Vol. 148, No. 17 — August 13, 2014
SOR/2014-193 August 1, 2014
CANADA TRANSPORTATION ACT
Regulations Amending the Railway Interswitching Regulations
P.C. 2014-896 July 31, 2014
Whereas, pursuant to subsection 36(2) of the Canada Transportation Act (see footnote a), the Canadian Transportation Agency has given the Minister of Transport notice of the annexed Regulations;
Therefore, the Canadian Transportation Agency, pursuant to section 128 of the Canada Transportation Act (see footnote b), makes the annexed Regulations Amending the Railway Interswitching Regulations.
Gatineau, July 21, 2014
GEOFFREY C. HARE
Canadian Transportation Agency
Canadian Transportation Agency
Whereas, pursuant to subsection 128(1) of the Canada Transportation Act (see footnote c), the Canadian Transportation Agency may make regulations determining the rate per car to be charged for interswitching traffic and establishing distance zones for that purpose;
Whereas, pursuant to subsection 128(1.1) (see footnote d) of that Act, the Agency may, in a regulation made under paragraph 128(1)(c) of that Act, prescribe different distances for the regions or goods that that regulation specifies;
Whereas, pursuant to subsection 128(2) of that Act, in determining the interswitching rate, the Agency has taken into consideration those reductions in costs that, in the Agency’s opinion, result from moving a greater number of cars or from transferring several cars at the same time;
Whereas, pursuant to subsection 128(3) of that Act, in determining the interswitching rate the Agency has considered the average variable costs of all movements of traffic that are subject to interswitching rates and has determined that the rates set out in the annexed Regulations are not less than the variable costs of moving the traffic;
Whereas, pursuant to section 112 of that Act, the rates set out in the annexed Regulations are commercially fair and reasonable to all parties;
And whereas, based on the evidence available to the Agency, the Agency has determined that the interswitching rates are to be the rates set out in the annexed Regulations;
Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 36(1) of the Canada Transportation Act (see footnote e), approves the annexed Regulations Amending the Railway Interswitching Regulations, made by the Canadian Transportation Agency.
REGULATIONS AMENDING THE RAILWAY INTERSWITCHING REGULATIONS
1. (1) Subsection 7(2) of the Railway Interswitching Regulations (see footnote 1) is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
- (e) interswitching distance zone 5, being a zone that includes sidings located
- (i) within Manitoba, Saskatchewan or Alberta,
- (ii) wholly or partly within a radius of 160 km of an interchange located in Manitoba, Saskatchewan or Alberta, and
- (iii) wholly outside interswitching distance zones 1, 2, 3 and 4.
(2) Paragraph 7(2)(e) of the Regulations is repealed.
2. (1) Section 8 of the Regulations is replaced by the following:
8. Subject to sections 9 and 9.1, the interswitching rate charged by a terminal carrier for traffic originating in or destined to an interswitching distance zone set out in column I of the schedule is the interswitching rate set out in column II or III, as the case may be.
(2) Section 8 of the Regulations is replaced by the following:
8. Subject to section 9, the interswitching rate charged by a terminal carrier for traffic originating in or destined to an interswitching distance zone set out in column I of the schedule is the interswitching rate set out in column II or III, as the case may be.
3. (1) The Regulations are amended by adding the following after section 9:
9.1 If a siding is located wholly or partly within interswitching distance zone 5 and the point of connection with the siding is more than 40 km from an interchange along the line of track of a terminal carrier, the interswitching rate for each car is increased for each kilometre over 40 km by an amount equal to the rate per kilometre set out in item 5, column IV or V, as the case may be, of the schedule.
(2) Section 9.1 of the Regulations is repealed.
4. (1) The schedule to the Regulations is replaced by the schedule set out in the schedule to these Regulations.
(2) Item 5 of the schedule to the Regulations is repealed.
COMING INTO FORCE
5. (1) Subject to subsection (2), these Regulations come into force on the day on which they are registered.
(2) Subsections 1(2), 2(2), 3(2) and 4(2) come into force on the day on which subsection 7(2) of the Fair Rail for Grain Farmers Act, chapter 8 of the Statutes of Canada, 2014, comes into force.
(Sections 8 to 10)
Interswitching distance zone
Rate per car for interswitching traffic to or from a siding
Rate per car for interswitching a car block
Additional rate per kilometre for interswitching a car
Additional rate per kilometre for interswitching a car in a car block
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
The 2013 Western Canadian grain crop, at 76 million tonnes, is 50% higher than a normal crop. This volume has put significant pressure on Western Canada’s grain handling and transportation system, which, when combined with extremely cold temperatures and difficult winter conditions, affected normal railway operations.
The inability of the railway companies (carriers) to move the bumper crop created an extraordinary disruption to the effective and continued operation of the grain handling and logistics system, and compromised the ability of Canadian grain to access domestic and export markets. Railway companies’ ability to move other commodities was also adversely affected by the extreme conditions.
To address this situation, on March 26, 2014, Minister Ritz, supported by Minister Raitt, introduced in Parliament Bill C-30, An Act to amend the Canada Grain Act and the Canada Transportation Act and to provide for other measures (Fair Rail for Grain Farmers Act).
Section 7 of the Fair Rail for Grain Farmers Act empowers the Canadian Transportation Agency (the Agency) to prescribe new interswitching rates for customers at distances for specific regions, and for commodities as the Agency sees appropriate. The Government indicated that this amendment would be used to permit the interswitching of all commodities within a limit of 160 kilometres, in the Prairie Provinces (Alberta, Saskatchewan and Manitoba), extending the limit from the existing limit of 30 kilometres to ensure maximum opportunity for competition and for additional railway service to support grain farmers in the Prairie Provinces.
Forty-eight primary grain elevators currently have access to more than one railway, including American railways, with the interswitching distance limit of 30 kilometres provided for in the Railway Interswitching Regulations, SOR/88-41, as amended. With this amendment, the number of primary grain elevators located across the Prairie Provinces with the potential to be served by interswitching will increase to 261. This is a more than a fivefold increase in elevator accessibility to more than one railway. Eligibility to take advantage of the extended interswitching limit is also being extended to shippers of other commodities so they can take advantage of access to more than one carrier.
As the Fair Rail for Grain Farmers Act was granted Royal Assent on May 29, 2014, the Agency is now moving forward to amend the Railway Interswitching Regulations.
The Agency is an independent, quasi-judicial tribunal and economic regulator that makes decisions on a wide range of economic matters involving federally regulated modes of transportation including rail. With respect to regulations, the Agency is exercising its role as an economic regulator, and gives notice to the Minister of any regulation it is proposing to make and every regulation made is done so, only with the approval of the Governor in Council.
Regulated in Canada since 1904, interswitching is a competitive access provision of the Canada Transportation Act (CTA) for the benefit of shippers. It is a service where a carrier picks up a shipper’s traffic at either its origin or destination, and conveys it to an interchange point with a second carrier, which then completes the movement to its ultimate destination. This ensures that captive shippers (i.e. shippers with only one choice of railway) have fair and reasonable access to the rail system at a regulated rate.
The Railway Interswitching Regulations set the rates to be charged for interswitching services provided by the terminal carrier, thereby establishing a predictable and fair pricing regime that is applied equally to all terminal carriers providing interswitching services. Carriers are fully responsible for reimbursing each other.
The interswitching provisions of the CTA are considered to be competitive access provisions, allowing the shipper to choose their carrier despite having physical access to only one carrier.
Under section 128 of the CTA, the Agency may
- make regulations prescribing terms and conditions for the interswitching of traffic;
- determine the rate per car to be charged for performing this operation; and
- establish distance zones for that purpose.
As described above in the “Issues” section, farmers in the Prairie Provinces experienced difficulties moving their grain to market by rail this past season. In response, on March 26, 2014, the Government introduced Bill C-30, the Fair Rail for Grain Farmers Act, which created the regulatory authority to enable the Agency to extend interswitching distances for specific regions or goods. In keeping with the objectives of the amendments and in anticipation of the upcoming crop year which commences on August 1, 2014, the Agency has determined to extend interswitching in the Prairie Provinces to 160 kilometres from 30 kilometres, for all commodities.
Increasing the access that farmers and elevators and shippers of other commodities have to the lines of competing railway companies will increase competition among carriers for business and will give shippers more transportation options.
The new, expanded interswitching regime will expire on August 1, 2016, unless a resolution is adopted by both Houses of Parliament. The Agency will monitor the take-up of this new option and any issues that may arise.
The Fair Rail for Grain Farmers Act was granted Royal Assent on May 29, 2014, and provided, among other measures, an amendment to section 128 of the CTA by adding the following after subsection (1):
(1.1) A regulation made under paragraph (1)(c) may prescribe different distances for the regions or goods that it specifies.
(2) Subsection 128(1.1) of the CTA is repealed.
The Agency is now moving forward to meet the Government’s objective by amending the Railway Interswitching Regulations to extend the interswitching distances in the Prairie Provinces to 160 kilometres for all commodities in order to increase competition among railways and to give shippers access to alternative rail services.
The amendment to the Railway Interswitching Regulations will protect and advance the public interest in the economic well-being of Canadians, as expressed by Parliament in the legislation, and promote a fair and competitive market economy, specifically by increasing competition among railway companies and giving shippers access to alternative rail services, which will contribute to the ability of shippers of grain and other commodities to have improved access to domestic and export markets.
These amendments create a new interswitching zone (Zone 5) which will be applicable to movements of all commodities in the Prairie Provinces (Alberta, Saskatchewan and Manitoba) and being defined as wholly outside of the existing 30-kilometre radius, and wholly or partly inside the new radius of 160 kilometres. This radial distance is used to determine the zone of eligibility requiring both the shipper and the interchange to be located within the defined radius.
The rate for Zone 5 follows the pattern established in the current rates, namely that the zone rate will apply for the first 40 kilometres of track distance travelled within the zone, and a per- kilometre rate will apply for each kilometre of track distance travelled beyond the 40 kilometres within the zone.
The Zone 5 rate will be $325 per single car or $118 per car in a car block, for the first 40 kilometres of track distance, and $2.10 per kilometre per single car or $1.60 per kilometre per car in a car block beyond the first 40 kilometres of track distance travelled within the zone.
The “One-for-One” Rule does not apply to this proposal, as there is no change in administrative costs to business.
Small business lens
The Agency has reviewed the business information of all classes of railways which could potentially be subject to the Railway Interswitching Regulations (SOR/88-41).
As a result, the Agency is of the opinion that no railway subject to this federal regulation meets the established definition of being a small business and therefore, the small business lens does not apply to this proposal.
The Agency undertook a consultation process over a three-week period in June and July.
This consultation process involved the Agency providing interested stakeholders, including farmers, shippers and carriers, and also related lobby groups, associations and academics with both background material and proposed approach to setting new rates.
The consultation process also involved targeted, but segmented information-sharing sessions during which the Agency presented the results of their initial analysis and sought reaction and response from stakeholders representing farmers, shippers and carriers.
Approximately 75 individuals representing the various stakeholders took part in these sessions, either via teleconference or in face-to-face meetings. Farmers associations such as Saskatchewan Pulse Growers, Farmlink Manitoba and the Alberta Grains Council, and those of producers of other commodities such as Suncor Energy and the Canadian Fertilizer Institute were well represented, as were both the Canadian National (CN) and Canadian Pacific (CP) railways. Several short-line carriers also participated, as did a number of individual shippers.
In addition, the Agency received comments from representatives of the provincial governments of Alberta, Saskatchewan and Manitoba.
This regulatory amendment was developed in coordination with other federal departments.
Through the consultation process, the following issues were raised:
- A. Consultation process
- B. Distance, region, goods eligible
- C. Rates, block car size, maximum grain revenue entitlement implications
- D. Capacity, location and identification of interswitching locations
- E. Enforcement
- F. Lack of reciprocity with American railways
A. Consultation process
The majority of stakeholders prefaced their submissions with an indication that the short time period allowed for consultation did not allow them to fully explore all of the issues presented by the proposed regulatory amendment. Despite this, the vast majority of stakeholders were able to submit comments and data sets which guided the Agency in its considerations during the development of this amendment to the Railway Interswitching Regulations.
B. Distance, region, goods eligible
Stakeholders from the carrier community raised a number of issues related broadly to the application of the proposed regulation developed under the new section 128(1.1) of the Canada Transportation Act. They included the following points:
1. Why the proposed distance, region and goods
The Agency heard from carriers that the Agency should independently exercise its policy authority for amending the Railway Interswitching Regulations and not automatically accept the Government’s objective to extend the distance for interswitching to 160 kilometres, to limit this extension to the three Prairie Provinces nor to have the rate apply to all commodities.
The Fair Rail for Grain Farmers Act modified the Canada Transportation Act by creating a new subsection 128(1.1) which states
A regulation made under paragraph (1)(c) may prescribe different distances for the regions or goods that it specifies.
Although not stated specifically in subsection 128(1.1), the Government consistently and clearly indicated, both in the House of Commons and in the Senate, that this amendment would be used to create an additional interswitching zone of a distance of 160 kilometres, for the transport of all commodities, within the Prairie Provinces. This intention was subsequently repeated and specifically discussed in both committees of the House of Commons and the Senate as part of the debate on Bill C-30 (the Fair Rail for Grain Farmers Act).
These statements were reiterated in both the House of Commons and the Senate during the second and the third readings, thereby providing full and transparent disclosure of the Government’s objectives.
Witnesses from both the shipper and railway communities also addressed these issues before the Committee.
While shippers were generally supportive of the proposed distance, region and goods, both CN and CP voiced their opposition to the imposition of expanded interswitching distances for all goods, citing as their concern the unknown impact on the Canadian economy as a result of extending the interswitching zones without greater consultation.
The Agency has taken the decision, guided by the clearly expressed intent of Parliament, and in advance of any evidence based on actual activity, to use subsection 128(1.1) to amend the Railway Interswitching Regulations allowing for the expansion of the interswitching zone for shippers of all commodities, located within the Prairie Provinces from the current 30 kilometres to 160 kilometres.
The Agency also considers the new regime to provide a pilot testing opportunity that will be monitored and assessed.
2. Why an expansion of the interswitching zone contrary to the 2001 Review of the Canada Transportation Act
In response to the Agency’s information-sharing presentations, both CN and CP reminded the Agency of the recommendation of the final report of the 2001 Review of the Canada Transportation Act, in which the question of expanding the distance of interswitching zones was examined and in which the panel recommended to retain the existing limit of 30 kilometres.
The Agency notes that this recommendation was based on the evidence provided to the panel in 2001, which was not convinced that market conditions warranted a change at that time.
3. Concern over the potential effect on the movement of dangerous goods
One carrier expressed concern regarding the inclusion of all commodities in this extended interswitching zone and suggested that dangerous goods be excluded from this extended interswitching zone. The carrier suggested increased risk of public exposure to dangerous goods including toxic inhalation hazard due to the following reasons: first, that a double handling of rail cars would be required in order to switch cars over the greater distance, second, that there would be new and longer delays arising out of the new operational interchange process, and third, that the interchange infrastructure would often be concentrated in urban high density populated areas. One carrier noted in conversation that insurance costs for the transport of dangerous goods could increase, if the goods were carried for greater distances, yet as the rate was fixed, the carrier would be obligated to absorb any increased insurance charges.
The Agency notes that rail, air, marine and road transportation of dangerous goods is federally regulated by Transport Canada under the Transportation of Dangerous Goods Act, 1992 and the Transportation of Dangerous Goods Regulations, which establish the safety requirements for the transportation of dangerous goods. No aspect of this amendment to the Railway Interswitching Regulations diminishes or limits either of the above-noted pieces of legislation.
The Agency also notes that the rate it sets incorporates the cost of insuring the movement of dangerous goods.
With respect to any increase in carrier costs, the Agency acknowledges that the rate is being set based on informed expectations of behaviour by shippers and carriers. Once the rate is in place and actual use data becomes available, the Agency will analyze the data from the interswitching activity and will assess the need for adjustments of rates in the future.
C. Rates, block car size and maximum grain revenue entitlement implications
As part of the consultative process, the Agency produced and widely circulated two presentation decks among the farmer, shipper and railway stakeholder communities. The first of these presentations detailed the process and considerations by which the Agency has previously established interswitching rates. The second presentation detailed a recommended proposal for the setting of specific rates for the new 160-kilometre interswitching zone, for shippers located within one of the three Prairie Provinces.
a. Responses from carriers
In reaction to these presentations, the Agency received comments and submissions from carriers that the proposed rates were too low and not commercially fair and reasonable to all parties since they are based entirely on an estimate of costs.
The Agency notes that the proposed new interswitching rates modify the existing Regulations that is cost-based and commercially fair and reasonable.
The Agency has more than two decades of experience in the determination of regulated interswitching rates and is continually updating and improving its process for the determination of rates, fully cognizant of, and adapting to, frequent changes in the rail industry operations and costs.
The Agency’s costs are based on a method that captures operating costs, as well as capital costs including depreciation of assets, and returns on investment in those assets. The returns on investment are a weighted average of the returns on debt and the returns on equity, and are determined by the Agency according to its cost of capital methodology, which was recently reviewed in a significant consultation. That is, the revenues from providing interswitching service are modelled to be equal to the expected variable cost of providing the service, including a return on debt and equity invested in providing rail service, plus a contribution to the fixed costs.
For all cost determinations, the Agency staff measures the quantity of each activity or process involved in the movement or service, multiplies the quantity of each activity or process by its predetermined unit cost (including applicable overheads), and sums the costs of all activities or processes.
The measured workloads at each interchange location are multiplied by the unit workload costs. The estimated variable cost in a zone is a weighted average of the interchange variable costs in that zone for CN and CP. Weights are based on the number of cars interswitched at each interchange. A system average contribution to fixed costs is added to the variable costs for each zone to arrive at the interswitching rate for the zone.
The Agency calculates the system average contribution to fixed cost separately for each carrier. The amount of fixed cost is calculated as the total system cost (available from financial reports provided to the Agency) less the system variable cost (calculated by the Agency costing model). The system contribution to fixed cost is the amount of fixed costs expressed as a proportion of the system variable costs (calculated for this exercise to be 24%).
In summary the interswitching rates calculated by the Agency
- cover all operating, maintenance, and administration costs incurred in providing the interswitching service;
- cover the cost of investment in the infrastructure used in providing the service;
- cover the cost of the infrastructure consumed in providing the service (depreciation);
- cover the appropriate portions of the costs of interest, and federal, provincial, and municipal taxes;
- provide for an appropriate contribution to the carrier’s fixed costs; and
- provide for an adequate return to the carrier’s investors.
Finally, resulting from the provision of additional costing data being submitted by the rail carriers during the consultation process, the Agency has made adjustments to its model, and thereby the proposed new rates, and is confident that, based on the best available data before any actual activity occurs, the rate which it is proposing is both commercially fair and reasonable to all parties.
One of the major railways (CN) also stated to the Agency during the consultations that the use of a “per-kilometre” rate was preferred to the introduction of a new zone. The railway’s contention is that unlike traffic within the existing four zones, up to a 30-kilometre radial distance, the number of zones required for serving shippers up to 160 kilometres from an interchange would be too numerous, and would be highly correlated with distance anyway.
The other major railway company (CP) noted that while a per-kilometre rate may be more representative of the actual costs, the railway company had concerns about the potential complexities of implementing the per-kilometre rate for individual shippers where the distance from the interchange might become an issue.
The carriers also raised concerns about the difference between track miles (pure distance) and operational miles (which includes re-routing, etc.) stating that the two can be very different.
On balance, while there may be additional effort required to determine the rates separately for each customer outside of 40 kilometres by track, the imposition of numerous new zones would also require additional effort which, in the Agency’s opinion, is not warranted. In fact, both railway companies acknowledge the greater accuracy of the per-kilometre approach, which is also consistent with the approach for longer distances in the current Regulations.
The Agency, using data representative of various types of rail activity and movement, believes that it is most appropriate to proceed with a “per-kilometre” rate approach consistent with what is used in the current Regulations for Zone 4 customers. A base “zone rate” for the first 40 kilometres by track distance is set, and then for each kilometre after the first 40, a per-kilometre rate per car would then be applied to any additional distance travelled.
On the issue of track distance versus operational distance, the current rates are based on track distance, but also take into consideration the actual operations used to service those customers. As evidential data of interswitching activity outside of the current Zone 4 (30-kilometre radius) becomes available, the Agency will be in a position to review the rates to ensure they are representative of the actual handling of that traffic.
b. Responses from farmers and shippers
Some members of the farmer and shipper communities expressed surprise at both the zone and “per-kilometre” rate as being too high. The expectation of these stakeholders was that as the existing Zone 4 rate already sufficiently remunerated the railways for the first 40 kilometres, that it would be unchanged for the first 40 kilometres of the new Zone 5. Furthermore, many shippers were of the opinion that the “per-kilometre” rate should decrease as the distance travelled increased.
For the reasons stated above in the carriers concerns, the Agency acknowledged and demonstrated the expected different nature of the rail movement required to service an expanded interswitching zone and the different input costs which necessarily produced both a different zone and “per-kilometre” rate.
2. Block car size
The Agency also heard from some shippers a related issue concerning the existing determination of 60 cars as the number necessary for the establishment of a block interswitching rate. Suggestions were made from these stakeholders to lower the total number of cars necessary to qualify as a “block” to 50 or 40.
While the Agency acknowledges that a smaller number of cars have the potential to alter the rate, the Agency has determined from observation of actual movements that the 60-car block reflects established operational practices with respect to the assembly of trains.
The Agency acknowledges that the rate is being set based on informed expectations of behaviour by shippers and carriers. Once the rate is in place and actual use data becomes available, the Agency will analyse the data from the interswitching activity and will assess the need for adjustments of rates in the future.
3. Maximum grain revenue entitlements for the shipment of Western grain implications
With the increased distance of 160-kilometre radius, which has the potential to result in over 300 kilometres of track distance, the railways noted that this significant increase had a strong potential to cause distortion to the maximum revenue entitlement.
The Agency recognizes the potential for unintended distortions as a result of the current treatment of the interswitching movements under the maximum revenue entitlement program and is prepared to examine this issue in the context of the ongoing administration of this program, if needed.
D. Capacity, location and identification of interswitching locations
Comments were received from representatives of the farmer and shipper communities, and also from representatives of the provincial governments of Alberta, Saskatchewan and Manitoba, that the Agency make known, not only the location of the interswitching points, but also the car capacity of each location.
This activity is beyond the scope of the current amendments; however it will be reviewed by the Agency for possible inclusion in a future, comprehensive update to the Railway Interswitching Regulations.
Comments were received from representatives of farmers, shippers and the governments of Alberta, Saskatchewan and Manitoba suggesting that the Agency should establish clear performance standards or operating benchmarks for regulated interswitching to ensure effective and non-discriminatory service by participating carriers. It was also suggested that this should be buttressed by Agency monitoring and enforcement capabilities.
The Agency will be actively monitoring the implementation and use of the expanded interswitching zone. The Agency has the authority to resolve any dispute that may arise between a shipper and a carrier with respect to the availability of regulated interswitching handled through facilitation, mediation or adjudication.
F. Lack of reciprocity with American carriers
Comments were submitted by one of the major carriers expressing specific concerns, and more generally by the other major carriers, about the lack of reciprocity with respect to interswitching and American carriers.
It was identified that when American carriers legally enter Canada on rail lines they own, shippers have the right to insist that the traffic be switched at regulated rates, for handoff to the American railway at or near the Canada/United States border. The extension of the interswitching zone from 30 to 160 kilometres may create the possibility for an increased number of shippers to exercise this option, thereby potentially increasing the amount of rail traffic which could potentially travel out of Canada to be handled by American carriers and ports.
The Agency recognizes that similar opportunities for regulated interswitching do not exist for Canadian carriers in the United States. The Agency notes, however, that regulated interswitching is a competitive access remedy for the benefit of shippers with access to only one railway carrier. Furthermore, the local railway always has the option of making more competitive offerings to retain the traffic base it currently has.
The Agency will be actively monitoring the implementation and use of the expanded interswitching zone and as data becomes available on the actual use of the expanded interswitching zones.
This amendment extends the interswitching zone for shippers of all commodities located within Alberta, Saskatchewan and Manitoba from 30 kilometres to 160 kilometres. The objective of these Regulations is to increase the access that shippers have to the lines of competing carriers, which in turn will increase competition among railways for business, and thereby give shippers more transportation options. Up to 261 grain elevators will have access to more than one carrier, compared to 48 at present.
The Agency has determined the interswitching rates based on its analysis of the variable costs of moving the traffic, and a reasonable contribution to fixed costs. This approach is meant to provide carriers with fully compensated operating costs and reasonable returns on the debt and equity employed. In the current case, as the traffic that will be interswitched pursuant to the new interswitching rates cannot yet be observed, the Agency staff developed operating scenarios for actual railway customers in the Prairie Provinces and applied the standard Agency costing model.
The Agency will actively monitor and assess the take-up and any issues that may arise in the implementation of extended interswitching.
Once implemented, the Agency notes that the new interswitching rates could potentially reduce the revenues of the carriers in serving captive shippers as compared to what might be achieved in the absence of interswitching.
Implementation, enforcement and service standards
As defined by the legislation, these Regulations will sunset on August 1, 2016, unless a resolution adopted by both Houses of Parliament postpones the coming into force of the clauses repealing the amendments to the CTA.
Disputes concerning the actual settling of financial accounts between the railway companies themselves have not previously been an issue brought before the Agency. There are no specific provisions within the CTA for the enforcement of disputes relating to the settling of financial accounts between carriers for the provision of regulated interswitching activities. The railway companies are obligated to reimburse each other according to the prescribed rates for all regulated interswitching activities.
Whether or not a movement is a regulated interswitching activity is a matter which may be determined by the Agency upon application and may be handled through facilitation, mediation or adjudication.
With respect to any complaints by shippers, either concerning the lack of interswitching service within a designated zone or the rate applied, interswitching disputes can be handled through facilitation, mediation or adjudication.
The Agency reviews the railway interswitching costs annually and revises the rates as required or as part of the five-year statutory review of the Railway Interswitching Regulations.
Industry Determinations and Analysis Directorate
Canadian Transportation Agency
15 Eddy Street