Cost Recovery Advisory Group – 2021 meeting

March 25, 2021
Virtual meeting
2–3:30 pm

Meeting Agenda

• Introductions and opening remarks
• Review of minutes and action items
• Looking back over the past year
• Operational management
  • Update on regulatory activity plans
  • Discussion
• Financial management
  • Financial overview
  • Regulatory activity plans
  • Formula fees
  • Fixed fees
  • Projections for future years
  • Dispute resolution mechanism
  • Discussion
• Other business
• Concluding comments and next meeting

Meeting Minutes

Licensee participants

Member	Sector represented	Work organization
Steve Coupland	Canadian Nuclear Association	Canadian Nuclear Association
Jack Vecchiarelli (Connie Leclair and Michelle Barboza as observers)	Nuclear reactors	Ontario Power Generation
Maury Burton	Nuclear reactors	Bruce Power
Shaun Cotnam	Nuclear research and test facilities	Canadian Nuclear Laboratories
Kevin Nagy	Uranium processing facilities and uranium mines	Cameco
Richard Wassenaar	Nuclear substance processing facilities	Nordion
Stephen J. Walker	Canadian Council of Independent Laboratories
Alan Brady	Nuclear substances and prescribed equipment (Nondestructive Testing Management Association and industrial radiography)	Team Industrial Services Inc.
Arliss McNaley	Nuclear substances and prescribed equipment (oil and gas exploration)	Schlumberger Canada Ltd.
Doug Otto	Nuclear substances and prescribed equipment (portable gauges)	TBT Engineering
Patricia MacNeil	Nuclear substances and prescribed equipment (industrial radiography)	A-Tech N.D.T.

Canadian Nuclear Safety Commission participants

Name	Position
Liane Sauer	Director General, Strategic Planning Directorate (CRAG Chair)
Benoit St. Jean	Director General, Finance and Administration Directorate (FAD)
Hugh Robertson	Director General, Directorate of Regulatory Improvement and Major Projects Management (DRIMPM)
Sylvain Faille	Director General (Acting), Directorate of Nuclear Substance Regulation (DNSR) / Director, Nuclear Substances and Radiation Devices Licensing Division, DNSR
Nancy Sigouin	Director, Financial Management and Internal Controls Division, FAD
André Bouchard	Director, Operations Inspection Division, DNSR
Dov Ben-Reuven	Director, Regulatory Operations Coordination Division (ROCD) DRIMPM
Mark Broeders	Director, Accelerators and Class II Facilities Division, DNSR
Tetyana Panichevska	Senior Project Officer, Director General’s Office, DRIMPM
Sonia Racine	Chief, Revenue Management
Lee Brunarski	Senior Policy Officer, Policy, Aboriginal and International Relations Division (CRAG Secretary)

2 pm – Meeting commenced.

Introductions and opening remarks

Liane Sauer, Cost Recovery Advisory Group (CRAG) Chair, opened the meeting and welcomed the participants.

Liane noted the following changes to the CRAG membership since the last meeting:

1. Patricia MacNeil, A-Tech N.D.T., is the industrial radiography representative for smaller industrial radiographers under the nuclear substances and prescribed equipment sector.
2. Doug Otto, TBT Engineering, is the portable gauges representative under the nuclear substances and prescribed equipment sector.

All 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, once finalized, would be available on the Canadian Nuclear Safety Commission (CNSC) website. Liane added that there were 2 action items from the previous meeting – add Stephen Walker to the participants list for the March 2019 meeting, which was completed; and hold a one-on-one meeting with Ontario Power Generation (OPG) regarding fees, which was not completed. Jack Vecchiarelli stated that the OPG action item could be considered closed as he would be raising it later in the meeting. 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

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

• the CNSC’s and industry’s ongoing responses to the COVID-19 pandemic, such as strong and innovative oversight and safe operations at all times, and generous support to communities and first responders
• President Velshi’s continued advocacy for international regulatory collaboration, readiness and harmonization for innovative nuclear technologies, such as small modular reactors
• the appointment of 2 new Commission members (Ms. Maharaj and Mr. Kahgee), resulting in the first full slate since 2013
• virtual Commission proceedings, including 1 public hearing and 5 meetings
• updates to the Radiation Protection Regulations, publication of 13 regulatory documents, and consultation on 7 others
• the submission of Canada’s Seventh National Report for the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management
• continued work with licensees to ensure the safety of Canada’s nuclear sector

Liane noted that a special meeting was held in December 2020 with all fee-paying regulatory activity plan licensees to discuss pending returns resulting from CNSC in-year savings.

Operational management

Update on regulatory activity plans

Tetyana Panichevska gave an update on regulatory activity plans (RAPs). RAPs apply 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 are based on 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. 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. 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. The 2020–21 RAPs and fee estimates were issued electronically on April 1, 2020.

In July 2020, 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 2019–20. For each facility, the reports included, as applicable, the number of licensing decisions for new licences, licence renewals and licence amendments; the number of Type I and Type II inspections conducted; and the number of orders issued.

CRAG members were informed that the 2021–22 RAPs and fee estimates would be issued electronically by the end of March 2021. The format and level of detail would be the same as for the 2020–21 RAPs, which, beginning in 2019–20, include additional information on technical regulatory activities and internal support services and a description of collective CNSC activities. The 2021–22 RAP cover letter would reflect the impacts of the COVID-19 pandemic, noting that fees might be adjusted during the year and that future years’ fee estimates would not be provided due to uncertainty caused by the pandemic. The report on the number of licensing and compliance activities completed by the CNSC in 2020–21 would be issued with the final invoices. 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.

Discussion

A CRAG member asked when fee-paying RAP licensees could expect to be informed of in-year fee adjustments for 2021–22. Benoit St-Jean replied that the CNSC would likely have the information regarding any in-year adjustments near the end of September, following a review of the second quarter data for fee-paying RAP licensees. If an in-year adjustment was required, a final decision would be provided around the end of December.

CRAG members asked about when future years’ fee projections would be included in RAP cover letters. Benoit replied that future years’ projections would be included once there was enough certainty post-pandemic to begin to do so again.

Financial management

Financial overview

Isabelle Ricard provided a financial overview. She discussed measures that the CNSC had taken in recent years to communicate and validate the CNSC costing methodology. A July 2019 special meeting with all fee-paying RAP licensees explained the methodology used to set RAP fees. A third-party consulting firm was engaged in fall 2019 to review the CNSC costing methodology and supporting processes. That review found that the processes were thoroughly documented and efficient, compliant with federal guides and regulations, and distributed costs fairly to RAP licensees. The review also found that both within the CNSC and externally there was an apparent lack of understanding and a perception of a lack of fairness, regarding the principles and driver of the model.

The CNSC’s expenses for 2020–21 were expected to total approximately $164.2 million, a decrease of over $3.3 million from 2019–20. Between 2015–16 and 2020–21, the average yearly increase in CNSC expenses was 1.2%, for a total of $9.2 million, which was under the 5-year, 1.59% average increase in inflation and the Consumer Price Index (CPI). Increased expenses were principally due to CNSC staff salary increases, which generally tracked the CPI. Non-salary expenditures decreased 1.2% per year during that same period due to internal efficiencies, whereas fees charged by other government departments increased by 3% per year. Generally speaking, fee-paying regulatory activities represented 85% of the CNSC’s expenditures, while non-fee-paying activities, such as those related to international nuclear agreements, represented 15%. The CNSC continued to manage fee increases prudently, while simultaneously investing in organizational renewal activities related to staffing, technology and workplace accommodations.

Regulatory activity plans

Between 2015–16 and 2020–21, final RAP fees increased by $4.6 million (4.7%), which represented an average yearly increase of $920,000 (0.9%). Initial RAP fees increased by $11 million (10.7%), which represented an average yearly increase of $1.8 million (1.8%). During that time, year-end refunds to RAP licensees varied between 0.6% and 8.5%. The increase in initial RAP fees in 2021–22 from 2020–2021 was $220,000 ($112,930,000 to $113,150,000). Fee-paying RAP licensees were advised that the initial RAP fees for 2021–22 were established with the assumption that domestic and international travel would not resume before the third quarter. Changes to that and other assumptions could result in the need for in-year revisions, as in 2020–21, which in turn could result in returns to fee-paying RAP licensees.

Formula fees

Between 2015–16 and 2020–21, formula fees increased by $3.7 million (61.8%), from $6,055,000 to $9,800,000, with an average yearly increase of $749,000 (12.4%). In recognition of the ongoing economic effects of COVID-19 on the nuclear industry, no changes in formula fees would be applied in 2021–22, with the exception of Dosimetry Services, which required an administrative correction. Since 2014–15, the CNSC has been phasing in an annual increase in formula fees to end the long-standing subsidization of the CNSC’s formula fees–related costs from the CNSC’s funding appropriated by Parliament.

Fixed fees

The CNSC’s fixed fees would increase by 4.04% in 2021–22. The increase was 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 CPI. The 4.04% increase represented the retroactive and cumulative increases in the CPI for 2019–20, 2020–21 and 2021–22.

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, analysis, discussion and challenge by the CNSC’s Executive Management team, and a review and audit of the CNSC’s financial statements and management discussion and analysis by the Office of the Auditor General. The CNSC also requires annual approval of its appropriations by the Treasury Board and Parliament. The CNSC would monitor and adjust its spending throughout 2021–22 in response to COVID-19, which could impact RAPs and associated fees. Projections for future years would not be included in the 2021–22 RAP fee package, but would be provided in future years once the longer-term impacts of COVID-19 were better understood.

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 whom to contact about disputes.

Discussion

Some CRAG members asked for clarity around the costs and percentages associated with the CNSC’s internal support services. Benoit replied that the CNSC’s internal support services costs were approximately 30% of actual spending on core responsibilities and of actual human resources, which was consistent with other government departments. He added that the CNSC had reporting obligations that are not common to the private sector. Some CRAG members requested that an overview of the CNSC’s internal support services costs be prepared and shared with CRAG members. Liane agreed and directed that it be an action item.

Stephen Walker and Patricia MacNeil asked when the formula fee increases were expected to end, noting that there had been a 63% increase in recent years. Benoit replied that the CNSC was still not fully recovering the costs of its regulatory effort related to formula fees licensees, which required a subsidy from the CNSC’s funding appropriated by Parliament, and the increases were designed to address that gap. Liane directed that an action item be created to provide an update on the status of the implementation of the increases.

Patricia stated that the CNSC, as a public sector entity, should be expected to find savings similar to how the private sector has had to. She asked if there were CNSC budget numbers that CRAG reviews, particularly for cost recovery, that show projected costs, actual costs and fees recovered. Liane directed that this be an action item and stated that the CRAG Secretary would send Patricia links to relevant information in CNSC departmental results reports and fee reports.

Richard Wassenaar asked for confirmation that fixed fees would increase by 4.04% in 2021–22 but that formula fees would not increase at all, with the exception of Dosimetry Services. Benoit confirmed that Richard was correct.

Richard then asked what the CNSC’s return-to-work would look like post-COVID-19. Liane replied that the CNSC had an initiative on reimagining the workplace to prepare for a post-COVID-19 future, and hoped to have more clarity in the summer or fall of 2021. Benoit added that an already approved accommodation plan would reduce the CNSC’s office space footprint over 5 years, which in turn would reduce the CNSC’s rent costs and represent an additional efficiency.

Steve Coupland asked about the annual 3% increase in costs to other government departments between 2015–16 and 2020–21. Benoit replied that those costs were related to information, technology and payroll services provided by other government departments and charged to the CNSC.

Steve asked if a breakdown could be provided for what is covered by appropriation and what has to be covered by cost recovery. Liane directed that this be an action item and stated that the CRAG Secretary would send the requested information.

Steve and Jack Vecchiarelli asked about the impacts to the CNSC’s recovered costs, particularly internal support services, when a large facility such as the Pickering Nuclear Generating Station ceases operations. Both expected that the CNSC would have to deal with any related challenges directly and not spread costs out over remaining licensees. Liane replied that the CNSC was acutely aware of the issue and that a strategic review was underway to consider that issue and many others in the CNSC’s operating environment. The strategic review would help position the CNSC as a modern regulator for the future. Benoit added that the CNSC was looking at how to manage the shift and related decrease in revenues.

Other business

There was no other business.

Concluding comments and next meeting

Liane stated that the plan was to hold the next CRAG meeting in March 2022 unless other issues arose that required a discussion before then.

Liane thanked CRAG members for their participation and adjourned the meeting at 3:30 pm.

Actions

1. Provide an overview of the CNSC’s internal support services costs
2. Provide an update on the implementation of formula fee increases
3. Provide Patricia with links to CNSC departmental results reports and fee reports
4. Provide Steve with information on activities covered by appropriation and cost recovery