The Canadian Transportation Agency has recalculated the amount of revenue Canada’s major railways can earn from hauling western Canadian grain in 2018-19.
In a document dated Oct. 25, the CTA confirmed that the Volume Related Composite Price Index (VRCPI) has been adjusted to 1.4114 at Canadian National Railway and 1.4608 at Canadian Pacific Railway.
Earlier this year, the CTA had calculated the 2018-19 VRCPI at 1.4197 for both railway companies.
However, legislative changes contained in the Transportation Modernization Act, which became law in May, require that the CTA calculate a separate and distinct VRCPI number for each railway company.
With the adjustments in place, freight revenues generated from hauling a tonne of western Canadian grain over a specified distance under the maximum revenue entitlement program will rise by a maximum of 2.1 percent over 2017-18 values at CN and 5.7 percent over 2017-18 values at CP.
The VRCPI is one factor in a complex formula that is used to calculate each railway company’s maximum revenue entitlement for moving western Canadian grain over regulated rail routes.
Essentially, the VRCPI is an inflationary index that reflects anticipated increases in operational costs at CN and CP.
Among other things, it accounts for increases in the costs of key railroading inputs such as labour, fuel, materials and cost of capital.
The new VRCPI values announced Oct. 25 also give each railway company credit for commitments to buy new grain hopper cars.