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