A Canadian Transportation Agency ruling will allow the railways to increase their per-tonne revenue in 2018-19
Canada’s major railway companies will be able to generate greater per-tonne revenues for moving regulated western Canadian grain in 2018-19 following an April 25 ruling by the Canadian Transportation Agency.
The CTA announced that the Volume Related Composite Price Index (VRCPI) will increase 2.8 percent in the 2018-19 crop year.
The VRCPI is a key factor that’s used to determine the railways’ maximum revenue entitlements (MREs) for moving regulated grain in Western Canada, also known as railway revenue caps.
Each year, the CTA examines the costs of various railroading inputs such as labour, fuel, materials and other capital cost items.
The cost assessments are used to establish the VRCPI, which in turn determines how much revenue can be retained by railway companies for hauling a tonne of grain over any distance.
This year’s cost analysis determined that overall 2018-19 railroading costs will increase by 3.2 percent.
That number was based on modest increases in the cost of labour and materials, a projected 4.8 percent increase in fuel costs and a 13.5 percent increase in the cost of other capital items including hopper car leases, car maintenance and amortization.
In its ruling, the CTA said anticipated investments in infrastructure and rolling stock in 2018-19 represented a significant factor in overall cost increases.
In determining fuel cost increases, the CTA applied “the average of third party forecasts” for the price of benchmark West Texas Intermediate crude, which was projected at US$60 per barrel in 2018 — up 18 percent from 2017 — and $57.90 per barrel in 2019.
Overall, railroading cost increases of 3.2 percent were tempered by a -0.4 percent adjustment, which accounts for the difference between projected costs in 2017-18 and actual costs.