Canada’s major railway companies have been ordered to pay more than $672,000 to the Western Grain Research Foundation to support western Canadian grain research activities.
The Canadian Transportation Agency announced Dec. 19 that Canadian National Railway and Canadian Pacific Railway both exceeded their railway revenue caps for the 2011-12 crop year.
Railway revenue caps limit the amount of money that the major railway companies can earn from the movement of western Canadian grain.
CN earned revenues of $542.8 million on grain movement in 2011-12, $240,000 above its revenue cap.
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CP earned $494.4 million from grain, or $400,000 above its cap.
Under federal regulations, the companies have until Jan. 19 to compensate the WGRF for revenue earned in excess of the caps, a total value of $640,000.
In addition, a five percent penalty is imposed on each railway company, accounting for an additional $32,000.
The $640,000 penalty accounts for less than 0.1 percent of total revenues generated through the movement of western Canadian grain last year.
Total revenues generated from grain movement amounted to more than 1.03 billion in 2011-12, up from $952 million in 2010-11.
About 33.1 million tonnes of western grain were moved in the 2011-12 crop year, 6.2 percent more than total movements in 2010-11, the CTA said.
The CTA determines railway revenue caps each year and determines every December if the railways exceeded their caps during the previous crop year.
Revenue caps are calculated using a formula that is based on several factors, including the volume-related composite price index. It is an inflation index that accounts for forecasted increases in the costs of railway labour, fuel, material and capital purchases made by federally regulated railway companies.
As of August 2012, the VRCPI increased by roughly 9.5 percent.
If all other factors remained constant, that 9.5 percent increase would translate into an extra $100 million in combined allowable revenues for the two railway companies in the 2012-13 crop year.
