Cost Recovery Advisory Group - 2023 Meeting

March 29, 2023,
Virtual Meeting
2:00 – 3:30 pm

Meeting agenda

• 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

Licensee participants

Member	Sector represented	Work organization
Steve Coupland (accompanied by Sorouche Mirmiran)	Canadian Nuclear Association	Canadian Nuclear Association
Sara Irvine	Nuclear reactors	Ontario Power Generation
Colin Elwood (for Maury Burton)	Nuclear reactors	Bruce Power
Nick Reicker (for Jason Nouwens)	Nuclear reactors	NB Power
Sarah Brewer (for existing CNL vacancy)	Nuclear research and test facilities	CNL
Kevin Nagy	Uranium processing facilities and uranium mines	Cameco
Tim Mahilrajan (for Richard Wassenaar, Nordion)	Nuclear substance processing facilities	BWXT Medical Ltd.
Valerie Phelan	Accelerators	Isologic
Stephen J. Walker	Canadian Council of Independent Laboratories
Sean Hunt	Nuclear substances and prescribed equipment (servicing, etc. radioisotopes / calibration)	Stuart Hunt & Associates
Ryan Lacharite	Nuclear substances and prescribed equipment (smaller industrial radiographers)	MISTRAS Group
Doug Otto	Nuclear substances and prescribed equipment (portable gauges)	TBT Engineering
Alan Brady	Nuclear substances and prescribed equipment (Nondestructive Testing Management Association and industrial radiography)	Team Industrial Services Inc.
Mirela Kirr	Dosimetry	Landauer Inc.

Canadian Nuclear Safety Commission participants

Keith Dewar	Director General, Strategic Planning Directorate (CRAG Chair)
Benoit St-Jean	Director General, Finance and Administration Directorate
Karen Owen-Whitred	Director General, Directorate of Nuclear Substance Regulation
Kavita Murthy	Director General, Directorate of Nuclear Cycle and Facilities Regulation
Denys Bousquet	Director, Financial Management and Internal Controls Division
John Thelen	Director, Regulatory Operations Coordination Division and Internal Quality Management Division
Sylvain Faille	Director, Nuclear Substances and Radiation Devices Licensing Division
Josée Turcotte	Project Officer, Regulatory Operations Coordination Division
Lee Brunarski	Senior Policy Officer, International and Government Affairs Division (CRAG Secretary)
Sabrina Hyde	Policy Officer, International and Government Affairs Division

2:00 pm – Meeting commenced.

Introduction and opening remarks

Keith, Cost Recovery Advisory Group (CRAG) Chair, opened the meeting and welcomed the participants. Keith noted 2 new members had joined the CRAG since the March 2022 meeting. Ryan Lacharite of MISTRAS Group now represents smaller industrial radiographers under the Nuclear substances and prescribed equipment sector. Mirela Kirr of Landauer Inc. now represents the Dosimetry sector. Steve Coupland announced that this will be his last CRAG meeting and will be succeeded by Sorouche Mirmiran. 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 3 action items from the previous meeting, and that the CNSC had provided responses and/or updates for all 3 prior to the meeting:

1. Provide information on the CNSC’s current and future research priorities and new technology investments
2. Revisit the CRAG terms of reference to see if the existing communication mechanism is effective, and, if not, what can be done about it
3. Include the budget numbers for the 812 use type in the CNSC’s Financial Management Report

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:

• The Government of Canada provided considerable support in 2022 behind the CNSC’s small modular reactor readiness and relationship building efforts.
• Budget 2022 invested $50.7 million over 5 years to ensure the CNSC’s readiness for SMR projects. This funding is being used to:
  • ensure regulatory predictability,
  • enhance our capacity and capability to review projects, including through independent research,
  • strengthen coordination with governmental counterparts, and
  • advance international collaboration.
• The 2022 Fall Economic Statement also provided almost $36 million over 6 years to:
  • establish an Indigenous and Stakeholder Capacity Fund,
  • strengthen our Participant Funding Program, and
  • support ongoing engagement and collaboration.
• Close collaboration with the US nuclear regulator intensified, especially on the BWRX-300 design, proposed for OPG’s Darlington New Nuclear Project.
  • recently published our 4th joint evaluation report.
  • joined a 5-party oversight group with the USNRC, OPG, the Tennessee Valley Authority and GE-Hitachi on pre-licensing activities.
• The CNSC established a Transformation Management Office to oversee the development, monitoring and implementation of our major transformation initiatives over the next 3 years.
• Several new or updated REGDOCs were published, and consultations were held on various other REGDOCs, discussion papers and a regulation, on issues including constructing reactor facilities, safety analyses for Class 1B reactor facilities, certifying exposure device operators, nuclear fuel safety, nuclear security, and Class II nuclear facilities and prescribed equipment.
• The CNSC continues to operate in a hybrid work model where CNSC staff work in the office or remotely and under which we are working very well to carry out our mandate.
• Our office space in the National Capital Region is being converted to the Government’s design standards, and work to accomplish this should be around 75% complete by the end of August 2023.
• The Commission held 7 hearings, 5 hearings in writing and 4 meetings, using a mix of virtual and in-person options.
• The Federal Court concluded in June 2022 that the Commission’s December 2020 decision on BWXT’s licence renewal, which permitted commercial fuel pelleting operations in Peterborough, is lawful and reasonable.

Keith also noted that President Velshi would not be seeking another term as President/CEO, and work is currently underway to recruit a new President/CEO.

Discussion

Keith was asked a question on whether funding and support provided to the CNSC and the nuclear sector in federal budgets in 2022 and 2023 would have an impact on cost recovery, with savings passed on to the licensees. He replied that it would not impact cost recovery directly but should enable the CNSC to conduct reviews in a timely manner, particularly in contrast to waiting for special project funding.

Benoit responded to a question about the CNSC’s hybrid work model and how that approach has influenced spending. He noted that the CNSC was reducing the office footprint by 40% and by next fiscal year the benefits of reduced rent costs will be realized. Travel costs have also reduced by about 25%, but the cost of travel itself has increased about 17%, so savings are minimal. To support the hybrid work model there was an increase in spending for IT support and systems.

Benoit also noted the development of a performance indicator model to have clear data to make decisions about the CNSC’s future operations (i.e., the hybrid model). A CRAG member encouraged the CNSC to be transparent on meeting related deliverables and service standards, which will help demonstrate that the hybrid model is effective and working.

Operational Management

Update on regulatory activity plans

John provided a recap on the activities that occurred in the fiscal year 2022-23:

• March 31, 2022, CNSC issued RAPs & fee estimates for the fiscal year 2022-23
• July 2022, the CNSC issued reports to RAP-fee paying licensees for Class I nuclear facilities and uranium mine and mill facilities, detailing the number of major licensing and compliance activities completed during the fiscal year 2021-22. These reports included:
  • the number of licensing decisions for new licences, licence renewals, and licence amendments,
  • the number of inspections conducted,
  • and the number of Orders issued.

John indicated that the RAPs and fee estimates will be issued no later than Friday, March 31st.

• RAP format and level of detail will remain the same and RAPs and fee estimates will be issued electronically only.
• The RAP cover letter was updated with the following information:
  • remove the explanation of potential impacts from COVID-19 pandemic, and
  • new since the CRAG material was shared with the members, moving forward, the Financial Management and Internal Controls Division director will sign the RAP letters. This change was made to coincide with the Regulatory Program Director signing the letter as well.

As in previous years, the report on the number of major licensing and compliance activities completed by CNSC last fiscal year will be provided around the time the final invoices for 2022-23 are issued, which is normally in July.

Discussion

There were no related questions or comments. 

Financial management

Financial overview

Denys noted that this fiscal year’s expenditures increased due to additional spending on staffing, salary economic increase, travel, Participant Funding and Research Support Programs and inflation. At Q3, total expenditures for 2022-23 were estimated at $176 million. Forecasted expenditures at Q3 of 2022-23 are more aligned with pre-pandemic years and represent a 1.6% annual increase since 2017-18. The pre-pandemic increase rate was 2.7% annually.

During 2021-22, the CNSC also received funding related to readiness for SMRs and for an Indigenous and Stakeholder Capacity Fund for a total of $6.9 million. The expenditures related to those specific initiatives are included in the $176 million but are not charged to licensees.

Regulatory activity plans

Denys mentioned that this year, the CNSC undertook a detailed planning process to come up with its annual regulatory activity plan for each Class I licensee. Fees are set on a proportional allocation of costs, based on estimated level of direct effort for each planned regulatory activity, and for each licensee. Once the direct effort per licensee is established, the CNSC applies its costing model that calculates the allocation of common direct, indirect and internal services costs using an established algorithm. The result of this exercise leads to the creation of individual RAP licensee fees. Plans and costing information are reviewed and validated against prior years to ensure consistency and, at each quarter, the progress of the workplans is monitored and adjustments are made when required.

Regulatory Activity initial plans for 2023-24 are estimated at $121 million (or + 5.9% when compared with 2022-23 initial plans). The average yearly increase, when calculated from 2018-19 to 2022-23, represents 1.5% or 2.7% when considering 2023-24 initial plans. It was noted that during Q3, the CNSC received an in-year request to reflect a change in activities that was approved during the course of Q4, which will impact the return to RAP licensees by about 1%.

Formula fees

Denys explained that fees are calculated using the formulas set out in the Cost Recovery Fees Regulations (CRFR) Part 3 of Schedule 1. The formulas take into consideration base hours, variable hours, a compliance coefficient, and an hourly rate. The hourly rate is reviewed and calculated yearly using instructions from the CRFR Part 3, section 14. For 2023-24, the hourly rate will be increased from $270 to $275. Benoit noted that the hourly rate has not changed for the last 4 years. The slight increase in the hourly rate should result in a $200,000 increase in formula fees revenues. Since 2018-19, it represents a yearly increase of 3.8% in revenues.

Audited financial statements show that the CNSC’s Parliamentary appropriation continues to subsidize formula fees on an annual basis as costs to regulate formula fees licensees are higher than revenues collected. Looking forward, the CNSC plans to review the base and variable hours for each use type in the fee schedule to reflect changes to the regulatory work hours (if applicable). This activity may result in formulas being updated for each use type. Additional information regarding revenues and costs can be found in the 2021-22 CNSC Fee Report and in 2021-22 CNSC Financial Statements published on the CNSC’s website.

Fixed fees

It was reiterated that since June 2017, the Service Fees Act (SFA) sets how departments manage fees and is based on the following 3 requirements:

• service standards need to be established;
• fixed fees are to be adjusted annually, based on the Consumer Price Index; and
• in the eventuality where service standards would not be met, the CNSC has the obligation to remit the portion representing the services that were not rendered.

These requirements only impact fixed fees under Part 4 of the CNSC CRFR. For 2023-24, those fees will increase by 6.8%.

Dispute resolution mechanism

If there is a dispute between parties, there is a mechanism in place to be followed which is outlined on the CNSC website.

Discussion

Valarie asked if the cost of business being reported for inspections was for all licensees or for ones who pay fees only. Benoit and Denys clarified that the cost is calculated for all costs to complete the inspections, but those who are inspected may not all pay the same fees (i.e., hospitals do not pay inspection fees).

Steve asked for clarity about expenses from other government departments not covered by the CNSC. Benoit clarified that the costs are mostly for services provided to the CNSC to support the CNSC’s operations, for example, Shared Services Canada provides significant IT services to the CNSC.

Stephen asked if there was a change in the hours in the formula in addition to the change in hourly rate from $270 to $275. Benoit and Karen clarified that work is being done to evaluate the number of hours included in the formula and over the course of this year they will evaluate time accounting data. No changes to that part of the formula have been made at this point.

Sean asked about the CNSC process for formula fees, in which an initial review by a licensing specialist is then given a peer review, and whether all of the hours in that process are factored into the CNSC’s costs. Karen and Sylvain responded that the peer review process has been used for many years.

Other business

To provide meeting minutes as soon as possible, the CNSC will:

• not be waiting for approval via the next CRAG meeting
• draft them as soon as possible following the meeting, have them reviewed internally and then distributed to CRAG members for review, ideally within a month following the meeting
• give CRAG members 2 weeks to review and will address comments/questions
• send for translation and have posted to the web asap, ideally withing 2-3 months

Concluding comments and next meeting

Keith thanked CRAG members for their participation and said the next meeting will tentatively be held in March 2024. Keith adjourned the meeting.

Actions

1. Meeting minutes will be sent to CRAG members for review as soon as possible following the meeting, ideally within a month, and the CNSC will target online posting within a maximum of 3 months.