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Decision No. 203-R-2004

IN THE MATTER OF the determination by the Canadian Transportation Agency of the 2004-2005 volume-related composite price index required for Western Grain Revenue Caps established pursuant to Division VI, Part III of the Canada Transportation Act, S.C., 1996, c. 10.

File No. T6650-2

INTRODUCTION

The Canadian Transportation Agency (hereinafter the Agency) is required to determine the volume-related composite price index for crop year 2004-2005. A crop year begins on August 1 of one year and ends on July 31 of the following year.

BACKGROUND

Effective August 1, 2000, a new "revenue cap" regime for the movement of western grain by a prescribed railway company replaced the former rate scale regime for such movements. The Canada Transportation Act (hereinafter the CTA) requires the Agency to determine each railway company's revenue cap annually and to determine whether each cap has been exceeded by the railway company.

Subsection 151(1) of the CTA provides the formula that the Agency is to use in determining the revenue caps. One of the inputs to the formula is the volume-related composite price index. This index is to be determined by the Agency in advance of the crop year on or before April 30. Hence, by April 30, 2004, the Agency must determine the value for the volume-related composite price index for crop year 2004-2005.

Subsection 151(4) of the CTA states that:

The following rules are applicable to the volume-related composite price index:

(a) in the crop year 2000-2001, the index is deemed to be 1.0;

(b) the index applies in respect of all of the prescribed railway companies; and

(c) the Agency shall make adjustments to the index to reflect the incremental costs incurred by the prescribed railway companies for the purpose of obtaining cars as a result of the sale, lease or other disposal or withdrawal from service of government hopper cars.

The development of the volume-related composite price index for 2004-2005 required detailed submissions of historical price information of railway inputs (labour, fuel, material and capital) from the prescribed railway companies, currently the Canadian National Railway Company and the Canadian Pacific Railway Company. The submitted information was audited and verified by Agency staff. In addition, the railway companies and Agency staff developed forecasts for future changes in the price of railway inputs. The historical and forecasted information was summarized in an Agency report and shared with grain industry participants during a consultation session held in Winnipeg on March 25, 2004. This session included participants from producer organizations, the Canadian Wheat Board, shipper organizations, grain companies, railway companies, and federal, provincial and municipal governments.

AGENCY DECISION

The Agency's determination of the volume-related composite price index for crop year 2004-2005 is: 1.0108, or 0.9 percent lower than for crop year 2003-2004.

This determination is in compliance with subsection 151(4) of the CTA in that:

(a) the crop year 2004-2005 index is determined on the basis that the crop year 2000-2001 index was deemed to be 1.0;

(b) the index applies in respect of all of the prescribed railway companies; and

(c) the volume-related composite price index has not been adjusted to reflect the incremental costs incurred by the prescribed railway companies for the purpose of obtaining cars as a result of the sale, lease or other disposal or withdrawal from service of government hopper cars as the sale, lease or other disposal or withdrawal from service of government hopper cars has not taken place.

In making this determination, the Agency considered the views of the grain industry participants with which it consulted in March of this year. The Agency also took into account the most recent economic conditions and forecasts.

This volume-related composite price index will be applied in the legislative formula under section 151 of the CTA when the Agency is required to make its revenue cap determinations for the crop year 2004-2005, which is legislated to be rendered by December 31, 2005.