Determination No. R-2024-123

Application

[1] On April 10, 2024, CN filed an application seeking an adjustment to its 2023–2024 VRCPI to account for additional costs that it has incurred during the 2023–2024 crop year in obtaining 1,694 hopper cars through purchase and leasing arrangements for use in the movement of regulated western grain.

[2] This determination addresses the following issue:

Should the Agency, pursuant to paragraph 151(4)(c) of the CTA, adjust CN’s 2023–2024 VRCPI to recognize the costs that it has incurred in obtaining 1,694 hopper cars for the movement of regulated western grain?

The law

[3] 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.

[4] 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

[5] CN seeks this adjustment to recognize additional costs that it has incurred during the 2023–2024 crop year as follows:

(i) In a news release issued on May 7, 2021, CN announced its plans to purchase 1,000 new hopper cars. In Agency Determination R-2022-28, the Agency adjusted the 2021–2022 VRCPI in part for the first instalment of the new cars. CN indicates in its application that it has now obtained the remainder of those cars;

(ii) In a news release dated October 5, 2023, CN announced it will acquire a further 750 new hopper cars. CN indicates that a subset of those cars were received by CN during the 2023–2024 crop year; and

(iii) CN indicates that it has entered into a leasing arrangement to obtain additional hopper cars for the movement of western grain.

[6] The costs incurred by CN in obtaining the purchased and leased cars are the subject of this adjustment.

[7] In support of its application, CN provided copies of fully executed agreements outlining the details of the various purchase and leasing arrangements described above.

[8] Based on the information filed in CN’s application, the Agency finds that CN has incurred additional costsin obtaining hopper cars for the movement of western grain that were not accounted for when CN’s 2023–2024 VRCPI was set and that these additional costs justify an adjustment to CN’s 2023–2024 VRCPI pursuant to paragraph 151(4)(c) of the CTA. Consistent with Agency Determination 374-R-2015, the Agency calculated the hopper car acquisition costs in this instance using the average of actual to date Canada/U.S. exchange rate figures.

[9] The Agency further finds that the additional costs of obtaining the hopper cars should be prorated based on the number of months that the cars will be available for use in transporting grain within the 2023–2024 crop year.

Conclusion

[10] In light of the above, the Agency, pursuant to paragraph 151(4)(c) of the CTA, adjusts CN’s 2023–2024 VRCPI set in Determination R-2023-91 from 1.8295 to 1.8364.

[11] The Agency makes this adjustment effective as of August 1, 2023, pursuant to subsection 151(6) of the CTA.

[12] The Agency will use this adjusted value in determining CN’s Maximum Revenue Entitlement for the 2023–2024 crop year, which the Agency must issue by December 31, 2024.