OTTAWA – December 22, 2011 – The Canadian Transportation Agency (Agency) today issued its Decision No. 443-R-2011, ruling that the revenues of the Canadian Pacific Railway Company's (CP) for the movement of Western grain had exceeded its revenue cap for crop year 2010-2011. The Agency has also ruled that the revenues from grain transportation of the Canadian National Railway Company (CN) for the same period were below its cap.
CP’s grain revenue of $443,822,775 was $1,252,034 above its revenue cap of $442,570,741.
CN's grain revenue of $508,403,510 was $913,447 below its cap of $509,316,957.
In the 2010-2011 crop year, 31.1 million tonnes of Western grain were moved, which is 2.5 percent lower than the Western grain volume for the previous crop year. As well, the average length of haul of 965 miles was 12 miles, or 1.2 percent lower than the previous crop year.
CP now has 30 days to pay the amount by which it exceeded its 2010-2011 revenue cap, in addition to a five percent penalty of $62,602. Government 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.
Determining the Revenue Cap
The Canada Transportation Act (CTA) requires the Agency to determine each railway company's revenue cap annually and whether each cap has been exceeded by the railway companies. 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.
Revenue caps are calculated using a formula containing numerous elements which are established by the CTA. The Volume‑Related Composite Price Index (VRCPI) is one of these elements and is determined by the Agency, 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 annual revenue caps.
The Agency is an independent administrative body of the Government of Canada. It performs two key functions within the federal transportation system:
- As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including accessibility issues for persons with disabilities. It operates like a court when adjudicating disputes.
- As an economic regulator, the Agency makes determinations and issues authorities, licences and permits to transportation carriers under federal jurisdiction.
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For more information on the Agency’s revenue cap determinations since 2000-2001, please see the Western Grain Revenue Cap Statistics Backgrounder.
For information on the Cost of Capital and VRCPI, please visit the Agency's Web site at www.otc-cta.gc.ca.
News Media Enquiries: media@otc-cta.gc.ca or 819-934-3448
General Public Enquiries: info@otc-cta.gc.ca or 1-888-222-2592
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