Cost Recovery Advisory Group - 2022 Meeting
March 31, 2022,
- Introductions and opening remarks
- Approval of agenda and review of last year’s minutes
- Looking back over the past year (roundtable discussion)
- Operational management
- Update on regulatory activity plans (RAPs)
- Financial management
- Financial overview
- Dispute resolution mechanism
- Other business
- Concluding comments and next meeting
|Canadian Nuclear Association
|Canadian Nuclear Association
|Ontario Power Generation
|Nuclear research and test facilities
|Canadian Nuclear Laboratories
|Uranium processing facilities and uranium mines
|Nuclear substance processing facilities
|Stephen J. Walker
|Canadian Council of Independent Laboratories
|Nuclear substances and prescribed equipment
(servicing, etc. radioisotopes / calibration)
|Stuart Hunt & Associates
|Nuclear substances and prescribed equipment
(oil and gas exploration)
|Schlumberger Canada Ltd.
|Nuclear substances and prescribed equipment
|Nuclear substances and prescribed equipment (Nondestructive Testing Management Association and industrial radiography)
|Team Industrial Services Inc.
Canadian Nuclear Safety Commission participants
|Director General, Strategic Planning Directorate (CRAG Chair)
|Vice-President, Corporate Services Branch and Chief Financial Officer
|Director General, Directorate of Advanced Reactor Technologies (DART)
|Director General, Directorate of Nuclear Substance Regulation
|Director, Financial Management and Internal Controls Division (FMICD), Finance and Administration Directorate (FAD)
|Director, Regulatory Operations Coordination Division (ROCD), Regulatory Operations Branch
|Senior Project Officer, ROCD
|Senior Financial Advisor, FMICD, FAD
|Senior Policy Officer, International and Government Affairs Division (CRAG Secretary)
2:30 pm – Meeting commenced.
Introductions and opening remarks
Keith Dewar, Cost Recovery Advisory Group (CRAG) Chair, opened the meeting and welcomed the participants. All participants then introduced themselves.
Review of minutes and action items
Keith noted that the minutes of the last meeting had been provided to all CRAG members and, once finalized, would be available on the Canadian Nuclear Safety Commission (CNSC) website. Keith added that there were 4 action items from the previous meeting all of which had been completed:
- Provide an overview of the CNSC’s internal support services costs
- Provide an update on the implementation of formula fee increases
- Provide Patricia MacNeil with links to CNSC departmental results reports and fee reports
- Provide Steve Coupland with information on activities covered by appropriation and cost recovery
No other comments were made, and it was agreed that the minutes be considered final. The agenda was adopted as drafted.
Looking back over the past year
Keith recounted some of the notable developments for the CNSC since the last meeting, including:
- celebrated 75 years as Canada’s nuclear regulator
- continued to respond to a COVID-impacted operating and work environment
- held virtually 10 public Commission hearings, 15 Commission hearings in writing and 12 public Commission meetings
- increased focus on radioactive waste management, including an Auditor General audit, parliamentary committee study and federal policy update
Stéphane added the CNSC is moving to a hybrid work model which will see the CNSC’s office footprint reduced by 34% and result in savings starting in 2024. Stéphane added that Microsoft 365 was rolled out in the previous year, along with digital collaboration tools, which will enable greater efficiency among CNSC staff. Stéphane concluded that the CNSC is completing a several year strategic review of how the CNSC does business and will be able to update at the next CRAG meeting on what it means for the CNSC.
Update on regulatory activity plans
Caroline gave an update on regulatory activity plans (RAPs), noting that although there have been some changes to the way CNSC does things during the pandemic, the RAPs process remains unchanged. RAPs do not apply to all CNSC licensees; they apply only to Class I nuclear facilities, uranium mines and mills, and waste nuclear substances activities. The estimates for the level of effort for planned regulatory activities in RAPs are driven by a comprehensive planning process. The planning process considers several factors, including anticipated licensing applications, the compliance baseline, past licensee performance, environmental scan information, development or improvement of the CNSC regulatory framework and processes, anticipated research and support projects, and internal support services. The CNSC asks RAP licensees annually to provide an update on any planned new activities, which supports the CNSC’s planning process and estimated level of effort. Regulatory activities are prioritized based on risks, documented in CNSC work plans, costed for the RAP fee estimates, and summarized in RAP packages. RAP packages include a cover letter, a RAP and a fee notification, which indicates the total estimated fee and the quarterly payments for fee-paying licensees. RAPs include the estimated effort for technical regulatory activities and internal support services, the total estimated effort and fee, and the list of major activities. Caroline explained that estimated effort for technical regulatory activities is made up of licensing/certification, compliance and other regulatory activities specific to a facility, and a proportional share of effort for technical regulatory activities common to the type of facility, for example regulatory documents and research. Internal support services include estimated effort for human resources, finance, legal services and communications.
The 2021–22 RAPs and fee estimates were issued electronically prior to April 1, 2021. In July 2021, the CNSC issued reports to fee-paying licensees of Class I nuclear facilities and uranium mine and mill facilities on the number of licensing and compliance activities completed by the CNSC in fiscal year 2020–21. For each facility, the reports included, as applicable, the number of licensing decisions for new licences, licence renewals and licence amendments; the number of inspections conducted; and the number of orders issued.
CRAG members were informed that the 2022–23 RAPs and fee estimates would be issued electronically the same day as the present meeting, March 31, 2022. The format and level of detail would be the same as for the 2021–22 RAPs, which, beginning in 2019–20, include additional information on technical regulatory activities and internal support services and a description of collective CNSC activities. Caroline added that the 2022–23 RAP cover letter would explain potential impacts on fees from the nuclear industry evolution towards novel technologies, such as small modular reactors (SMRs), and the COVID-19 pandemic. Due to ongoing uncertainties from the pandemic, future years’ estimates would not be provided, and fees could be adjusted if the scope of work or costs change. The report on the number of licensing and compliance activities completed by the CNSC in 2021–22 would be issued with the final invoices, which is usually in July. RAP licensees were encouraged to contact CNSC Regulatory Program directors for detailed information related to licensing and compliance activities, and to contact CNSC finance officers for fees-related questions.
Stéphane responded to questions about the CNSC not providing future years’ estimates as being related to the challenge of finding clarity at a time when the CNSC is considering business process changes, inflation taking hold in the economy and the ongoing pandemic. Caroline added that the CNSC will continue to estimate as accurately as possible on an annual basis.
Keith responded to a question on research projects and new technology investments that are of benefit to RAP licensees by taking on an action to provide information on the CNSC’s current and future research priorities and new technology investments.
Isabelle provided a financial overview. From 2017-18 to 2020-21, the CNSC decreased overall spending by $1.3 million (0.8%) per year. Excluding the pandemic-impacted years, the CNSC’s spending would have increased by $4.4 million (2.7%) over 3 years. Decreased spending during the pandemic was mostly related to reduced travel expenditures and fewer staffing actions. The CNSC’s expenditures comprise salary (approximately 70%), non-salary, such as travel, research and support program, and professional services (approximately 20%) and expenses from other government departments not controlled by the CNSC, such as Shared Services Canada and rent (approximately 10%). The CNSC’s expenditure increases over the past 6 years fall within the 1.90% inflation / Consumer Price Index (CPI) increase over the same period. Salaries accounted for a 2.8% increase per year due to collective bargaining adjustments, whereas non-salary expenditures decreased 3.0% per year due to pandemic impacts. Generally, 70% of the CNSC’s expenditures are recovered from fee-paying RAP licensees, and formula and fixed fees licences. The Government of Canada covers 30% of the CNSC’s expenditures for non-recoverable activities, which are those that do not provide identifiable recipients with direct benefits beyond those received by the general public. Those activities include international and governmental obligations and cooperation and developing and maintaining legislation and regulations. The CNSC is committed to prudently managing fee increases while mindful of organizational and regulatory changes stemming from the pandemic and CNSC improvement initiatives.
Regulatory activity plans
In 2017-18 and 2018-19, initial and final expenditures were close and resulted in moderate refunds to fee-paying RAP licensees at year-end (0.6 – 1.1%). Variances became more significant during the pandemic, resulting in substantial refunds in 2019-20 (6.2%) and 2020-21 (11.8%). The 3rd quarter of 2021-22 suggests a refund of approximately 6.8%, which will be confirmed when financial statements are finalized in July 2022. The initial RAP fees for 2022-23 of $114 million include the assumptions of a return of a semblance of normalcy at the operational level, planned effort and regulatory activities related to SMR projects, and planned work under special projects with licensees and potential licence applicants on SMR deployment and readiness. Robust and ambitious staffing plans are needed to accomplish the related work plans, which, if not realized as planned may require in-year revisions. A significant variance in expenditures could result in an early return applied to estimated fees, as was done in 2020-21 when the last invoice of the year was discounted.
Between 2017–18 and 2022–23, revenue increased by almost $2 million, corresponding to an average yearly increase of 4.9%. The increase is the result of the phased-in approach the CNSC introduced in 2014-15 to reduce the subsidization of formula fees licensees from the CNSC’s parliamentary appropriation. In recognition of the ongoing economic effects of COVID-19 on the nuclear industry, no changes in formula fees were applied in 2021–22 and none will be in 2022-23, with the exception of Dosimetry Services, which required an administrative correction. The hourly rate remains unchanged in 2022-23 at $270. A review of the base and variable hours for each use type in the Fee Schedule will take place in 2022-23 to reflect changes to the regulatory work hours, if applicable.
The CNSC’s fixed fees will increase by 3.4% in 2022–23. The increase is required under a new framework governing how departments manage fees, which was developed following the passage of the Service Fees Act (SFA) in June 2017. Only the fees under Part 4, Fixed Fees, of the Canadian Nuclear Safety Commission Cost Recovery Fees Regulations are subject to the SFA and are required to be increased annually by a pre-determined amount based on the Consumer Price Index.
Projections for future years
The CNSC reviews budgets and costs every year and has a rigorous planning process in place. There are several layers of control over the CNSC’s budgeting process, including review, and challenge by the CNSC’s Executive Management group, a review of the CNSC’s financial statements by the Office of the Auditor General, and management discussion and analysis. The CNSC also requires annual approval of its appropriations by the Treasury Board and Parliament. Isabelle reiterated that future years’ estimates will not be provided due to uncertainties and remaining impacts of the pandemic and future changes to the industry, for example the arrival of SMRs, combined with the CNSC’s ongoing strategic review. The CNSC will closely monitor the financial situation and make adjustments if necessary.
Dispute resolution mechanism
CRAG members were reminded of where to find information on the CNSC website about the dispute resolution mechanisms for regulatory activity assignments and fee administration (from the “Acts and regulations” tab, select “Cost recovery program”) and who to contact about disputes.
Stephen asked when the phased-in increases for formula fees to end the subsidization from the CNSC’s parliamentary appropriation will be finished, and whether any associated cost savings in the last few years will be applied to formula fees. Isabelle responded that given an increase in the CNSC’s cost recovery rate from 70% in 2014-15 to 77% and the end of 2021, a further discussion is needed to determine if the increases will resume. Stéphane added that cost savings from the last few years will be applied to RAPs and formula fees, noting that business efficiencies could also help reduce hours required to do activities and the related costs.
Patricia asked if there will be a move to breaking down formula fees costs by use type, when the annual savings from the CNSC’s reduced office space will begin, and why the CNSC’s salary-related expenditures increased 14% over 5 years. Stéphane affirmed that the CNSC has use type costs and projections by use type, that the annual savings from reduced office space will start in 2024, and that the increased salary-related expenditures were related to pay increases for staff and executives retroactive to 2017 as well as staffing increases in key areas.
Sean asked how much of compliance is worked into formula fees costs, noting that originally a compliance coefficient was proposed but never introduced, and whether administrative monetary penalties (AMPs) can be used to augment fees for poor performers or if the compliance coefficient could be introduced. Karen replied that AMPs are a tool to enforce compliance, among others, not a supplement for fees. The compliance coefficient is used in a relatively small number of cases – 2 to 3 licensees that the CNSC spends a significant amount of time in enforcing compliance and has a very minimal effect on cost recovery. Stéphane added that high performers are getting a return already through less licensing hours being applied, which results in them being charged less, whereas poor performers are given an AMP.
Patricia asked if fee-exempt licensees are reviewed to see if there is a mechanism to charge them fees. Stéphane responded that the Treasury Board Secretariat (TBS) did a full review of fee exempt CNSC licensees in 2012, as TBS covers the related costs, to ensure that they are bringing greater good to the population. Stéphane added that one licensee, the Saskatchewan Research Council, has been shifted to fee-paying from fee exempt.
Shaun asked if indirect costs are split 70% to 30%, the same as the CNSC’s cost-recovered / parliamentary appropriation split. Stéphane and Isabelle confirmed that the split is the same – 70%/30%.
Steve asked for an update on the eventual closure of the Pickering Nuclear Generating Station, notably how the overhead costs will be managed and fee-paying licensees’ expectations that they will not be spread out over the remaining base. Stéphane replied that it is under discussion and consideration within the CNSC, including through Project Athena, and with Ontario Power Generation. The CNSC is looking at what business lines or activities can be increased or abandoned to get efficiencies and whether CNSC expertise is needed in-house or can be contracted out. Ultimately, it is assumed that close to 75% of the CNSC’s revenue from Pickering will be reduced and the remaining costs will be spread out among remaining fee-paying licensees.
Jason emphasized the importance of stability and predictability, noting that refunds are appreciated but represents funds that could have been used in-year for improvements. The more accurately that activities can be predicted 2-3 years out, the better.
Alan asked for clarity on expectations of CRAG members for communicating with licensees about information from CRAG meetings. Stephen added that members of the Canadian Council of Independent Laboratories have over half of the portable gauges in Canada, and information from CRAG is relayed to them, but there is a large group of contractors that do not have access to the same information channel. Karen noted that there are existing forums of communication including meetings of the Industrial Radiography Working Group, the Directorate of Nuclear Substance Regulation’s monthly digest to licensees and the CNSC’s website. Karen continued that CRAG meeting minutes could likely be better publicized and added that a discussion on the best way to communicate would be welcomed. Caroline suggested revisiting the CRAG terms of reference, which envision CRAG members communicating with licensees, to see if that still makes sense. Keith directed that an action item be added to revisit the CRAG terms of reference to see if the existing communication mechanism is effective and, if not, what can be done about it.
Patricia asked that an action item be added to include the budget numbers for the 812 use type in the CNSC’s Financial Management Report.
Concluding comments and next meeting
Keith thanked CRAG members for their participation and said the next meeting will tentatively be held in March 2023. Keith adjourned the meeting at 3:53 pm.
- Provide information on the CNSC’s current and future research priorities and new technology investments
- Revisit the CRAG terms of reference to see if the existing communication mechanism is effective and, if not, what can be done about it
- Include the budget numbers for the 812 use type in the CNSC’s Financial Management Report
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