OTTAWA, ONTARIO, CANADA — In a determination issued on Dec. 30, the Canadian Transportation Agency (CTA) ruled that revenues of the Canadian National Railway Co. (CN) and the Canadian Pacific Railway Co. (CP) were below their maximum grain revenue entitlements for crop year 2018–19.
CN’s grain revenue of $933,357,710 was $371,116 below its entitlement of $933,728,826.
CP’s grain revenue of $862,734,965 was $764,101 below its entitlement of $863,499,066.
As both railway companies’ revenues did not exceed their respective maximum revenue entitlements, no overage-related payouts or penalties were assessed for this crop year.
The Canada Transportation Act (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 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 labor, 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, so that 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 2018–2019 crop year, 46,060,737 tonnes of Western grain were moved under the MRE program, 13.4% more than the volume moved during the previous crop year. The average length of haul of 979 miles was 2.7% higher than the previous crop year.