Industry stung by IPC charges

Operators of processes under integrated pollution control (IPC) will now have to pay directly for any compliance monitoring carried out by HM Inspectorate of Pollution (HMIP) under a revised cost-recovery scheme for 1994/5.1 The move has angered industry - as has a new "claw-back" fee to recoup a shortfall in HMIP's income. However, a review of the charging system has found limited support for alternatives to the current component-based scheme.

HMIP has a statutory duty to recover the costs of authorising and policing processes covered by IPC. A recent survey by ENDS found that the level of the fees was industry's biggest complaint about the system (ENDS Report 227, pp 3-4 ). HMIP has been under strong pressure from the Confederation of British Industry (CBI) and the Chemical Industries Association (CIA) to provide a transparent justification for its charges and to keep costs to a minimum.

The fees paid by industry depend on the number of "components" of a process. The fees for 1994/5 are broadly based on HMIP's targets for the time spent on each activity: In 1994/5, the charge for each day of inspector time will rise by 2.9% to £993 per day - "well below the relevant inflation indicator", according to HMIP. However, industry maintains that this rate is much higher than that paid to commercial consultants. The CBI is concerned that inspectors are expected to spend only 135.5 days per year, or 61% of their time, on fee-earning activities.

HMIP's overall cost-effectiveness is now coming under scrutiny from the Department of the Environment (DoE), which will soon set up an independent advisory committee "with the aim of identifying further scope for savings".

In the meantime, the revised scheme contains three stings in the tail. The first stems from shortfalls in HMIP's anticipated income of £2 million in 1991/2 and £1.7 million in 1992/3. This reflects a serious initial underestimate of the effort involved in processing applications, and HMIP is already clawing back some £1 million of the shortfall through extra charges on operators who applied in 1991/2. But it now says that the remaining losses "will not be recovered in full within a reasonable period at present charging rates".

The result is that a further "claw-back" charge of £150 per component will be included in the annual "subsistence" fee for 1994/5 and the following three years. The fee will be paid by all operators. HMIP says that this is an equitable means of paying for "the set-up costs of establishing the new regulatory system". The CBI argued that the subsistence fee is already "far too high for any responsible operator" - but failed to block the move.

ENDS understands that the Treasury insisted that industry must bear the added costs of getting IPC off the ground. There are also signs that HMIP's budget is being squeezed by the DoE. Although its contribution to HMIP's finances has held steady - in contrast to cuts in the National Rivers Authority's grant-in-aid (ENDS Report 226, p 3 ) - HMIP's staff levels and workload have risen substantially over the past four years.

A second, and more controversial, addition to the 1994/5 scheme is that operators will have to meet in full the costs of any compliance monitoring required by HMIP. These tests are essential to verify data collected by operators. HMIP has no in-house monitoring capability, and employs contractors for all routine and reactive tests.

Under the formula for previous years, the subsistence charge was designed to cover "the ongoing costs of inspection, monitoring and enforcement". In practice, however, very little of this income was spent on monitoring. In a review of data on the public registers last summer, ENDS found no evidence that any compliance monitoring had been carried out (ENDS Report 227, pp 3-4 ).

HMIP now says that "it would be inequitable to recover the cost of routine monitoring" through the subsistence fee. Instead, the forecast expenditure on routine monitoring and site surveys will be levied directly on the process concerned. Any necessary adjustment will be made in the following year's fee. The costs of reactive monitoring will continue to be covered by the subsistence fee, as these cannot be forecast in advance.

This summer, HMIP plans to institute a "substantial" programme of check monitoring with a budget of £1.5 million. The initial focus will be on power stations and chemical waste incinerators. The charge per process will depend on the number of release points and substances measured, but HMIP says that costs will average £3-5,000. For large, complicated emission sources, the bill could be up to £20,000.

The CBI branded the proposals as "not justifiable" - though it has in the past advocated direct charging for subsistence fees - and questioned the "open-ended" nature of the fee. Once again, HMIP did not give any concessions. However, the row over the monitoring issue is unlikely to go away. Both the CBI and CIA have expressed concern over the safety and confidentiality implications of allowing external consultants on to sites to carry out tests.

The third sting in the tail is the announcement that HMIP, backed by the DoE and the Treasury, is considering an extra charge to cover the costs of "pre-application guidance". Such meetings with operators are designed to improve their understanding of IPC's requirements, but have been a drain on HMIP's resources and have detracted from its policing role (ENDS Report 224, pp 7-8 ). A charge may be made from 1995/6 - though the CBI is concerned that it may deter firms from entering into "beneficial" discussions.

HMIP remains under pressure to cut its costs, but demands for a reform of the component-based charging system have eased. In response, HMIP launched a review of the scheme last October (ENDS Report 220, pp 30-31 ). Three options were mooted - direct charging based on demands on inspectors' time, charging based on the "pollution potential" of a process, or a continuation of the component system.

Critics of the component-based system say that it fails to put pressure on HMIP to reduce costs - or on operators to improve their performance. However, of the 50 respondents to the review, half favoured the retention of the component system, arguing that it is simple, predictable and familiar. Some feared that the pollution-based option could prove too complicated or subjective. Direct charging was thought to be fair in principle, but many operators said that it could provide ample grounds for dispute or inequality in practice.

HMIP now intends to retain the component system until 1995/6 - so that any overhaul of the scheme will coincide with IPC's transition to the Environment Agency. However, it has shifted its position on another issue, and now says it will look favourably on firms which participate in the BS7750 or the EC eco-management and audit schemes. A certified environmental management system, it says, is likely to give HMIP "some confidence that we can reduce the level of inspection activity", and consideration is to be given to "how such a reduction can be reflected in whatever charging scheme emerges".

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