CN and CP exceed their Maximum Grain Revenue Entitlements for Crop Year 2017-2018
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) have exceeded their maximum grain revenue entitlements for crop year 2017-2018.
CP's grain revenue of $709,499,416 was $1,500,513 above its entitlement of $707,998,903.
CN and CP now have 30 days to pay the amount by which they exceeded their 2017-2018 revenue entitlements, in addition to a five percent penalty of $52,364 for CN and $75,026 for CP. 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.
CN and CP moved 6.0 percent less grain this crop year
In the 2017-2018 crop year, 40,618,285 tonnes of Western grain were moved—6.0 percent less than the volume moved during the previous crop year. The average length of haul of 953 miles was unchanged from the previous crop year.
Determining the Maximum Revenue Entitlement
The Canada Transportation Act requires the CTA to determine each railway company's annual maximum revenue entitlement 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 from their shipments of Western grain remains below the ceiling set by the CTA.
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 CTA for each of CN and CP, 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 respective annual entitlements.