CTA establishes rules on Revenue Cap regime

The Canadian Transportation Agency has established the new rules by which the Agency will determine western grain revenue under the new Revenue Cap regime for Canadian National and Canadian Pacific railways.

Effective August 1st, 2000, a new “revenue cap” regime for the movement of western grain by a prescribed railway company (currently CN and CP), replaced the former rate-setting regime for such movements. Consequently, CN and CP can price their western grain movements in response to market conditions. However, their grain revenues must not exceed a certain entitlement, which is referred to as the “revenue cap”.

The Canada Transportation Act requires the Agency to determine each railway’s revenue cap annually for western grain movements and to determine whether the railways have exceeded their respective caps.

The legislation sets out the formula the agency will use and lists certain items to be considered when the Agency determines a railway’s grain revenues.
If a railway exceeds its revenue cap, the legislation includes provisions for the pay out of any excess amount plus any applicable penalty in accordance with the regulations currently being developed by Transport Canada.

The interpretations contained in the Agency decision will affect railway grain revenues beginning with crop year 2000-2001, the Agency’s first year for revenue cap determinations. A crop year begins on August 1st of one year and ends on July 31st of the following year. The CTA is required to determine whether the railways exceeded their revenue caps for crop year 2000-2001 on, or before, December 31, 2001.