CN and CP above their Maximum Grain Revenue Entitlements for Crop Year 2019–2020
OTTAWA – December 22, 2020 – In a determination issued today, the Canadian Transportation Agency (CTA) ruled that revenues of the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) were above their maximum grain revenue entitlements for the crop year 2019–2020.
- CN’s grain revenue of $933,502,041 was $3,170,615 above its entitlement of $930,331,426.
- CP’s grain revenue of $999,230,808 was $2,170,010 above its entitlement of $997,060,798.
CN and CP now have 30 days to pay the amount by which they exceeded their 2019–2020 revenue entitlements, in addition to a five percent penalty of $158,531 for CN and $108,501 for CP. Regulations require these payments go to the Western Grains Research Foundation. This foundation is a farmer-financed and directed organization set up to fund research that benefits Prairie farmers.
Determining the Maximum Revenue Entitlement
The Canada Transportation Act (Act) requires the CTA to determine each railway company’s annual maximum revenue entitlement (MRE) 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 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 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 respective 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 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).
CN and CP moved 4.3 percent more grain this crop year
In the 2019–2020 crop year, 48,023,898 tonnes of Western grain were moved – 4.3 percent more than the volume moved during the previous crop year. The average length of haul was 965 miles – 1.4 percent lower than the previous crop year.
- The Maximum Revenue Entitlement: A Guide
- Statistics on the maximum revenue entitlement for western grain
- Determination No. R-2019-68 for the Volume‑related Composite Price Index (2019–2020)
About the CTA
The Canadian Transportation Agency is an independent, quasi-judicial tribunal and regulator that has, with respect to all matters necessary for the exercise of its jurisdiction, all the powers of a superior court. The CTA has three core mandates: helping to keep the national transportation system running efficiently and smoothly, protecting the fundamental right of persons with disabilities to accessible transportation services, and providing consumer protection for air passengers. To help advance these mandates, the CTA makes and enforces ground rules that establish the rights and responsibilities of transportation service providers and users and level the playing field among competitors, resolves disputes using a range of tools from facilitation and mediation to arbitration and adjudication, and ensures that transportation providers and users are aware of their rights and responsibilities and how the CTA can help them.