Canada’s largest railway companies have been cleared to charge more for moving western Canadian grain in the 2016-17 crop year.
In an April 29 ruling, the Canada Transportation Agency (CTA) confirmed that the volume-related composite price index, or VCPRI, will increase 4.8 percent as of Aug. 1.
The VRCPI is part of a complex regulatory formula that is used to calculate maximum revenue entitlements, or MREs, for Canadian National Railway and Canadian Pacific Railway.
MREs, also known as railway revenue caps, limit the amount of revenue that a railway can generate for moving a tonne of western Canadian grain over any given distance.
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Last week’s VCRPI adjustment means that grain companies — and farmers by extension — will pay more to have grain moved on regulated corridors to export terminals in Vancouver, Prince Rupert or Thunder Bay.
The 4.8 percent increase sets the VCRPI at 1.3275 compared to a baseline of 1.0 in 2000-2001.
In other words, regulated freight rates have increased by 32.75 percent over the past 16 years.
The VRCPI accounts for inflationary pressures on a variety of railway costs, such as labour, fuel, maintenance, capital costs and pension liabilities.
The CTA reviews the index every year, essentially determining how much money railway companies can earn for moving a tonne of prairie grain over any distance.
Grain that is moved on non-regulated routes is exempt.
In its 2016-17 determination, the Canada Transportation Agency concluded that railway wages and worker benefits will increase by 1.4 percent , fuel costs will increase 1.3 percent and the cost of materials will increase 1.5 percent.
The agency also adjusted the 2015-16 VCRPI to account for the difference between projected costs as determined by the CTA, and actual costs based on data provided by the railways.
The VCPRI increase announced last week follows a 4.9 percent VRCPI decrease announced a year ago.
The index has grown at an annual average compounded rate of 1.8 percent per year since MREs were introduced in August 2000.
brian.cross@producer.com
