Determination No. R-2023-235

Summary

[1] [This is the Agency’s determination of the 2023 depreciation rates for CPKC pursuant to subsection 156(4) of the CTA.

[2] The Agency approves the Confidential Schedule of Depreciation Rates for use in CPKC’s accounts for the year 2023. These rates shall remain in effect until revised in accordance with section 1311 of the Uniform Classification of Accounts and Related Railway Records (UCA). Such depreciation rates are to be applied in accordance with section 1311.05 of the UCA. The approved Confidential Schedule of Depreciation Rates for use in CPKC’s accounts for the year 2023 will be transmitted to CPKC via the Agency’s secure portal on or before December 31, 2023.

Background

[3] CPKC and the Canadian National Railway Company (CN) must apply to the Agency for approval of their depreciation (also referred to as amortization) rates on an annual basis. These rates are then used to determine each railway’s yearly depreciation expense, which has historically represented a significant portion of total railway expenses.

[4] The depreciation expense is used in various contexts, such as: the annual interswitching rates determination; Agency costing information provided to an arbitrator in a Final Offer Arbitration process; development of the Guide to Railway Charges for Crossing Maintenance and Construction used in disputes about road, utility and private crossings; costing determinations in the calculation of the Maximum Revenue Entitlement; and disputes about public passenger service providers’ use of railway lines and other assets.

The law and methodology

[5] Under section 156(4) of the CTA, in prescribing a uniform classification and system of accounts for CPKC and CN, the Agency may prescribe the classes of property for which depreciation charges may properly be included under operating expenses in those accounts. In so doing, the Agency may prescribe the rates of depreciation to be charged with respect to each of the classes of property.

[6] Instructions for preparing and filing their depreciation rates are provided to CPKC and CN in sections 1311.10 to 1311.14 of the UCA. A link to the UCA is provided in the table below for ease of reference.

Analysis and determination

[7] The Agency finds that the depreciation rates submitted by CPKC have complied with UCA sections 1311.12, 1311.12 and 1311.14.

[8] CPKC is directed to complete and submit to the Agency, on or before May 31, 2024, the Schedule of Amortization Rates for 2024, along with a copy of the signed cover letter to the Schedule and any supporting details. It is requested that all replies be forwarded to: ferroviaire-rail@otc-cta.gc.ca.