More Deregulation Is Not The Solution

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We’ve all heard tales of the inefficiencies that have plagued centrally planned economies in far-off places.

How about this one? A shipper books a train to clear out some of its inventory so it can continue accepting deliveries from its customers.

The train is supposed to come on Saturday. So the shipper makes sure it has all the necessary staff in place to load it and get it on its way. After all, there are pretty steep penalties imposed on shippers if a train shows up and there’s no one there to load it.

Saturday rolls around. The crew comes to work and waits – and waits. No train comes. Calls to dispatch indicate the train has been delayed. But they are told it would be there Sunday. On Sunday, the crew is told it will be there Tuesday.

The train didn’t arrive at the facility until the following Saturday. In the meantime, its suppliers got fed up with waiting and took their goods elsewhere. So in addition to wasted staff time and lost capacity, this shipper lost business.

In all, this one little loading episode set the shipper back about $10,000, costs it has no choice but to pass on to its customers.

Quite the banana republic, eh? Too bad these shippers weren’t part of a modern, rationalized, highly efficient handling system driven by market forces like we have in Western Canada.

Wait a minute. This is Western Canada. This is the system that emerged from railway demands to get rid of the branch lines and grain-handling system’s inventory-holding capacity (a.k.a. small grain elevators) and move to high-throughput terminals on main lines.

The need for 50-car sidings soon became 100-car sidings, which, as it turns out, aren’t being fully used because the railways apparently can’t find that many cars.

Unfortunately, incidents like the one described are far from isolated, according to a report by QGI Consulting, which was hired by the federal government to assist with the ongoing review of railway performance. Its case study of railway car supply performance found the two national railways delivered the number of cars they said they would deliver on schedule between 12 and 21 per cent of the time.

The federal government is considering changes to the Canada Transportation Act. The brief by the Western Rail Shippers Coalition makes it clear problems are widely shared.

It is doubly ironic, however, to hear the Western Grain Elevators Association call for increased regulation of grain transportation after representatives of these companies fought so long and hard to have the system deregulated.

“Rail service is offered under terms that minimize railway costs, not under terms that meet the transportation needs of the grain industry,” the WGEA says in its brief.

“In recent years we have severely struggled to meet contractual commitments due to railway shortfalls, inefficiencies, and failures. The current federal legislation does very little to protect against these unnecessary deficiencies.”

Western shippers take issue with the Canadian Transportation Agency’s decision in the 2008 level-of-service complaint that achieving 80 per cent of the car orders on time is a reasonable performance target.

“In the absence of significant and meaningful railway competition to allow the marketplace to facilitate service, the only option is to artificially re-establish balanced accountability through legislation to enforce the level of service that publicly traded monopolies do not naturally provide. Commercial solutions are born from a balanced system.”

That’s the common thread running through many of the briefs presented to the review.

The next phase of this federal review involves an independent panel, which will report to the minister in the fall.

The railways will argue that their hands are already tied by too much regulation, such as the revenue cap. But given the level of service past rationalization has delivered, it’s looking very much as though reregulation is in order.

About the author

Vice-President of Content

Laura Rance

Laura Rance is vice-president of content for Glacier FarmMedia. She can be reached at [email protected]

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