Cost Recovery Advisory Group - 2024 meeting

March 25, 2024
Virtual Meeting

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

Meeting minutes

Licensee participants

Member	Sector represented	Work organization
Sorouche Mirmiran	Canadian Nuclear Association	Canadian Nuclear Association
Sara Irvine	Nuclear reactors	Ontario Power Generation
Maury Burton	Nuclear reactors	Bruce Power
Sarah Brewer	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 Walker	Canadian Council of Independent Laboratories	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
Arliss McNalley	Nuclear substances and prescribed equipment (oil & gas exploration)	Schlumberger Canada Ltd

Canadian Nuclear Safety Commission participants

Name	Position
Benoit St-Jean	Director General, Finance and Administration Directorate (Acting CRAG Chair)
Sarah Eaton	Director General, Directorate of Advanced Reactor Technologies
Alex Viktorov	Director General, Directorate of Power Reactor Regulation
Claire Pike	Acting Director General, Directorate of Nuclear Substance Regulation
Kimberley Campbell	Director, Wastes and Decommissioning Division
Denys Bousquet	Director, Financial Management and Internal Controls Division
John Glover	Acting Director, Operations Secretariat
Sylvain Faille	Director, Nuclear Substances and Radiation Devices Licensing Division
Geneviève Boudrias	Director, International and Government Affairs Division
Josée Turcotte	Project Officer, Operations Secretariat
Lee Brunarski	Senior Policy Officer, International and Government Affairs Division (CRAG Secretary)

10:30 am – Meeting commenced.

Introductions and opening remarks

Benoit St-Jean, Cost Recovery Advisory Group (CRAG) Acting Chair, opened the meeting and welcomed the participants. Benoit noted that Sarah Brewer would be representing Canadian Nuclear Laboratories (CNL) for this meeting but that the ongoing CNL representative would be confirmed following the meeting. Benoit noted that the only change in membership was that Mirela Kirr of Landauer Inc. would no longer be the representative for the dosimetry sector, and that a replacement was being identified.

Review of minutes and action items

Benoit noted that the minutes of the last meeting had been provided to all CRAG members and that no comments were received. Accordingly, they are now available on the Canadian Nuclear Safety Commission (CNSC) website. Benoit added that there was 1 action item from the previous meeting, which was to send the draft meeting minutes to CRAG members for review as soon as possible before posting online within 3 months. This action item was completed.

No other comments were made, and it was agreed that the minutes be considered final. The agenda was adopted as drafted with no changes.

Looking back over the past year

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

• Rumina Velshi, the CNSC’s former President and CEO, left the CNSC in October 2023. Executive Vice-President Ramzi Jammal has been acting as CEO since, and Commission member Dr. Timothy Berube has been acting as President of the Commission.
• The CNSC continues to support the acting CEO in advancing the CNSC’s priorities domestically and internationally, while working to be ready to support a seamless transition when the new leader joins.
• Complementing the funding received in Budget 2022 for small modular reactor (SMR) readiness, Budget 2023 provided funds announced in the 2022 Fall Economic Statement to support the CNSC’s existing Participant Funding Program, as well as to establish the Indigenous and Stakeholder Capacity Fund.
• The government also announced a commitment in Budget 2023 to improve the efficiency of the impact assessment and permitting processes for major projects and established a ministerial working group to lead on related efforts.
• The Commission held 11 public hearings, 8 hearings in writing and 3 public meetings, using a mix of virtual and in-person options. Highlights included:
  • renewing Cameco’s waste facility operating licence for the decommissioned Beaverlodge mine and mill site for another 2 years
  • authorizing Canadian Nuclear Laboratories to construct a near surface disposal facility at its Chalk River Laboratories site; that decision is under judicial review, so it could not be discussed further
  • conducting a public hearing on the applicability of the Darlington New Nuclear Project environmental assessment and plant parameter envelope for Ontario Power Generation’s proposed small modular reactor technology, the BWRX-300
• Several new or updated regulatory documents were published or updated and focused on reporting requirements for nuclear power plants, nuclear fuel safety and qualification, controlling releases to the environment, and a licence to prepare a site for a deep geological repository.
• The CNSC continues to operate in a hybrid work model, where CNSC staff work in the office or remotely and under which CNSC staff are working very well to carry out the CNSC mandate.
• The CNSC’s office space in the National Capital Region continues to be converted to the government’s design standards, and that work is nearly completed – completion in April 2024 is expected. This project will result in about a 40% reduction of the CNSC’s footprint and financial savings of approximately $2 million per year.
• The CNSC remains focused on the 4 key priorities of being a modern, trusted, global and agile nuclear regulator in support of the CNSC’s vision to be a world-class nuclear regulator.

Discussion

There were no related questions or comments.

Operational management

Update on regulatory activity plans (RAPs)

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

• On March 31, 2023, the CNSC issued RAPs and fee estimates for fiscal year 2023–24
• In July 2023, 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 fiscal year 2022–23. These reports included the number of:
  • licensing decisions for new licences, licence renewals, and licence amendments
  • inspections conducted
  • orders issued

John indicated that the RAPs and fee estimates will be issued no later than Thursday, March 28, 2024.

• RAP format and level of detail will remain the same, and RAPs and fee estimates will be issued electronically only.
• No updates to the RAP cover letter were made.

As in previous years, the report on the number of major licensing and compliance activities completed by the CNSC last fiscal year will be provided around the time the final invoices for 2023–24 are issued, which is normally in July.

Discussion

There were no related questions or comments.

Financial management

Financial overview

Denys Bousquet noted that this fiscal year’s expenditures had increased due to a need to invest in specific areas, a combination of salary increments and inflationary pressure, along with staff growth to support regulatory activities.

Based on the latest 2023–24 forecast, expenditures were estimated at $202 million. Since 2018–19, CNSC expenditures have risen by $36.6 million (or 22.1%), with significant increases occurring in the past few years due to ongoing activities related to regulatory modernization, Indigenous consultation and SMRs, with most funding coming from parliamentary appropriation. Salary and benefit expenses rose by $30.6 million (or 25.6%) due in part to higher staff usage (57 full-time equivalents, FTEs), as well contingencies of almost 9% set aside since 2021–22 in anticipation of a new collective agreement, which was recently presented to CNSC staff for ratification, after the previous collective agreement ended on March 31, 2022.

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, which 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 2024–25 are estimated at $135 million (or +11% when compared with 2023–24 initial plans). The average yearly increase, when calculated from 2018–19 to 2024–25, represents 1.5% or 4.5% when considering 2024–25 initial plans.

Formula fees

Denys explained that fees are calculated using the formulas set out in the Cost Recovery Fees Regulations (CRFR), Part 2 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 2024–25, the hourly rate will be increased from $275 to $293 (or 6.5%). Since 2018–19, formula fee revenues have increased by $2.5 million, or 10.6%. The CNSC continues with its phased-in approach to annual formula fee increases, which began in 2014–15 but was paused during the pandemic, to enable the CNSC to fully recover the costs to regulate formula fees licensees. The CNSC's regulatory effort related to formula fees licensees has been higher than the revenues collected for many years, and that gap has been subsidized from the CNSC's parliamentary appropriation.

Fixed fees

It was reiterated that since June 2017, the Service Fees Act (SFA) has set 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
• 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 2024–25, those fees will increase by 4.4%.

Dispute resolution mechanism

For any disputes over fee administration or regulatory activity assignments, there are related mechanisms in place to resolve them, outlined and available on the CNSC website – Dispute Resolution Mechanism for Fee Administration and Dispute Resolution Mechanism for Regulatory Activity Assignments.

Discussion

In response to a question about the more than 6% increase in the CNSC’s FTE usage between fiscal year 2022–23 and 2023–24, Benoit replied that most of the FTE effort was directed to SMR readiness, Indigenous consultation and regulatory modernization. Most of this was funded through appropriations from Parliament.

In response to a comment on the importance of a risk-based approach for industry and the CNSC to ensure CNSC regulatory readiness and efficient regulatory and licensing reviews, Benoit noted that the CNSC is seized with the issue. He added that a long-term workforce planning presentation had recently been given to the CNSC Executive Team, which identified the risks to hiring sufficient FTEs and strategies to mitigate those risks.

In response to questions about the relation between the RAP and hourly rate increases and CNSC staff salary increases, Benoit replied that most of the hourly rate increase is related to increased CNSC staff salary expenses. He noted that CNSC staff had recently been presented a tentative 4‑year collective agreement, retroactive for 2 years, and would soon be voting on it. He referred CRAG members to the Professional Institute of the Public Service website for details on the tentative collective agreement. He added that during negotiations over the 2 previous fiscal years, the CNSC had set aside funds in anticipation of the fiscal impacts of a new collective agreement, so some of the related costs are already included in the fiscal framework. However, the tentative collective agreement includes additional elements that were unforeseen until recently, and, if it is accepted, those elements will have upward pressure on costs, which was reflected in the numbers presented to CRAG members during this meeting.

In response to a question about initial RAP fees rising from $114 million in 2022–23 to $135 million in 2024–25 being related to CNSC staff salary increases and increased work for the CNSC, Benoit confirmed that 80% of the increase is due to CNSC staff salary increases and 20% is related to additional work on existing or new projects. He added that the RAP increases will not be across the board for RAP fee licensees but will be allocated proportionally based on effort.

A question was asked on whether the CNSC continues to look at its business model for efficiencies, noting that prior to the pandemic, the portable gauges sector was seeing yearly increases in fees of approximately 15% and is looking for clarity on whether those increases are likely to continue and if any changes to formula fees should be expected. Benoit replied that the CNSC’s biggest change since the pandemic has been the move to a hybrid approach, which has resulted in a 40% reduction in office space, resulting in approximately $2 million in savings per year. He noted that the costs of the CNSC’s office retrofit were covered by the Government of Canada, not licensees. With respect to revisions to the formula fees, Benoit replied that the formula fees are reviewed each year but that revising the formula fees would require opening the Cost Recovery Fees Regulations. He noted that the CNSC recognizes the nuclear industry is evolving, and the CNSC is looking at its long-term planning process to see if efficiencies can be realized, with this work being supported by the Transformation Management Office established in January 2023 to provide project management, change management and change leadership support through January 2026. Benoit noted that as the industry evolves and grows, the CNSC will need to adapt and, in that context, a reduction in costs is not foreseeable.

Other business

Benoit noted that the CRAG Terms of Reference (ToR) have not been revisited for many years. A review of the ToR was recommended to be carried out over the next year, beginning with an internal CNSC review followed by engagement of CRAG members. Changes are expected to have been implemented or to be ready for discussion at next year’s CRAG meeting.

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 as soon as possible, ideally within 2 to 3 months.

Concluding comments and next meeting

Benoit thanked CRAG members for their participation and said the next meeting will tentatively be held in March 2025. Benoit 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.
2. A CNSC internal review of the CRAG ToR will be conducted, followed by engagement with CRAG members.