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Gas Transportation Charging Review Group

Minutes of the Joint Meeting held on 30 October 2007

Present:

K Allars, Chairman, HSE

Industry Members

J Duckworth - National Grid Gas
I McPherson - UKPIA
S Gay - Scotia Gas Networks
J Watson - LPGA
D Montgomery - CIA
J Roche - CIA
K Dixon-Jackson - CIBA
W Piatkiewicz - NFA
S Lewis - NFA
M Woods - BCGA
T Smith - Explosives Industry Group (CBI)
K Shepherd - TSA

Competent authority members

S Wing - HSE (Gas CRG Chair)
M Lacaille - HSE
B Davis - EA
M Reyland - HSE
S Welsh - HSE
K McFadyen - HSE (Secretary)

Welcome and introduction

1. The Chairman welcomed everyone to the meeting. He explained that the agenda covered the standard business items as well as the proposals for changing the coverage of charging and the 2008/09 hourly rates. Although this was not a formal consultation on those proposals, the views of industry were important and would be conveyed to the HSC and to Ministers. To facilitate this it was intended to submit the draft minutes to members for approval by 9 November with a request that all comments be received by 16 November so that the final agreed minutes can be submitted to the HSC Secretariat by 20 November as an attachment to the HSC paper on charging for discussion at its meeting on 11 December. He sought members’ agreement to the minutes being attributable to members/representatives rather than simply ‘industry comments’. This was agreed.

2. Introductions were made. Apologies for absence had been received from D Hutchison, Northern Gas Networks; B Murray, Independent Pipelines Ltd; J Asherson, CBI; C Clarke, Wales & West Utilities; J Burns, SEPA and R Shuttleworth, LPGA for whom Mr Watson was deputising. It was also noted that A Gilbert would no longer be the main contact for the NFA. Her replacement was to be confirmed. Also J Mowatt had changed jobs and would be replaced by P McNulty as the T&G contact.

Minutes of the CCRG meeting held on 10 October 2006

3. The CCRG minutes had been previously agreed and published on HSE’s website. The GCRG did not meet last year and their business had been dealt with by correspondence.

Matters arising 

4. There was an action on HSE at para 7 of the CCRG minutes. Mr Reyland said that it was unclear what further analysis was required on the salary costs. They covered ERNIC and superannuation costs which were common to all the Competent Authority members. Members agreed to consider the action as cleared.

5. The Chairman referred to para 19 of the CCRG minutes, regarding an alternative charging method. He said that this had not moved on yet, but that HSE and CIA would be discussing the merits and priorities of putting effort into developing such a scheme.

2006/07 outturns

6. These were in the standard format agreed some time ago.

  1. HSE: The outturn confirmed that the hourly rate of £114 that had been charged was the correct rate to break even.
  2. EA: The target was £114 but had out turned at £115 which offset the slight over recovery the previous year. There had been some revision between the categories which accounted for the variation in some percentages from the previous year.
  3. SEPA: The outturn indicated that the SEPA rate should have been £527 rather than that charged. COMAH is a very small part of SEPA activity for which costs are recovered and the amount they have recovered has been reducing.
  4. GSMR: The outturn matched the hourly rate.

Proposed increased Charge Out Rates 2008/9 and separately an increase in the HSE activities to be charged for

7.  Mr Lacaille explained that it was HSE policy and Treasury guidance that all the costs of permissioning work should be recovered.  A review had concluded that this was not being done.  He emphasised that there was no cross subsidy between the various permissioning regimes.  The proposed increase in charging rate reflected the costs of activities described as ‘common good’, and a separate increase in additional chargeable activity included for relative statutory provision work on COMAH sites.

The work that would increase the rate was essential to support the permissioning function and covered:

The aim was to recover costs, not to make a profit.  The charging guidance on the internet would be revised and the proposed revisions shared with industry.  HSE was not required to formally consult on the increased cost-recovery proposals, but would like industry views.  A paper will be going to the HSC meeting on 11 December and will include industry reaction to the proposals.  Following the HSC meeting HSE will make a submission to Ministers.

8. The Chairman said that there had already been an amount of correspondence from industry on this matter.  Issues raised in correspondence so far were:

Others coming in are concerned about research costs and suggesting guidance should be free.  All correspondence will be replied to.

9. There have also been issues raised internally by inspectors and at the meeting, covering:

All issues raised will be included in the HSC paper.

10. The Chairman asked Dr Welsh to comment on the research aspects.  Dr Welsh said that the major hazard science programme was broad ranging from research to identify the mechanisms for tumour formation in certain genetically modified vaccines to probabilistic safety assessment of dynamic loads from extreme weather conditions on the structural integrity of offshore platforms – with COMAH in the middle.  The commissioned science provides the essential technical underpinning to provide ‘lines to take’ for making regulatory judgements about compliance in a proportionate way, this has always been the case and in recent years Major Hazards science has been particularly scrutinised and challenged, through detailed business cases to ensure there is a direct link to operational delivery – no research is carried simply for its own sake.  Examples of current science priorities include the development of techniques for assessing the ‘COMAH’ implications from the Global Harmonisation scheme for classification of dangerous substances; work to judge the suitability of risk based inspection of hazardous plant and equipment underpinned by non destructive/invasive techniques and of course, following Buncefield - a range of fundamental research will be needed to understand the vapour cloud explosion mechanism.

The Chairman thanked Dr Welsh, and opened the meeting for further comments.

11. CIA (DM) Did not think there was any data on non-COMAH activity on sites. Their members’ response to the Chairman’s letter thought there would be an increase of 30% - 40%, and the costs, based on activity at CIA member sites, would be closer to £10m rather than £1m.  In light of this uncertainty she felt there should be a Regulatory Impact Assessment and that HSE should allow everyone to input to it in order to understand the impact on large and small companies, and on different sectors, as some might be more impacted than others.  The Chairman said that at the lower end of COMAH activity the impact of RSPs would likely be higher than for top tier sites, but that he did not accept that RSP work cost would be anywhere near £10m.  The chairman added that proactive non-COMAH work on large top tier sites could be in the region 2 days/year.  For small lower tier sites, because of the lower COMAH charges, this could therefore be closer to 90% of the total HSE resource on the site.

12. CIA (JR) Queried the percentage of research to be devoted to COMAH.  Dr Welsh replied that it was £350k next year.

13. CIBA (K D-J) Expressed concern about COMAH costs for companies with small capitalisation, and felt there should be some cut-off for HSE charges.  It appeared that HSE could charge what it wants for investigations.

14. CIA (DM) Agreed with K D-J, saying that the number of inspectors that turned up on site could sometimes seem excessive.  She cited an incident where nine people attended, including two photographers.  There needs to be transparency and accountability.  It also seems to take a long time for reports to appear.  The Chairman responded that if an operator receives a bill that it considers to be inappropriate, then there is a procedure for challenging it.  If HSE cannot justify the work it will be admitted and the bill reduced.  On timely reports he conceded that in some case it does take time to get everything right.  However industry can query this through the inspector’s line manager, and up to himself, if necessary.

15. NFA (WP) Felt that hourly charging was detrimental to efficiency.

16. CIBA (K D-J) Charging LT sites at the same rate was discriminatory.  The Chairman responded that in general less time was spent on non major hazard issues at TT sites because they more likely had a more robust H&S infrastructure not necessarily found in LT sites.  However, there was no intention to send in inspectors just to raise revenue.  KS said that the effect on LT sites would be disproportionate and asked whether the increase could be staged.  The Chairman said this had been mentioned by a few responders, but HSE was seeking to recover costs it should have been recovering in the past.  However this would be considered again, but members should note that no retrospective cost-recovery was proposed.

17. NG (JD) Queried whether charging was different in the different permissioning regimes.  The Chairman said that RSPs are already charged for in the offshore regime, but other things, the ‘common good’ activities, are being brought into that, and the offshore rate is going up as well to account for them.

18. NG (JD) Cannot see the justification for charging for RSPs by HID staff where the same type of site, and sometimes the same site, is also inspected by FOD and RSPs not charged for.  As an example, JD mentioned that FOD carried out an inspection at an NG site last week looking at HAVs issues.  Is it the intention that FOD will start charging for their work?  Mr Wing commented that this was similar to the adjacent COMAH/non-COMAH site situation, and the Chairman confirmed that FOD will indeed start to charge for appropriate activity on COMAH and Gas sites.

19. NFA (SL) The regulations only provide for charging for specific COMAH related activities and it is wrong to apply the same charges to non-COMAH activities.

20. LPGA (JW) Felt the extension of charging went beyond the EU Directive.  The Chairman said that he did not believe this to be the case, but this will be looked at as part of the HSC submission and clearly what HSE does has to be within the powers in HSWA.

21. CIBA (K D-J) Buncefield will result in extra costs to industry.  If there is another comparable incident with different causes there will be more additional costs to industry.  The Chairman responded that industry has to learn the lessons from such major incidents and do the necessary work to improve its safety envelope.  Site-specific learning from non-COMAH and international incidents will be chargeable if needing to be applied to COMAH sites.  If a company thinks the cost is disproportionate, the disputes procedure can be used.  K D-J asked if charges would be raised for a non-COMAH incident, to which the Chairman responded that they would.

22. NFA (WP) Commented that it is inappropriate for HSE COMAH inspectors to charge COMAH rates for non-COMAH issues when on COMAH sites.  Charging should be at the rate appropriate for the task in hand, not the location of the task.

23. NFA (WP) Asked if charging for non-permissioning regimes was a possibility. The Chairman said it could not be ruled out in the longer term, but is NOT part of this proposal.

24. CIA (DM) Expressed concern over the timing of the proposals as industry only heard about them after budgets had been set.  Also reiterated the earlier question of phasing-in the increase over several years.

25. BCGA (MW) Queried whether there was an accumulator built into the rate, and asked whether the costs of moving staff out of London was coincidental to this rate rise.  The Chairman said that the staff relocation was not relevant; it was a normal efficiency saving process.

26. NFA (WP) Asked whether industry can see the COMAH-specific research projects.  Mr Welsh said that they were published on HSE’s website.  NFA queried whether corporate intelligence was being lost from previous projects and industry would end up paying twice for the same thing.  Mr Welsh said there was a mechanism to minimise this possibility.

27. LPGA (JW) Asked whether data on the additional ‘common good’ work would be kept to judge the effect on the rate.  The Chairman responded that it would.

28. NG (JD) When charging was being introduced there was formal consultation with industry: why is this not so when the principles are changing?  The Chairman conceded a well made point, and that HSE would recheck the advice, but also explained that he understood HSE’s legal advice to be that the HSWA specifically precludes the need for consultation on regulations for fees such as Reg 22 of COMAH.

29. CIA (JR) Asked whether the extras being charged for will appear on invoices. The Secretary said they would not, as they were not direct activities but part of the overhead in the hourly rate.  Invoices would continue to show Assessment, Inspection, Investigation and Enforcement activities only, but the MTA would be made more explicit to show the cost involved in those additional activities.  The break-down of ‘common good works’ will be reviewed by the group each year.

30. CIA (DM) Queried whether meetings with industry associations and trade associations that have both COMAH and non-COMAH sites would have HSE staff time apportioned, and for the COMAH portion be calculated as part of the overhead.  (Secretary’s note: Industry Associations are not chargeable entities - we can only charge site operators.)

31. CBI (TS) Queried whether companies which contributed time and effort to committees such as ACDS and its sub-committees might have their charges reduced in recognition.  Also, that many of the consultations should take place at ACDS – and yet ACDS had been abandoned.  It was wrong to say such discussions took place if they did not – and there certainly shouldn’t be a provision for charging for such discussions if they didn’t take place.  The Chairman said that charges were for work done by the Competent Authority staff attributable to COMAH site operators, and there was not presently a means of reductions for positive interactions.

32. CIA (JR) Many guidelines go to Europe, and other countries will be getting benefit from UK industry’s costs. 

33. CIA (JR) It will be difficult to know how much to budget for.  The Chairman responded that there will be an intervention plan for each site indicating what will be done, and that will be shared with the company to assist in budgeting.  Companies can discuss the plan with local inspectors and, as appropriate, agree on specific timescales for intervention activity – including the proactive number of hours likely to be involved.

34. TSA (KS) One terminal has already been charged £25k this year for COMAH work – next year that would equate to £33k, and for that money companies with a small number of employees could probably employ someone full time to monitor health and safety.  The Chairman responded that that would be fine, but HSE would still be the regulator and would charge for appropriate interventions with the company.

35. EIG (TS) Guidance in the explosives sector is poor.  The guidance should be appropriate and there should be more industry input if they are paying for it.

36. The Chairman drew contributions to a close saying that all letters, e-mails and comments or options proposed will be input to the HSC paper.  He thanked everyone for the constructive discussion.

Proposed rates for 2008/9

37. The proposed rates are:

  1. EA Rate: The proposed EA rate is £120, a 2.7% increase.  EA are still doing a detailed cost review and will have regard to what HSC say.  The increased rate reflects higher pensions contributions offset by efficiency savings.  EA’s work on pollution prevention and control is sometimes difficult to separate from COMAH activity, but if there is any doubt it is treated as pollution prevention and control.  EA has not decided at this stage whether they will be going the same way as HSE on RSPs. Noted
  2. SEPA Rate: The proposed SEPA rate is £132 which is an inflationary increase. Noted
  3. HSE COMAH Rate: The proposed rate is £155.
  4. HSE GSMR Rate: The proposed rate is £137.

The HSE rates were noted subject to the comments made under the previous item.

Any other business

38. Mr Reyland said that it was necessary to revisit the continued lack of independent members of the queries and disputes panel.  He wrote to members two years ago and got no volunteers.  He will be writing to members again.

39. The question of the recently issued late invoices was raised.  The Secretary said this was a result of problems with a new IT system and hopefully should not happen again.  Members were very concerned about such late invoicing, which the Chairman apologised for.

40. The Chairman informed members that this was the Secretary’s last meeting, as the responsibility for cost recovery work was being transferred to Bootle in the new financial year.  He thanked the Secretary for his work over a number of years.

41. The Chairman reminded members that the minutes should be with them by 9 November, and that comments would be required back in a week.

Date of next meeting

42. The next meeting was scheduled for 30 October 2008.


Updated 2008-12-05