OTTAWA, ONTARIO, CANADA — The Canadian Transportation Agency (CTA) last month ruled that the Canadian National Railway Co. (CN) and the Canadian Pacific Railway Co. (CP) exceeded their maximum grain revenue entitlements for the 2016-17 crop year. As a result, the two companies are subject to penalties that must be paid before the end of January.

According to the CTA, CN’s grain revenue in 2016-17 was C$808,213,784, which was C$5,773,741 above its entitlement of C$802,440,043. Meanwhile, CP’s grain revenue totaled C$725,457,448, which was C$1,078,947 above its entitlement of C$724,378,501.

The two railways must pay the amount by which they exceeded their revenue entitlements, as well as a 5% penalty of C$288,687 for CN and C$53,947 for CP. The penalties must be paid to the Western Grains Research Foundation, which is a farmer-financed and directed organization set up to fund research that benefits Prairie farmers.

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 shipments remains below the ceiling set by the CTA. To establish the entitlements, the CTA said it uses a formula that includes a variety of factors, including the Volume-Related Composite Price Index (VRCPI). The VRCPI is an inflation index that reflects forecasted price changes for railway labor, fuel, material and capital purchases by CN and CP.

The CTA indicated that CN and CP moved 6.9% more grain in 2016-17 than during 2015-16. In total, 43,196,615 tonnes of Western grain were moved, the agency said, with the average length of haul 953 miles, which was 0.2% higher than the previous crop year.