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CPR adjusts fuel surcharge policy to offset rising prices

Canadian Pacific Railway June 21 announced changes to its Fuel Cost Adjustment (FCA) charge, which since May 2000 authorized the Class I to increase certain tariffs 3 percent when fuel price exceeds $22 per barrel and other tariffs 3 percent when fuel price surpasses $30 per barrel.

CPR June 7 began applying a fuel-cost adjustment on local and interline freight movements for all tariffs except grain, and combining tariffs into a single FCA item. The Class I also is using a 90-day average-price approach instead of the threshold-price procedure it used under FCA.

The railroad now plans to add a 3 percent surcharge if fuel price, as measured by West Texas Intermediate (WTI), averages $22 or more per barrel for an entire quarter; if fuel price averages $30 or more per barrel for a quarter, CPR would add another 3 percent surcharge.

The FCA would apply to existing tariff rates, price quotes and contracts that incorporate the tariff, and any new or renewed contract offers that don't include other escalation provisions.

"Fuel-price volatility remains a challenge in the transportation industry," said Fred Green, CPR senior vice president of marketing and sales, in a prepared statement. "As such, it is our intention to implement mechanisms to afford reasonable risk management against further fuel cost escalation."

Recent WTI projections suggest a strong possibility that the average second-quarter WTI price will exceed the $22-per-barrel threshold and trigger a 3 percent surcharge in July, CPR officials said.

The railroad plans to eliminate fuel-cost adjustments if prices moderate.

Contact Progressive Railroading editorial staff.

More News from 6/24/2002