Percentage based Fuel Cost Adjustment
Tariff 9000 - Program schedule
Fuel Cost Adjustment (FCA) programs will now have two application periods each month, apply a 15 day average fuel index price and provide 20 days lead time of the FCA change.
The tariff amendments are effective January 1st, 2009.
The change is designed to improve the responsiveness of the FCA program to changes in fuel price by reducing the time delay between when CP incurs a change in fuel expense and when that cost is reflected in our FCA program.
When fuel prices rise rapidly, a monthly FCA program does not keep pace in offsetting the higher fuel expense. Conversely when fuel prices decline the FCA program lags behind the fuel price change. This short-term lag can adversely impact both the rail carrier and the shipper.
The use of a 15 day average fuel index price is consistent with the Application Period, which is 15 days in length on average. Calculating the average fuel index price based on 15 days prior to the 20 days preceding the application date more closely aligns FCA to fuel price changes.
CP is providing more than the required advance notification for the tariff amendments.
Once the amendments are in effect the tariff itself remains unchanged, only the product of the formula changes. Providing 20 days lead time is consistent with the objective to make the program more responsive for CP and the customer. The lead time change is compliant with both STB regulations and the Canada Transportation Act.
All standard Fuel Cost Adjustment tariffs, including Tariff 9000, 9600 and 9700, will be amended.
Effective January 1st, 2009, all price authorities that reference a CP standard Fuel Cost Adjustment tariff will be subject to these amendments.