Revenue Cap Inflation Factor for Crop Year 2012-2013
OTTAWA – April 30, 2012 –
The Canadian Transportation Agency has announced a 9.5% increase in the Volume-Related Composite Price Index (VRCPI), which is used in determining the revenue caps for the Canadian National Railway Company (CN) and the Canadian Pacific Railway Company (CP) for the movement of western grain. Decision No. 149-R-2012 sets the index at 1.2895 for the 2012-2013 crop year beginning August 1.
Essentially an inflation factor, the VRCPI reflects a composite of the forecasted prices for railway labour, fuel, material and capital purchases. The VRCPI is one of the numerous factors included in the formula used to calculate the revenue caps. In determining the annual VRCPI, the Agency examines and verifies detailed railway submissions and collects and analyzes various data to develop forecasts.
The VRCPI determination for crop year 2012-2013 reflects the impacts of recent Agency decisions on methodologies it will use to determine the cost of capital (Decision No. 425-R-2011) and for recognizing pension costs for multi-year averaging in the labour price index (Decision No. 97-R-2012). These decisions were issued in December 2011 and March 2012, respectively, following substantive consultations and a comprehensive review. The impact from these decisions on the forecasted VRCPI for 2012-13 is 3.3% and 4.6%, respectively.
“As a regulatory body, the Agency considers it good practice to periodically undertake substantial reviews of the methodologies it uses in order to ensure a robust and current approach,” said Geoff Hare, Chairman of the Canadian Transportation Agency. “Recent Agency decisions on methodologies, such as the cost of capital and pensions, demonstrate our commitment to sound regulatory practices and to making decisions in a fair and reasonable manner.”
CN and CP combined have made voluntary contributions of approximately $2.9 billion from 2009 to 2012 into their pension funds.
The application of the two new methodologies has a one-time impact on the 2012-2013 VRCPI.
The VRCPI has grown at an average annual rate of 2.1% over the 2000-2001 to 2012-2013 period.
About the Agency
The Agency is an independent administrative body of the Government of Canada. It performs two key functions within the federal transportation system:
- As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including accessibility issues for persons with disabilities. It operates like a court when adjudicating disputes.
- As an economic regulator, the Agency makes determinations and issues authorities, licences and permits to transportation carriers under federal jurisdiction.
For more information please see the Agency’s Western Grain Revenue Cap Program Backgrounder.
For more information on the Agency’s revenue cap determinations since 2000-2001, please see the Western Grain Revenue Cap Statistics Backgrounder.
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