CTA Sets Revenue Caps For Grain Movement By Rail

The Canadian Transportation Agency announced a 7.4% decrease in the Volume-Related Composite Price Index that is used to establish Canadian National Railway (CN) and Canadian Pacific Railway (CPR) revenue caps for the movement of Western grain during the 2009/10 (Aug-Jul) crop year.

The index is an inflation factor that reflects forecasted price changes for railway labour, fuel, material and capital purchases by CN and CPR.

Over the last few crop years the index has not followed the typical pattern of an inflation index of relatively small increases. Instead it has fluctuated significantly as a result of changing fuel prices and a legislatively mandated adjustment, the CTA said.

During the 2007/08 season the index fell by 5.4% because it incorporated an 8.0% reduction to reflect lower hopper car maintenance costs.

In 2008/09 the index rose by 8.0% with most of the increase attributable to higher fuel prices.

The 2009/10 index was reduced to reflect lower fuel prices, the CTA said.

The revenue cap is a form of economic regulation that enables CN and CPR to set their own rates for services, provided the total amount collected remains below the ceiling set by the CTA. The caps are calculated using a formula containing numerous factors which are established by the Canada Transportation Act.

Under the Act, the CTA determines annual revenue caps for CN and CPR and whether or not each cap has been exceeded by the railway company.

The caps apply to the movement of grain from Prairie elevators or U.S. origins, to terminals at Vancouver, Prince Rupert, Thunder Bay, Churchill, as well as movements of grain up to Thunder Bay or Armstrong, Ontario destined to Eastern Canada.

The CTA is a Government of Canada administrative tribunal with quasi-judicial powers that is responsible for helping achieve an accessible and efficient transportation system. The CTA deals with, rate and service complaints arising in the rail industry; disputes between railway companies and other parties; applications for certificates of fitness for the proposed construction and operation of railways; approvals for railway line construction; regulated railway inter-switching rates; and revenue caps for the movement of Western grain by rail.

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