Cost Recovery Advisory Group – 2019 meeting

March 25, 2019
280 Slater Street, Ottawa, Ontario
10:30 a.m.–12:00 p.m.

Meeting Agenda

• Introduction/opening remarks
• 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/next meeting

Meeting Minutes

Licensee participants

Member	Industry Represented	Work Organization
Steve Coupland	Canadian Nuclear Association	Canadian Nuclear Association
Connie Leclair, joined by Robin Manley (both via teleconference)	Nuclear reactors	Ontario Power Generation
Maury Burton	Nuclear reactors	Bruce Power
Jason Nouwens, joined by Brian Thorne (both via teleconference)	Nuclear reactors	NB Power
Kevin Nagy (via teleconference)	Uranium processing facilities and uranium mines	Cameco
Richard Wassenaar	Nuclear substance processing facilities	Nordion
Stephen J. Walker	Canadian Council of Independent Laboratories	John D. Paterson and Associates Limited
David Paynter (via teleconference)	Canadian Industrial Radiography Safety Association	Buffalo Inspection Services
Corie Kehoe (via teleconference)	Nuclear substances and prescribed equipment (oil and gas exploration)	Schlumberger Canada Ltd.
Dan Stunden (via teleconference)	Nuclear substances and prescribed equipment (portable gauges)	Stantec
Alan Brady	Nuclear substances and prescribed equipment (Nondestructive Testing Management Association)	Team Industrial Services Inc.

Canadian Nuclear Safety Commission participants

Name	Position
Liane Sauer	Director General, Strategic Planning Directorate (CRAG Chair)
Colin Moses	Director General, Directorate of Nuclear Substance Regulation
Hugh Robertson	Director General, Directorate of Regulatory Improvement and Major Projects Management
Daniel Schnob	Director General, Finance and Administration Directorate
Claire Pike	Director, Regulatory Operations Coordination Division
Tetyana Panichevska	Senior Project Officer, Regulatory Operations Coordination Division
John Kiska	Financial Specialist, Financial Management and Internal Controls Division
Michelle Woods	Financial Advisor, Financial Management and Internal Controls Division
Lee Brunarski	Senior Policy Officer, Policy, Aboriginal and International Relations Division (CRAG Secretary)

10:30 – Meeting commenced.

Introductions and opening remarks

Liane Sauer, the Cost Recovery Advisory Group (CRAG) Chair, opened the meeting and welcomed the participants.
She noted that there had been six changes to the CRAG membership since the last meeting:

1. Alan Brady from Team Industrial Services Inc. has joined as the Nondestructive Testing Management Association representative in the nuclear substances and prescribed equipment sector.
2. Corie Kehoe from Schlumberger Canada Ltd. has returned to the CRAG as the oil and gas representative, also in the nuclear substances and prescribed equipment sector.
3. Richard Wassenaar from Nordion has taken over as the nuclear substance processing facilities representative.
4. Connie Leclair and Robin Manley are representing Ontario Power Generation, and Connie will be listed as the official CRAG member on the web page.
5. Jason Nouwens and Brian Thorne are NB Power’s representatives, and Jason will be listed as the official CRAG member on the web page.
6. Maury Burton has joined as Bruce Power’s representative.

The participants then introduced themselves.

Review of minutes and action items

Liane noted that the minutes of the last meeting had been provided to all CRAG members and would soon be available on the Canadian Nuclear Safety Commission (CNSC) website. She added that there were no actions arising from the previous meeting and asked if there were any comments. No comments were made and it was agreed that the minutes were considered final.

The agenda was adopted without objection, amendment or comment.

Looking back over the past year

Liane recounted some notable developments for the CNSC since the last meeting:

• Rumina Velshi became the new President and CEO of the CNSC in August 2018 for a five-year term.
• The CNSC’s key priorities under President Velshi are to have a modern approach to nuclear regulation, be a trusted regulator, maintain its global influence and improve its management effectiveness.
• As a personal commitment, President Velshi also advocates for women and girls in science, technology, engineering and mathematics (STEM) disciplines.
• We’ve continued collaboration with interdepartmental colleagues to prepare for the implementation of Bill C-69, the proposed legislation to revise federal assessments of major projects.
• Major public hearings were held for licence renewals for the Bruce and Pickering nuclear generating stations.
• Public meetings were held for regulatory oversight reports on research reactors and Class IB accelerators, the use of nuclear substances in Canada, Canadian nuclear power generating sites, uranium and nuclear processing facilities, and Canadian Nuclear Laboratories sites.
• Exercise Synergy Challenge, which simulated a nuclear emergency, was held at the Point Lepreau Nuclear Generating Station.
• Ten regulatory documents were updated or published, and consultations were held on six others.
• Preparations continued for Canada to host an International Atomic Energy Agency (IAEA) Emergency Preparedness Review (EPREV) mission in June 2019 and an Integrated Regulatory Review Service (IRRS) mission in September 2019.
• Preparations were made for the CNSC Executive Vice-President’s role in leading IRRS missions in the United Kingdom in October 2019 and in Japan in January 2020.
• Work continued with licensees to ensure the safety of Canada’s nuclear industry.

Operational management

Update on regulatory activity plans

Claire Pike gave an update on regulatory activity plans (RAPs). Key points included clarifying facilities and activities to which RAPs apply, what factors are considered when preparing RAPs and what information RAP packages include. RAP packages include the estimated effort for technical regulatory activities and internal support services, the total estimated effort and fee, and the list of major activities. The 2018–19 RAPs and fee estimates were issued in March 2018.

Reports on the number of licensing and compliance activities completed by the CNSC in fiscal year 2017–18 were issued in July 2018 to fee-paying licensees for Class I nuclear facilities and uranium mine and mill facilities. As applicable to a given facility, the reports include the number of licensing decisions for new licences, licence renewals and licence amendments, as well as the number of Type I and Type II inspections conducted, and if applicable, the number of orders issued.

The CNSC’s target is to issue 2019–20 RAPs and fee estimates by the end of March 2019. The format and level of detail of 2019–20 RAPs will remain largely the same as the 2018–19 RAPs, albeit with an expanded section on technical regulatory and internal support service activities and a new section that describes collective CNSC activities. The report on the number of licensing and compliance activities completed by the CNSC in 2018–19 will be issued to Class I nuclear facilities and uranium mine and mill facilities around the time the final invoices are issued. RAP licensees were encouraged to contact CNSC regulatory program directors or project officers for detailed information about licensing and compliance activities at their facilities and CNSC finance officers for fees-related questions.

Discussion

A CRAG member asked if it was known whether the RAP fees increase for FY 2019–20 would be within the 2–3% range. The member noted that fees have risen considerably more than that average for their facility over the last five years, and the member was directed to try to resolve the issue through the CRAG.

A CNSC participant responded that the fee increase will average about 2.7%. Liane added that the CRAG is a forum for general questions and discussions about cost recovery, and questions about individual or specific fees should be taken up with regulatory program directors. She suggested that members contact her if they feel that satisfactory progress is not being made so she can follow up internally.

Financial management

Financial overview

John Kiska provided a financial overview. He noted that the CNSC’s overall spending increased by $20.3 million (or 13.6%) between 2013–14 and 2018–19. Eighty percent of that increase was the result of economic increases, including retroactive pay, related to new collective agreements for staff and management. During that same period, RAP licensees represented 64% of the CNSC’s activities. Regulatory requirements for formula fees have changed since 2003 to meet industry and other regulatory requirements. However, the fees recovered by the CNSC in formula fees have not kept pace, resulting in a subsidy to formula fees from the funding appropriated to the CNSC by Parliament. The CNSC’s Workforce of the Future Initiative will ensure that the CNSC has the staff necessary for seamless regulation as employees retire. The CNSC anticipates costs will be stable in future years.

Regulatory activity plans

Between 2013–14 and 2018–19, final RAP fees increased by $9.7 million (or 10%), which represents an average yearly increase of $1.9 million (or 2%). During this time, year-end refunds to RAP licensees varied between 0.6 and 7.3%. We paid out $13 million in retroactive pay to CNSC staff in 2017–18, and an additional $1.9 million in 2018–19. A total of $2.4 million was being held in 2019–20 for the next collective agreement. RAPs fees for 2019–20 will increase by $2.8 million from  2018–19.

Formula fees

The CNSC’s regulatory oversight and deliverables for formula fees have changed since 2003 to meet industry and regulatory requirements. Formula fees have been subsidized from the funding appropriated by Parliament to the CNSC by $2.2 million to $3.7 million for the last several years to account for the shortfall in revenues compared to the regulatory effort required. Fees are calculated using the formulas set out in Schedule 1, Part 2 of the Canadian Nuclear Safety Commission Cost Recovery Fees Regulations (CRFR). The hourly rate is calculated yearly based on instructions from Part 3, Section 14 of the CRFR. The yearly increases in formula fees that were phased in starting in 2014–15 will reduce the subsidy from appropriations, and revenues from formula fees are expected to align with costs by 2023–24.

Discussion

A CRAG member asked whether the CNSC expects stability in its costs. A CNSC participant responded that when looking at the level of effort expected going forward and the investments in improvements made in the last few years, such as a new financial system and staff renewal program, no cost spikes are expected in the near future. The goal will remain to keep increases stable at approximately 2% on average. The biggest unknown variable remains economic increases to staff through collective agreements.

A CRAG member asked whether year-to-year increases in full-time equivalent (FTE) effort should be expected. A CNSC participant replied that the resources dedicated to each regulatory program vary depending on what is happening with each licensee. Another CNSC participant added that the CNSC planning process cannot account for future year changes that occur within the nuclear industry, which can impact FTE effort and related costs. That CNSC participant added that the CNSC’s big improvement initiatives are now seen as relatively stable, but there will likely continue to be variation from facility to facility.

A CNSC participant suggested that CRAG members wait until they receive their 2019–20 RAPs to follow up on any questions or concerns with their regulatory program directors.

A CRAG member asked how refunds are allocated. A CNSC participant responded that the industry agreed to a fixed proportion model several years earlier to avoid extra in-year costs and smooth out any large increases and decreases over four or five years. Under the fixed proportion model, refunds are issued proportionally when total revenues exceed total costs. For example, if a RAP licensee’s initial invoice represented 5% of the CNSC’s initial “full costs” but year-end actual costs for all RAP licensees were lower by $1 million, the licensee would receive 5% (or $50,000) of the overall refund.

A CRAG member asked if the CNSC has done any planning for five years out when the Pickering Nuclear Generating Station is forecasted to stop operating to ensure that additional cost burdens are not allocated to other operators. A CNSC participant replied that the CNSC does an extensive environmental scan every year to see where the industry is going and identifies challenges and opportunities for the years ahead, including the Pickering closure.

Other business

Liane noted that prior to the meeting, a CRAG member had suggested as an agenda item that the CNSC provide more information to allow for a better understanding of the CNSC’s planning and costing processes, and specifically, how fees are calculated and refunds are determined. Liane explained that the suggestion was not included as an agenda item, since not all CRAG members receive RAPs. Liane therefore proposed a special meeting on RAPs at a later date, which all fee-paying RAP licensees, whether on CRAG or not, would be invited to attend. With no one objecting and several CRAG members indicating agreement with the proposal, Liane agreed to schedule the meeting and invite CRAG members to participate.
A CRAG member asked whether additional information could be included in RAPs detailing CNSC investments in new technologies and improvements in efficiency. A CNSC participant suggested that that type of information might best be provided during the proposed special meeting on RAPs, and the CRAG member agreed.

Concluding comments/next meeting

Liane stated that the plan is to hold the next CRAG meeting in a year unless other issues arise that require a discussion before then.

Liane thanked CRAG members for their participation and adjourned the meeting at 12:00 p.m.