OTTAWA, ON - In a determination issued today, the Canadian Transportation Agency (CTA) ruled that revenues of the Canadian National Railway Company (CN) were above and the Canadian Pacific Railway Company (CP) were below their maximum grain revenue entitlements for the crop year 2020–2021.
- CN's grain revenue of $1,044,909,345 was $2,399,676 above its entitlement of $1,042,509,669.
- CP's grain revenue of $1,014,927,140 was $20,248,072 below its entitlement of $1,035,175,212.
CN now has 30 days to pay the amount by which it exceeded its 2020–2021 revenue entitlement and a five percent penalty of $119,984. Regulations require these payments to go to the Western Grains Research Foundation. This foundation is a farmer-financed and directed organization to fund research that benefits Prairie farmers.
CN and CP moved record amounts of grain this crop year
In the 2020–2021 crop year, 52,334,795 tonnes of Western grain were moved – 9.0 percent more than the volume moved during the previous crop year and the highest volume ever on the record.
Determining the Maximum Revenue Entitlement
The Canada Transportation Act (Act) requires us to determine each railway company's annual maximum revenue entitlement (MRE) and whether each entitlement has been exceeded. The 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 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 reflecting 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 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, overall, 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).
Source : Cision