Determination No. R-2021-45

SUMMARY

[1] The Agency set the 2020–2021 VRCPI in Determination No. R-2020-81, issued on April 30, 2020.

[2] On January 18, 2021, CN filed an application requesting that its 2020-2021 VRCPI be adjusted, pursuant to paragraph 151(4)(c) of the CTA, to reflect the costs it incurred for obtaining hopper cars pursuant to ten car supply agreements and three purchase agreements.

[3] This determination addresses the following issue:

Should the Agency, pursuant to paragraph 151(4)(c) of the CTA, adjust CN’s 2020‑2021 VRCPI to recognize the costs incurred by CN in obtaining hopper cars for the movement of grain?

[4] For the reasons set out below, the Agency adjusts CN’s 2020‑2021 VRCPI upwards from the value set in Determination No. R-2020-81 of 1.4202, , to 1.4433.

[5] Pursuant to subsection 151(6) of the CTA, the Agency makes this adjustments effective as of August 1, 2020.

[6] The Agency will use this adjusted value in determining CN’s Maximum Revenue Entitlement (MRE) for the 2020–2021 crop year, which the Agency must issue by December 31, 2021.

THE LAW

[7] Paragraph 151(4)(c) of the CTA states:

the Agency shall make adjustments to each prescribed railway company’s index to reflect the costs incurred by the prescribed railway company to obtain hopper cars for the movement of grain and the costs incurred by the prescribed railway company for the maintenance of those hopper cars.

[8] Subsection 151(6) of the CTA states:

Despite subsection (5), the Agency shall make the adjustments referred to in paragraph (4)(c) at any time that it considers appropriate and determine the date when the adjusted index takes effect.

ANALYSIS AND DETERMINATIONS

Should the Agency, pursuant to paragraph 151(4)(c) of the CTA, adjust CN’s 2020‑2021 VRCPI to recognize the costs incurred by CN in obtaining hopper cars for the movement of grain?

[9] In support of its application for an adjustment to its 2020-2021 VRCPI, CN filed ten car supply agreements and three purchase agreements. These agreements were not in place at the time that the Agency determined CN’s 2020-2021 VRCPI.

[10] The Agency notes that the car supply agreements indicate that CN has obtained a number of hopper cars from various customers as part of its car supply program wherein participants provide a specified number of cars for integration into CN’s general pool of hopper cars for the movement of grain.

[11] The Agency further notes that, pursuant to the filed purchase agreements, CN has purchased a total of 1,500 new hopper cars that will be fully available at various points throughout the 2020-2021 crop year as per the contracted delivery schedules.

[12] In light of these new agreements, the Agency finds that CN has incurred costs in obtaining hopper cars for the movement of grain that were not accounted for when the Agency determined CN’s 2020-2021 VRCPI and that these additional costs justify an adjustment to CN’s 2020-2021 VRCPI pursuant to paragraph 151(4)(c) of the CTA.

[13] The Agency further finds that the additional costs of obtaining the hopper cars should be prorated based on the number of months the cars will be available for use in transporting grain within the 2020-2021 crop year.

CONCLUSION

[14] In light of the above, the Agency, pursuant to paragraph 151(4)(c) of the CTA, adjusts CN’s 2020–2021 VRCPI originally set in Determination No. R-2020-81 from 1.4202 to 1.4433.

[15] The Agency makes this adjustment effective as of August 1, 2020 pursuant to subsection 151(6) of the CTA.