Decision on Process for Cost of Capital Methodology Review
May 30, 2011
File No.: T 6275-17
On November 4, 2010, the Canadian Transportation Agency (Agency) issued Decision No. LET‑R-185-2010. This consultation document invited comments on certain matters pertaining to the Agency's cost of capital publication/methodology from a broad distribution list of industry participants, including carriers, shippers and governments. In addition, the Agency invited comments on any other cost of capital publication/methodology issues that the participants chose to raise.
Submissions were received on or by March 31, 2011 from the following carriers: the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP); from the following shipper groups: the Canadian Canola Growers Association, the Coalition of Rail Shippers, the Western Canadian Shippers Coalition (WCSC); and from the governments of the Province of Alberta, the Province of Manitoba and the Province of Saskatchewan. By virtue of having made submissions, the Agency now considers these parties to be the participants in this process.
The Agency also stipulated in the above letter decision that parties making submissions should state their position on whether an oral hearing would be of value to the consultation and that the Agency would make a determination regarding an oral hearing, following its preliminary analysis of the initial submissions and responses. In Decision No. LET‑R-9-2011 dated January 9, 2011, the Agency indicated that this decision would be made and communicated to participants before May 31, 2011.
CP, CN and WCSC stated positions with respect to an oral hearing, as noted below - CN and CP in their initial submissions, WCSC in its response.
CP does not think an oral hearing is necessary. It submits that none of the following needs it identifies as making an oral hearing beneficial are present in this review: when the issues in debate are vague and unclear; there is a thin evidentiary base on which the tribunal can rely; there is limited Agency expertise on the matters in dispute; cross-examination is necessary due to credibility concerns; transparency of decision-making is in doubt; or competence of decision-making is at issue.
It considers that the additional time, cost and effort associated with an oral hearing would create little marginal value to what will be an already full and fair formal record that is based on the consultations that have taken place in Phases 1 and 2 of this review.
CN agrees with CP that an oral hearing is not necessary. It submits that with the additional time provided to all parties to make submissions and with the opportunity provided to respond to other parties' submissions, the written record should be sufficiently detailed and complete to render the need for an oral hearing marginal.
WCSC, in its response, indicates that although it does not dispute the criteria presented by CP, incomplete though it may be, it cannot agree with CP's /conclusion. It considers its expert's identification of errors in logic and/or application of proposals put forward in both CN's and CP's submissions gives rise, at a minimum, to significant issues of credibility.
WCSC is also concerned that the arguments presented by the experts of the railway companies may appear more convincing by sheer weight of numbers and that an oral hearing, which would provide a thorough exposure of the various proposals through cross examination, is the best and only remaining method of assuring a full and meaningful hearing. It considers these reasons, coupled with the magnitude of the economic impact of the railway companies' proposals to be a compelling argument for proceeding with an oral hearing.
The Agency has carefully considered the points of view expressed by the participants, and recognizes that many of the issues being examined in this review are both controversial and significant. However, based on its preliminary analysis of the material, the Agency concludes that it is not necessary to convene a formal oral hearing at this time. However, if its analysis of the material so far presented leads the Agency to conclude that further information is required, testing of certain assumptions is necessary or that it would be useful to get the participants' views on certain proposals, it may issue interrogatories or seek additional comment from the parties.
If the Agency determines that further consultation is required, it will inform the participants. The consultation may be undertaken through an exchange of written submissions. Alternatively, if the Agency considers it more efficient and effective, the consultation may be in the form of an expedited, issue-driven, modified oral hearing process. Such a session would be short and its scope would be limited to specific issues that the Agency finds require clarification. If held, it would take place at the Agency's offices in Gatineau, Quebec, sometime between Labour Day and the end of September, 2011. All participants are advised to note in their scheduling this possible oral hearing process at that time.
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