CN, CP exceed Western grain revenue entitlements, ordered to pay back $9M

OTTAWA – The Canadian Transportation Agency says the country’s two main railways have exceeded their Western grain revenue entitlements for the 2014-2015 crop year and must repay those sums along with penalties.

According to the transportation agency, Canadian National Railway’s grain revenue of $745,068,906 was $6,866,595 above its entitlement, while Canadian Pacific Railway received $2,137,168 above its revenue entitlement of $724,045,774.

The agency says CN and CP have 30 days to repay the amounts by which they exceeded their entitlements, in addition to a five per cent penalty of $343,330 for CN (TSX:CN) and $106,858 for CP (TSX:CP).

Regulations stipulate that such payments must be made to the Western Grains Research Foundation, a farmer financed and directed organization set up to fund research to benefit Prairie farmers.

CN and CP both said they were reviewing the agency’s decision.

In the 2014-2015 crop year, 41,306,191 tonnes of Western grain were shipped — 7.4 per cent more than in the previous crop year.

The Canada Transportation Act requires the agency to determine each railway company’s annual maximum revenue entitlement and whether such entitlement has been exceeded.

The maximum revenue entitlement is a form of economic regulation that enables CN and CP to set their own rates for services, provided the total amount of revenue collected from their shipments of Western grain remains below the ceiling set by the agency.

Entitlements are calculated using a formula containing numerous elements under the act, including forecast changes to the cost of labour, fuel, material and capital purchases, as well as tonnage carried and distance moved.