Saskatchewan - Ministry of Highways and Infrastructure

Policy and Programs Division

February 29, 2008

Mr. Michel Maisonneuve
Canadian Transportation Agency
Rail and Marine Complaints and Audit Services Directorate
Jules Leger 15 Eddy Street
GATINEAU QC KIA 0N9

Dear Mr. Maisonneuve:

Re: Review of the Railway Interswitching Regulations

The Ministry of Highways and Infrastructure is pleased to provide comments for the Canadian Transportation Agency's review of the Railway Interswitching Regulations and proposed interswitching rate changes. Saskatchewan supports the continuation of regulated interswitching rates, as a means of providing effective rail competition for shippers where this option is available.

Saskatchewan supports maintaining the contribution toward fixed costs of 7.5 per cent of variable cost. This level of contribution above the variable cost to the servicing carrier ensures that the carrier who uses interswitching to access the customer can compete effectively with the originating carrier, while offering appropriate compensation to the railway for the costs incurred in providing the service.

Saskatchewan believes railway interswitching rates should be established at or near the level of variable cost associated with providing rail service, to prevent cost disadvantages for railways that use interswitching to access customers. The interswitching provisions of the Canada Transportation Act require the Agency to "consider the average variable costs of all movements of traffic". In addition, interswitching rates set by the Agency need to be "commercially fair and reasonable to all parties". Saskatchewan believes the "commercially fair and reasonable" level of interswitching rates should be the price that would exist under effective competition.

Saskatchewan is concerned that the proposed interswitching rate changes include significant differentials in the rates for similar car block sizes within the two-tiered rate structure, which are not consistent with the provision for cost-based rates in the interswitching regulations.

For example, a multi-car block of 55 cars would cost 190 to 275 per cent more to interswitch than a multi-car block of 60 cars for various hauling distances, under the Agency's proposed rate structure (see Appendix).

Establishing interswitching rates by averaging costs over a wide spread of block movements tends to distort the upper and lower ends of the rate tiers. Saskatchewan believes the price differentials established in the proposed rate structure for similarly sized multi-car blocks at the upper end of the first tier, and the lower end of the second tier do not accurately reflect the average variable costs associated with moving these car blocks. Saskatchewan questions whether establishing a rate differential of this magnitude for multi-car blocks of similar sizes, within the two-tiered rate structure, is commercially fair and reasonable to all parties.

The rate spread between small and large car blocks within each of the four interswitching zones would also increase under the proposed rates, particularly for shorter distances. Interswitching rates for multi-car blocks of less than 60 cars would increase by 4 and 6 per cent more than for blocks greater than 60 cars in Zones 1 and 2, respectively, with only modest increases proposed in Zones 3 and 4.

The widening spread in interswitching rates between zones reflects the small size of the traffic base for movements over short distances, which contributes to higher unit. costs for car blocks of less than 60 cars. The proposed price increases for Zones 1 and 2 could further limit opportunities for small shippers to access a second rail carrier to obtain competitive rates and service.

Saskatchewan recognizes that the unit costs associated with interswitching generally vary inversely with car block size and hauling distance. This allows the interswitching rate structure to reflect economies of scale associated with larger multi-car blocks, while capturing operating cost savings from movements over longer distances.

The discrepancies in the proposed interswitching rates could be alleviated by revising the rate structure to reduce the price differentials for similarly sized multi-car blocks within the two tiers, to better reflect the average variable costs associated with these movements. Appropriate price increments could be developed by the Agency for multi-car blocks of various sizes within the tiered rate structure, to establish cost-based rates that are commercially fair and reasonable to all parties.

Some shippers have expressed concerns that the limited number of interchange points, totalling 18 in the Prairie provinces, has constrained opportunities to use interswitching to promote rail competition. In addition, consolidation of the primary elevator system has reduced the number of grain handling facilities with access to an interchange point within a radius of 30 km.

Shippers have indicated that co-production agreements and other commercial arrangements between CN and CP Rail have increased the interchange of traffic at points located outside the four interswitching zones, where regulated interswitching rates are not available.

Saskatchewan suggests that the Agency consider reviewing the interchange of traffic under co-production agreements and other contractual arrangements. This may allow the Agency to determine whether interswitching zones and/or distances could be adjusted to reflect changes in railway operations, and potentially benefit the shipper community.

Sincerely,

George Stamatinos
Assistant Deputy Minister

Attachment

cc: John Law, Deputy Minister, Ministry of Highways and Infrastructure Alanna Koch, Deputy Minister, Ministry of Agriculture


APPENDIX
INTERSWITCHING COSTS FOR MULTI-CAR BLOCKS
  CarsCost
ZONE 1
(0 - 6.4 km)
1 $ 205.00
5 $ 1,025.00
10 $ 2,050.00
15 $ 3,075.00
20 $ 4,100.00
25 $ 5,125,00
30 $ 6,150.00
35 $ 7,175.00
40 $ 8,200.00
45 $ 9,225.00
50 $10,250.00
55 $11,275,00
60 $ 3,000.00
65 $ 3,250.00
70 $ 3,500.00
75 $ 3,750.00
80 $ 4,000.00
85 $ 4,250.00
90 $ 4,500.00
95 $ 4,750.00
100 $ 5,000.00
105 $ 5,250.00
110 $ 5,500.00
115 $ 5,750.00
ZONE 2
(6.4 - 10 km)
1 $ 215.00
5 $ 1,075.00
10 $ 2,150.00
15 $ 3,225.00
20 $ 4,300.00
25 $ 5,375.00
30 $ 6,450.00
35 $ 7,525.00
45 $ 9,675.00
40 $ 8,600.00
50 $10,750.00
55 $11,825.00
60 $ 3,300.00
65 $ 3,575.00
70 $ 3,850.00
75 $ 4,125.00
80 $ 4,400.00
85 $ 4,675.00
90 $ 4,950.00
95 $ 5,225.00
100 $ 5,500.00
105 $ 5,775.00
110 $ 6,050,00
115 $ 6,325.00
ZONE 3
(10 - 20 km)
1 $ 245.00
5 $1,225,00
10 $ 2,450.00
15 $ 3,675.00
20 $ 4,900.00
25 $ 6,125.00
30 $ 7,350.00
35 $ 8,575.00
40 $ 9,800.00
45 $11,025.00
50 $12,250.00
55 $13,475.00
60 $ 4,200.00
65 $ 4,550.00
70 $ 4,900.00
75 $ 5,250.00
80 $ 5,600.00
85 $ 5,950.00
90 $ 6,300.00
95 $ 6,650.00
100 $ 7,000.00
105 $ 7,350.00
110 $ 7,700.00
115 $ 8,050.00
ZONE 4
(20 - 30km)1$ 300.00
5 $ 1,500.00
15 $ 4,500.00
20 $ 6,000.00
25 $ 7,500.00
30 $ 9,000.00
35 $10,500.00
40 $12,000.00
45 $13,500.00
50 $15,000.00
55 $16,500.00
60 $ 5,100.00
65 $ 5,525.00
10 $ 3,000.00
70 $ 5,950.00
75 $ 6,375.00
80 $ 6,800.00
85 $ 7,225.00
90 $ 7,650.00
95 $ 8,075.00
100 $ 8,500.00
105 $ 8,925.00
110 $ 9,350.00
115 $ 9,775.00
Report a problem on this page

* Please select all that apply: (required)

Date modified: