Railway Debate Continues: MRE Or Interswitching?

Tuesday, April 21, 2026

By Richard Kamchen

The railway revenue cap has fewer critics these days, thanks to strong service over the past year, but railways might want to be careful what they wish for with their ongoing calls for its demise.

Canada’s two major freight railways have never liked what is officially called the Maximum Revenue Entitlement (MRE) — and from their perspective, why would they — but they weren’t always the only critics.

Back in the 2013–14 crop year, Prairie farmers produced a record crop of roughly 76 million tonnes of grains and oilseeds, which turned into a logistics nightmare as grain backed up across the West and ships waited at port. Farmers and shippers were looking for answers — and for someone to blame.

At that time, some observers outside the railways — including academics — argued the problem was the MRE. In interviews, they suggested that, under the revenue cap framework, railways lacked the incentive to invest enough to run the system more smoothly. The argument was, simply put, “you get what you pay for.”

They also warned that poor service threatened Western Canada’s reputation as a reliable supplier and could cost it market share in export markets.

Fast forward to present times and another series of large crops, and there are fewer voices calling for the MRE’s removal — and more people saying the policy can work if it’s designed and applied properly.

Strong service

Much of that shift has to do with the railways’ bulk grain handling performance so far in 2025–26, despite new highs in wheat and canola production.

Canadian National Railway Company (CN) reported solid bulk grain volumes through January and February, while Canadian Pacific Kansas City Railway Company (CPKC) announced it had set a new January monthly record for transporting grain and grain products this crop year (2025–26).

“With a record crop this year, we are seeing better than ever rail service,” says Wade Sobkowich, executive director of the Western Grain Elevator Association (WGEA). WGEA is an association of grain businesses that collectively handle in excess of 90 per cent of Western Canada’s bulk grain exports.

What changed?

The grain sector wasn’t nearly as upbeat in 2017–18, when another serious backlog occurred that drew comparisons to 2013–14.

Optimism rose with the passage of Bill C49, the Transportation Modernization Act, in May 2018. The act kept the MRE in place but changed how it works, including how railways’ costs and investments are treated in the MRE calculation. “With the separation of certain costs from the railways, they can recoup investments made in better service,” explains Derek Brewin, professor and department head in the University of Manitoba’s Agribusiness and Agricultural Economics department. “Since 2018, they have increased their pool of high efficiency grain cars, and rail incentives to grain companies have helped ramp up loop track capacity at country elevators and increased investments at port.”

CPKC says it has invested heavily in grain transportation capacity.

“Following our more than $500 million purchase of 5,900 high capacity, Canadian-made hopper cars, approximately 90 per cent of our network-wide grain hopper fleet is now high-capacity,” says CPKC manager of media relations, Terry Cunha.

With those investments, Cunha says, CPKC can now ship roughly one-third more grain per train than it could during the 2013–14 bumper crop year.

“CPKC is well positioned to transport Canada’s grain crops to market,” Cunha says. “In fact, there have been many weeks this fall and winter where capacity has gone unused by our grain customers.”

Rate fluctuations

In recent years, concerns about rail service for grain have given way to concerns about how rates move under the cap.

“The problem more recently is the wild fluctuations in the rates put in place by the railways while still allowing them to come under the cap,” says Sobkowich. “So, the problem isn’t that there is an MRE — it’s that it is designed to allow for these fluctuations to happen. The railways raise the rates in the fall and bring them down in the spring, so they can come under the entitlement.”

Using price to manage demand, however, is standard practice in many industries, notes Barry Prentice, professor of supply chain management and director of the University of Manitoba’s Transport Institute.

“The use of prices to address demand is everywhere from high-season prices at resorts to Uber surge pricing,” says Prentice.

“There is only so much space, and higher prices reduce demand, or shift it to the shoulder seasons. Spreading out the demand increases efficiency.”

Fluctuations or not, farmers’ groups say the MRE remains a necessary tool to help balance market power.

“The railways exist in a duopoly situation, which inherently leads to unbalanced market power,” says Gunter Jochum, president of the Wheat Growers Association.

“(The MRE) protects farmers from monopolistic exploitation during high-demand periods, or when commodity prices are strong — which can act as a signal to charge more to the detriment of farmers.”

MRE or interswitching?

The railways, however, would prefer to see the MRE become history. Cunha calls the MRE “an antiquated and harmful regulatory intervention that should be removed.”

He also labels it “inconsistent” with Canada’s National Transportation Policy, “which recognizes and affirms that competition and market forces are the best means of providing a viable, effective, sustainable, and cost-competitive transportation system.”

Cunha also points to the 2015 Canada Transportation Act Review (the Emerson Report), which found that the MRE was “originally envisaged as a short-term measure, to have effect during the period of transition to a fully commercialized industry … (and) found no compelling evidence why grain shippers should be protected by this program and not other kinds of shippers.”

But removing the MRE could leave the railways facing something they dislike more: expanded interswitching.

“If and when the MRE is to be removed, then at the same time, the government needs to implement an upgraded policy of extended interswitching — mandated switching up to, say, 175 kilometres — to serve as many captive shippers as possible,” says University of Saskatchewan professor James Nolan.

The federal government last used extended interswitching as a temporary measure to respond to the 2013–14 grain backlog.

Under the Fair Rail for Grain Farmers Act and related regulatory changes, the interswitching radius in the Prairie provinces was increased from 30 kilometres to 160 kilometres between 2014 and 2017.

Nolan says Ottawa needs to choose one main regulatory approach or the other — MRE or extended interswitching — but not both.

“And to date, we know one policy has worked on some levels, and not on others — MRE — while the other — interswitching — worked very well when tried in reality,” says Nolan. “The latter worked so well the railroads don’t want it back, so you tell me which one shippers should prefer.” BF