Determination No. R-2024-173

Summary

[1] This is the Agency’s determination of the 2022 unit costs for CN pursuant to the Railway Costing Regulations and sections 156 and 157 of the Canadian Transportation Act (CTA).

[2] The Agency approves the:

a) CN 2022 Costing Manual and deems it appropriate for use in the development of CN’s 2022 unit costs; and

b) confidential CN 2022 unit cost values determined using the Agency-approved cost of capital rate for CN of 5.75% and deems them
    appropriate for use in legislative and regulatory cost determinations for CN operations in 2022.

Background

[3] The Agency approves each railway company’s cost to produce a unit of defined railway activities such as track and roadway maintenance, signals investment, and the like, based on system expenses for each activity and the observed system service units.

[4] The costing model developed by the Agency then determines the total variable cost, including direct activities as well as indirect supervisory, management and administration activities, to produce a unit cost for each service unit. These indirect costs are referred to as overhead, as they do not relate to service units directly, but instead relate to the direct costs of those service units (for example, when a train moves one gross ton mile, it will incur track maintenance labour costs directly, as well as indirect costs or overhead for the management of, and the equipment used by, track maintenance labourers).

[5] The unit costs are 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

[6] The Agency’s authority to prescribe unit costs for CN and CPKC is provided in subsection 156(1) of the CTA.

[7] Under section 10 of the Railway Costing Regulations and subsection 157(5) of the CTA, railway companies shall make available all unit costs, output units and other statistical and supporting information required by order from time to time by the Agency in determining whether cost submissions are acceptable for the purpose of the CTA.

[8] The Agency’s determined unit costs are final and binding as identified in subsection 157(4) of the CTA.

Analysis and determination

[9] The determination of CN’s 2022 unit costs includes updating from the approved 2021 unit costs to reflect changes in costs and operational changes, as well as changes made by CN to the allocation of expenses to various accounts of the Uniform Classification of Accounts and Related Railway Records (UCA).

[10] In developing CN’s 2022 unit costs, the Agency ensured methodological compliance with the Railway Costing Regulations, the updated 2015 UCA and the Agency-approved CN Costing Manual.

[11] The approved costing manual and approved confidential unit costs will be transmitted to CN via the Agency’s secure portal on or before December 1, 2024.

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Authority	Numeric identifier
Canada Transportation Act, SC 1996, c 10	156; 157(1); 157(2); 157(3); 157(4)
Railway Costing Regulations, SOR/80-310	10
Uniform Classification of Accounts and Related Railway Records (2014)	N/A