CN and CP above their Maximum Grain Revenue Entitlements for Crop Year 2019–2020

OTTAWA - In a determination issued today, the Canadian Transportation Agency (CTA) ruled that revenues of the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) were above their maximum grain revenue entitlements for the crop year 2019–2020.

CN and CP now have 30 days to pay the amount by which they exceeded their 2019–2020 revenue entitlements, in addition to a five percent penalty of $158,531 for CN and $108,501 for CP. Regulations require these payments go to the Western Grains Research Foundation. This foundation is a farmer-financed and directed organization set up to fund research that benefits Prairie farmers.

 

 

The Canada Transportation Act (Act) requires the CTA to determine each railway company’s annual maximum revenue entitlement (MRE) 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 rates for services, provided the total amount of revenue collected from their shipments of Western grain remains below the ceiling set by the CTA.

 

Entitlements are calculated using a formula containing numerous elements that are established by the Act. The Volume‑related Composite Price Index (VRCPI) is one of these elements and is determined by the CTA for each of CN and CP, no later than April 30 every year. The VRCPI is an inflation index that reflects forecasted price changes for railway labour, fuel, material and capital purchases by CN and CP. 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 respective annual entitlements.

 

The entitlement varies with the tonnage moved. A railway company can remain under its entitlement so long as it does not charge more than the average rate per tonne as set by the first part of the MRE formula (base year per tonne adjusted for length of haul and inflated by VRCPI).

 

 

In the 2019–2020 crop year, 48,023,898 tonnes of Western grain were moved – 4.3 percent more than the volume moved during the previous crop year. The average length of haul was 965 miles – 1.4 percent lower than the previous crop year.