CN, CP both below maximum grain revenue entitlements for 2018-19 crop year

The Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) will not have overage-related payouts or penalties due to falling below their respective maximum grain revenue entitlements for the 2018-19 crop year.

The amount of western grain moved under the MRE program during 2018-19 was 46,060,737 tonnes, 13.4% more than the volume moved during the previous crop year.

The Canadian Transportation Agency (CTA) ruled today that CN was $371,116 below its maximum revenue entitlement (MRE) of $933,728,826. While CP was also below its MRE of $863,499,066 by $764,101.

The amount allocated to each company is a requirement of the Canada Transportation Act which determines each railway company’s annual MRE and whether each entitlement has been exceeded. The MRE 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 from their shipments of Western grain remains below the ceiling set by the CTA.

These allowances are calculated using a formula containing several elements established by the Act. The Volume-related Composite Price Index (VRCPI) is one of the elements used, 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 which 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 can vary with the amount of tonnage moved, so that 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).

If a railway company exceeds its MRE, the company has 30 days to pay the excess amount, plus a penalty, to the Western Grains Research Foundation, a farmer-financed and directed organization set up to fund research that benefits Prairie farmers.

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