Railway Costing Regulations (SOR/80-310)

Short Title

1 These Regulations may be cited as the Railway Costing Regulations.

Interpretation

2 In these Regulations,

Act

Act means the Railway Act; (Loi)

branch line

branch line means a line of railway in Canada of a railway company that is subject to the jurisdiction of Parliament that, relative to a main line within the company’s railway system in Canada of which it forms a part, is a subsidiary, secondary, local or feeder line of railway, and includes a part of any such subsidiary, secondary, local or feeder line of railway; (embranchement)

Committee

Committee means the Railway Transport Committee of the Canadian Transport Commission; (Comité)

costs

costs means

• (a) in relation to a branch line, for the purpose of calculating actual loss, the costs that after allowing a reasonable period of time for adjustment to the new condition, would have been avoided or would be avoided by a company if, in any financial year, it did not maintain and operate the branch line and did not incur the variable cost of carrying the traffic originating or terminating on the line irrespective of when or in what manner or by whom such costs were incurred, and

• (b) in relation to a passenger-train service, for the purpose of calculating actual loss, the costs that after allowing a reasonable period of time for adjustment to the new condition, would have been avoided or would be avoided by a company in the carriage of passengers by the service if, in any financial year, the company did not operate the service irrespective of when or in what manner or by whom such costs were incurred; (frais)

passenger-train service

passenger-train service means such train or trains of a company as are capable of carrying passengers and are declared by an order of the Committee, for the purposes of sections 260 and 261 of the Act, to comprise a passenger-train service; (service de trains de voyageurs)

Uniform Classification of Accounts

Uniform Classification of Accounts means the uniform classification and system of accounts prescribed by the Commission pursuant to section 328 of the Act. (classification uniforme des comptes)

Application

3 Subject to section 11 and to any exemption ordered by the Commission pursuant to section 46 of the National Transportation Act, these Regulations shall apply in respect of cost submissions filed by all railway companies under the jurisdiction of the Commission for the year 1979 and the following years.

Variable Costs of the Carriage of Goods

4 For the purposes of these Regulations, the variable cost of the carriage of goods referred to in section 278 of the Act shall

• (a) be calculated on the basis of carloads of 30 000 pounds in the standard railway equipment for such goods and such other weights as are required for purposes of determining a rate; and

• (b) if the goods concerned may move between points in Canada by alternative routes of two or more railway companies, be computed on the basis of the costs of the lowest cost rail route.

Actual Loss Under Sections 252 to 258, 260 and 261 of the Act

• 5 (1) For the purposes of the calculation of actual loss under sections 252 to 258 and 260 and 261 of the Act, costs in relation to a branch line or in relation to a passenger-train service shall, subject to subsections (2) to (5), be based on expense accounts maintained under the Uniform Classification of Accounts and accounts reconcilable therewith or on such special studies of items and factors of costs as the Committee may order pursuant to section 46 of the National Transportation Act.

• (2) In computing the costs of a company for the purposes of section 256, 258 or 261, there shall be included an allowance for depreciation on a periodic basis

  • (a) that will reflect the annual decline in the net value that could be realized from the salvage of depreciable road property that the Committee is satisfied could or would be retired if the line were abandoned or the service discontinued, and that is required for continued operation; and

  • (b) at rates approved under the Uniform Classification of Accounts applied to the book value of such other depreciable assets and of such new assets as the Committee is satisfied are required for continued operation of the line or service.

• (3) In computing the costs of a company for the purposes of section 256, 258 or 261, there shall be included in the costs, for the last year of operation prior to abandonment of a line or discontinuance of a service that had previously been ordered retained, an allowance for depreciation on such new assets as the Committee is satisfied are required to comply with the order for retention, which allowance for depreciation shall be equal to the undepreciated cost of such new assets calculated by deducting from the actual cost of the assets their salvage value and the accumulated depreciation allowed on them for subsidy purposes in previous years.

• (4) In computing costs of a company for the purposes of section 253 or 260, there shall be included an allowance for cost of capital as follows:

  • (a) either

    • (i) the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the application is made, applied to the salvage value of the road property that the company proposes to retire if the line is abandoned or the service discontinued, to an amount not exceeding the net book investment, computed on the basis of the group plan of accruing depreciation, or

    • (ii) the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the application is made, applied to the net book investment of the road property that the company proposes to retire if the line is abandoned or the service discontinued, on condition that the company can develop depreciation charges and net investment calculations acceptable to the Committee as reflecting the specific aging characteristics of the road property; and

  • (b) the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the application is made, applied to the net book value of all other property that the Committee is satisfied is required in the operation of the line or service.

• (5) In computing the costs of a company for the purposes of section 256, 258 or 261, there shall be included an allowance for cost of capital as follows:

  • (a) the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the computation is made, applied to the salvage value of the road property that the Committee is satisfied could or would be retired if the line were abandoned or the service discontinued and that the Committee is satisfied is required for purposes of continued operation of the line or service, to an amount not exceeding the net book investment computed on the basis of the group plan of accruing depreciation;

  • (b) where the Committee is satisfied that investments in new assets are necessary for the continued operation of the line or service, there shall be applied to the net book value of such investments the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the investments in new assets are made; and

  • (c) the rate of return on capital, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for the company at the time the computation is made, applied to the net book value of all other property that the Committee is satisfied is necessary for continued operation of the line or service.

Categories of Costs To Appear in Cost Submissions

6 For the purposes of the calculation of actual loss under sections 252 to 258 and 260 and 261 of the Act, the following categories of costs shall be shown in the cost submissions, with a separation between “labour” and “material and other” costs and, in the case of branch lines, a separation between “on-line” and “off-line” costs:

• (a) Category I cost being all expenses that can be directly identified with the branch line or with the passenger-train service through company records;

• (b) Category II cost being transportation and maintenance expenses that would be avoided if the line were abandoned or the service discontinued and that are shared in common with other traffic or other services, including the off-line costs of traffic originating or terminating on the branch line;

• (c) Category III cost being all other expenses that would be avoided if the branch line were abandoned or the passenger-train service discontinued and that are not included in Categories I and II, including, where appropriate,

  • (i) superintendence expense,

  • (ii) traffic expense,

  • (iii) general expense,

  • (iv) communications expense, and

  • (v) non-revenue freight expense; and

• (d) Category IV cost being the cost of capital calculated on the basis set forth in subsections 5(4) and (5).

Basis of Costs for Purposes of Sections 264, 272 and 276 to 278

7 For the purposes of sections 264, 272, and 276 to 278 or for other purposes pertaining to rates for the carriage of goods,

• (a) costs shall be variable costs based either on the expense accounts maintained under the Uniform Classification of Accounts and accounts reconcilable therewith or on such special studies of items and factors of costs as the Committee orders pursuant to section 46 of the National Transportation Act, and shall include the increases or decreases in rail operations expenses resulting from changes in the volume of traffic, after allowing a reasonable period of time for adjustment in view of the traffic to be handled;

• (b) there shall be included in the variable costs an allowance for cost of capital based on a rate of return, including an allowance for income tax, that, in the opinion of the Committee, is appropriate for CP Rail (a Division of Canadian Pacific Limited) applied to the variable portion of the net book value of the assets related to the movement of the traffic; and

• (c) variable costs shall be shown in the cost submissions separated between “labour” and “material and other” costs, in the categories identified in the costing manuals filed pursuant to any order of the Committee.

Specific Costs

8 Whenever specific costs are known or can be readily determined from company records, such costs shall be used in lieu of averaged or allocated costs.

Costing Manuals To Be Filed

9 Cost submissions made pursuant to these Regulations shall be prepared in accordance with such costing manuals as the Committee shall, by order, require.

Information To Be Made Available to the Committee

10 Railway companies shall make available to the Committee all unit costs, output units and other statistical and supporting information required by order from time to time by the Committee in determining whether cost submissions are acceptable for purposes of the Act.

Cost Submissions for Other than Class I Railways

11 Cost submissions to the Committee by railways other than Class I railways shall be made as follows:

• (a) the submissions shall be based on direct costing to the extent feasible;

• (b) where feasible, an empirical adaptation of factors employed by Class I railways shall be made for other than direct assignment of costs;

• (c) cost submissions shall be in the same form as those prescribed for Class I railways and shall be supported by a complete description of the methods and procedures used in determining output units and in assigning and allocating costs; and

• (d) cost submissions shall include an allowance for cost of capital as follows:

  • (i) where the railway companies have developed a capital structure satisfactory to the Committee, at an approved cost of capital rate developed in the same manner as prescribed for Class I railways in these Regulations, or

  • (ii) where the railway companies have not developed a capital structure satisfactory to the Committee, at a cost of capital rate prescribed by the Committee.

Applications Under Section 106

12 Applications for abandonment of any line of railway under section 106 of the Act shall be accompanied by a statement of costs and revenues, showing the actual loss incurred in the operation of the line of railway, prepared in the same manner as these Regulations require for the purposes of actual loss calculations under section 253 of the Act, unless the Committee directs otherwise pursuant to section 46 of the National Transportation Act.