Increase in Revenue Cap Inflation Factor for Crop Year 2011-2012

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OTTAWA – April 21, 2011 – The Canadian Transportation Agency today announced a 3.5 per cent increase in the Volume-Related Composite Price Index (VRCPI) to be used to establish revenue caps on the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) for the movement of Western grain. Decision No. 136‑R‑2011 sets the index at 1.1777 for the 2011-2012 crop year beginning August 1.

The VRCPI is essentially an inflation factor that reflects forecasted price changes for railway fuel, materials, labour, and capital purchases by CN and CP.

The 3.5 % increase announced for crop year 2011-2012 is largely attributable to fuel prices, which have resulted in significant fluctuations in this index in recent years.

Changes in the major components of the VRCPI for 2011-2012 include forecast price increases of 10.7% for fuel, 2.8 % for railway materials, 2.3 % for labour; and a forecast price decrease of 0.6 % for other inputs, comprised mostly of hopper car maintenance and capital for investments. The overall increase for the year was somewhat muted by an update of the weights given to components of the index, resulting in a decrease of 0.7 %.

The revenue cap 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. The caps are calculated using a formula containing numerous factors which are established by the Canada Transportation Act. The VRCPI, one of these factors, is determined annually by the Agency no later than April 30.

Under the Act, the Agency must determine annual revenue caps for CN and CP and whether or not each cap has been exceeded by the railway company. The caps apply to the movement of grain from Prairie elevators or U.S. origins, to terminals at Vancouver, Prince Rupert, Thunder Bay, as well as movements of grain up to Thunder Bay or Armstrong, Ontario destined to Eastern Canada or for export.

About the Agency

The Canadian Transportation Agency is an independent administrative body of the Government of Canada. It acts as both a quasi-judicial tribunal and an economic regulator for various modes of transportation under federal jurisdiction, including rail, air and marine. The Agency deals with, among other things, rate and service complaints arising in the rail industry; disputes between railway companies and other parties; applications for certificates of fitness for the proposed construction and operation of railways; approvals for railway line construction; regulated railway interswitching rates; and revenue caps for the movement of Western grain by rail.

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