December 19, 2012 / 7:43 PM / 5 years ago

UPDATE 1-Canada orders railways to repay excess grain revenue

* Ottawa caps railways’ grain revenue

* Railways exceed mandated caps by less than 0.1 pct

* More grain moved by rail in 2011/12

By Rod Nickel

WINNIPEG, Manitoba, Dec 19 (Reuters) - Canada ruled on Wednesday the country’s two big railways, Canadian National Railway Co and Canadian Pacific Railway Ltd, earned too much money from hauling grain in the 2011/12 crop year, and ordered them to pay close to C$700,000 ($707,000).

The railways exceeded their government-mandated caps on revenue from moving western grain by less than 0.1 percent, the Canadian Transportation Agency said.

The Canadian government implemented the grain revenue cap in 2000 after it eliminated a subsidy for grain movement by rail called the Crow Rate. The cap applies to revenue the railways earn by moving grain from the Western Canadian crop belt to ports.

CN’s grain revenue was C$240,185 higher than its cap of nearly C$543 million, while CP’s revenue came in $400,132 above its cap of about C$494 million.

The companies have 30 days to repay the excess, plus five percent penalties. The money goes to the Western Grains Research Foundation.

Both railways said they are reviewing the agency’s decision.

“It should be noted that CN met its grain customers’ expectations during the crop year (and) moved more grain last year than in any other year since the inception of the revenue cap,” said CN spokeswoman Emily Hamer.

Structuring rates for moving western grain is complex, given unpredictable factors like weather and market conditions, said CP spokesman Ed Greenberg.

The railways moved 33.1 million tonnes of grain from Western Canada in 2011/12, which was 6.2 percent higher than the previous year’s volume.

Canada introduced legislation last week to impose penalties on the railways if they fail to meet their obligations to shippers.

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