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COMPETITION WATCH: Western Grain revenue cap price index increased for crop year 2006-2007

OTTAWA, Ont. — The Canadian Transportation Agency has announced a 6.6 per cent increase in the volume-related composite price index to be used to establish railway-specific revenue caps for the movement of western grain for crop year 2006-2007.

This index is essentially an inflation factor to cover Canadian National (CN) and Canadian Pacific Railway (CP)’s price changes for railway labour, fuel, material and capital inputs.

In an earlier interlocutory decision, the Agency directed that the index be adjusted to reflect the incremental costs incurred by CN and CP as a result
of the withdrawal from service of a number of government hopper cars and the subsequent leasing of these cars by CN and CP from the Canadian Wheat Board.

This adjustment accounts for 1.2% of the 6.6% increase in the Volume-Related Composite Price Index.

The revenue cap applies to the movement of grain by prescribed railway companies from Prairie elevators to terminals at Vancouver, Prince Rupert, Thunder Bay and Churchill.

In the course of establishing the Volume-Related Composite Price Index, the Agency consulted with producer representatives, the Canadian Wheat Board, shipper organizations, railway companies, grain companies and federal, provincial and municipal governments.

The current “revenue cap” regime, which came into effect on August 1, 2000, applies to the movement of western grain by a prescribed railway company. As a result, the Canada Transportation Act requires the Agency to determine each railway company’s revenue cap annually and whether or not each cap has been exceeded by the railway company. The Volume-Related Composite Price Index is one of several inputs required in the determination of the
railway company revenue caps.

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