GATINEAU – October 26, 2018 – The Canadian Transportation Agency (CTA) has redetermined the 2018-2019 Volume-Related Composite Price Index (VRCPI) for each of CN and CP, which will be used in determining the maximum revenue entitlement for the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) for the movement of western grain in the 2018-2019 crop year. Originally issued on April 25, 2018, the VRCPI was redetermined based on a provision included in the Transportation Modernization Act (Bill C-49), which received Royal Assent on May 23, 2018.
Increases of 2.1% for CN and 5.7% for CP
The CTA re-determined CN's and CP's VRCPI for the 2018-2019 crop year to include:
- establishing a distinct VRCPI for each of CN and CP;
- adjusting the VRCPI to remove costs associated with activities that will no longer be included as revenues for the purposes of the Maximum Revenue Entitlement (MRE) program; and,
- changes to the VRCPI to reflect costs incurred by the railway companies to obtain and maintain hopper cars that are to be used for the movement of western grain.
Determination No.R-2018-225 sets the revised indices at 1.4114 for CN, an increase of 2.1% from the 2017-2018 crop year, and at 1.4608 for CP, an increase of 5.7% from the 2017-2018 crop year.
The larger percentage increase in CP's VRCPI—as compared to CN—is primarily attributable to CP's costs associated with the use of a greater number of its subsidiary companies' hopper cars. Prior to the passage of Bill C-49, the cost to use those hopper cars was only recognized to the extent that they were intended to replace government-owned hopper cars.
The VRCPIs will be applied when the CTA makes its grain revenue entitlement determinations by December 31, 2019 for the 2018–2019 crop year.
About the Volume-Related Composite Price Index (VRCPI)
Essentially an inflation factor, the VRCPI reflects a composite of the forecasted prices for railway labour, fuel, material and capital purchases. The VRCPI is one of the numerous factors included in the formula used to calculate the MRE for CN and CP. The MRE is essentially a statutory limit on the overall revenue they can earn from the movement of western grain.
