Railways exceed grain revenue limits for 2019-20

Railways exceed grain revenue limits for 2019-20

Canada’s big two railways have about two more weeks to hand over about $5.6 million in Prairie grain revenue overages and related penalties for the 2019-20 crop year.

The Canadian Transportation Agency (CTA) on Dec. 22 ruled Canadian National Railway (CN) and Canadian Pacific Railway (CP) each overshot their maximum revenue entitlements (MREs) for the year, by $3,170,615 and $2,170,010 respectively.

The overages, plus respective five percent penalties of $158,531 and $108,501, are payable to the Western Grains Research Foundation (WGRF), the agreed-upon beneficiary, within 30 days of the ruling date, the agency said.

The railways’ allowable MREs for the crop year were $930,331,426 and $997,060,798 respectively.

CN’s qualifying Prairie grain movements in 2019-20 totaled 23,525,161 tons, while CP’s reached 24,498,737. Their average lengths of haul came in at 1,013 and 918 miles respectively, the CTA said.

Combined, their grain handle was up 4.3 percent on the year, while their combined average length of haul, at 965 miles, was down 1.4 percent, the agency said.

About the railways?

The two railways’ annual MREs, commonly described as their revenue caps, are calculated using a formula factoring in their grain handles and the average length of haul along with the volume-related composite price index (VRCPI), an inflation index reflecting the railways’ costs for labor, fuel, materials and capital purchases.

The CTA in May 2019 set the 2019-20 VRCPIs at 1.4371 for CN and 1.5148 for CP, both up from 2018-19. Both railways later sought and got adjustments from the agency, which raised CN’s 2019-20 index to 1.4498 and CP’s to 1.5311.

The 2019-20 crop year marked the second in which CN and CP have separate VRCPIs, following amendments to the Canada Transportation Act in 2018.

The CTA in May 2019 said the increased VRCPIs for 2019-20 were based mainly on “modest increases in the fuel and material components” of the index, and from the “recognition of costs for the acquisition of hopper cars.”

CN and CP in 2018-19 both came in below their MREs, after both booking overages of seven figures above their MREs during each of the previous four crop years.

Source:  Gainews.

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