Vol. 148, No. 12 — June 4, 2014

Registration

SOR/2014-113 May 16, 2014

ELECTRICITY AND GAS INSPECTION ACT

Regulations Amending the Electricity and Gas Inspection Regulations

P.C. 2014-568 May 15, 2014

Whereas, pursuant to subsection 28(2) of the Electricity and Gas Inspection Act (see footnote a), a copy of the proposed Regulations Amending the Electricity and Gas Inspection Regulations was published in the Canada Gazette, Part I, on December 14, 2013 and a reasonable opportunity was afforded to interested persons to make representations with respect to the proposed Regulations;

Therefore, His Excellency the Governor General in Council, on the recommendation of the Minister of Industry, pursuant to subsection 28(1) (see footnote b) and section 29.1 (see footnote c) of the Electricity and Gas Inspection Act (see footnote d), makes the annexed Regulations Amending the Electricity and Gas Inspection Regulations.

REGULATIONS AMENDING THE ELECTRICITY AND GAS INSPECTION REGULATIONS

AMENDMENTS

1. Subsection 2(1) of the Electricity and Gas Inspection Regulations (see footnote 1) is amended by adding the following in alphabetical order:

“Measurement Canada office” means any office of the Department of Industry for use by persons employed in the administration of the Act; (bureau de Mesures Canada)

2. Paragraph 11(2)(l) of the Regulations is replaced by the following:

3. Paragraph 21(1)(j) of the French version of the Regulations is replaced by the following:

4. The Regulations are amended by adding the following after section 47:

PART XI

ADMINISTRATIVE MONETARY PENALTIES

VIOLATIONS

48. The contravention of a provision of the Act or these Regulations set out in column 1 of Part 1 or 2, respectively, of Schedule 2 may be proceeded with as a violation in accordance with sections 29.11 to 29.29 of the Act.

CLASSIFICATION

49. The violation of each provision set out in column 1 of Part 1 or 2 of Schedule 2 is classified as a minor, serious or very serious violation in accordance with the classification set out in column 2.

PENALTIES

50. (1) The amount of the penalty in respect of each violation is, subject to subsection (2),

(2) The amount of the penalty is to be adjusted in accordance with the calculation set out in column 2 of Schedule 3 that corresponds to the history set out in column 1 of the person who has committed the violation.

(3) For the purposes of determining a person’s history, the points set out in column 3 of Part 1 or 2 of Schedule 2 are assigned for each violation of a provision set out in column 1.

51. The notice of violation is to set out that an amount equal to 50% of the penalty may be paid as complete satisfaction of the penalty if it is paid within the period referred to in subsection 53(1) and in the manner set out in the notice of violation in accordance with subsection 53(6).

COMPLIANCE AGREEMENTS

52. If the Minister enters into a compliance agreement under subsection 29.14(1) of the Act, the conditions of which include the making of expenditures by a person, the amount of the penalty set out in the notice of violation is to be reduced by an amount equal to one half of the expenditures made in fulfilment of the agreement, with a maximum reduction to nil.

PAYMENT

53. (1) For the purposes of paragraph 29.12(2)(e) of the Act, payment is to be made within 15 days after the day on which the person is provided with the notice of violation.

(2) For the purposes of subsection 29.13(1) of the Act, payment of the penalty set out in the notice of violation is to be made within 30 days after the day on which the person is provided with the notice.

(3) For the purposes of paragraph 29.14(4)(a) of the Act, payment is to be made within 15 days after the day on which the person is provided with the notice of default.

(4) For the purposes of subsection 29.15(1) of the Act, payment is to be made within 15 days after the day on which the person is provided with the Minister’s notice.

(5) For the purposes of subsection 29.16(3) of the Act, payment is to be made within 15 days after the day on which the person is provided with notice of the Minister’s decision under subsection 29.16(1) or (2) of the Act.

(6) A payment referred to in any of subsections (1) to (5) is to be made in one of the following manners, as set out in the applicable notice:

REQUESTS UNDER SUBSECTION 29.13(2) OF THE ACT

54. (1) A request under paragraph 29.13(2)(a) or (b) of the Act shall, within 30 days after the day on which the person is provided with the notice of violation, be submitted in writing to a Measurement Canada office in one of the following manners, as set out in the notice:

(2) The request shall set out

(3) The date of the request is

5. The schedule to the Regulations is numbered as Schedule 1.

6. The Regulations are amended by adding, after Schedule 1, the Schedules 2 and 3 set out in the schedule to these Regulations.

7. The Regulations are amended by replacing “the schedule” with “Schedule 1” in the following provisions:

COMING INTO FORCE

8. These Regulations come into force on the day on which section 6 of the Fairness at the Pumps Act, chapter 3 of the Statutes of Canada, 2011, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

SCHEDULE
(Section 6)

SCHEDULE 2
(Sections 48 and 49 and subsection 50(3))

VIOLATIONS

PART 1
ELECTRICITY AND GAS INSPECTION ACT
Item Column 1

Provision of the Electricity and Gas Inspection Act		 Column 2

Classification		 Column 3

Points
1. 3(1)(a) Very serious 5
2. 3(1)(b) Very serious 5
3. 5(a) Very serious 5
4. 5(b) Very serious 5
5. 6(2) Minor 1
6. 6(3) Minor 1
7. 9(1) Very serious 5
8. 9(4) Very serious 5
9. 12 and 33(1)(e) Very serious 5
10. 15(1) Very serious 5
11. 15(2) Very serious 5
12. 16(2) Very serious 5
13. 17 Minor 1
14. 18 Serious 3
15. 19 Very serious 5
16. 21 Serious 3
17. 22(2) Very serious 5
18. 30(a) Very serious 5
19. 33(1)(j) Very serious 5
20. 33(1)(k)(i) Serious 3
21. 33(1)(k)(ii) Serious 3
PART 2
ELECTRICITY AND GAS INSPECTION REGULATIONS
Item Column 1

Provision of the Electricity and Gas Inspection Regulations		 Column 2


Classification		 Column 3


Points
1. 5(1) Very serious 5
2. 5(2) Very serious 5
3. 6(1) Very serious 5
4. 9(4) Minor 1
5. 34 Serious 3
6. 35 Very serious 5
7. 41 Very serious 5

SCHEDULE 3
(Subsection 50(2))

PENALTY ADJUSTMENTS

Item Column 1

History		 Column 2

Adjustment Calculation
1. No violations committed under the Act or these Regulations in the five-year period immediately before the day on which the current violation was committed. Reduce penalty by 50%
2. Sum of the points assigned for all violations committed under the Act or these Regulations in the five-year period immediately before the day on which the current violation was committed is either one or two. Reduce penalty by 25%
3. Sum of the points assigned for all violations committed under the Act or these Regulations in the five-year period immediately before the day on which the current violation was committed is not less than three and not more than five. No penalty adjustment
4. Sum of the points assigned for all violations committed under the Act or these Regulations in the five-year period immediately before the day on which the current violation was committed is not less than six and not more than eight. Increase penalty by 25%
5. Sum of the points assigned for all violations committed under the Act or these Regulations in the five-year period immediately before the day on which the current violation was committed is more than eight. Increase penalty by 50%

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Traditional enforcement tools such as contractor education, warning letters, notices of non-compliance and prosecution are not always the most effective or cost-efficient means of assuring compliance with the requirements of the Electricity and Gas Inspection Act (EGIA) and of the Electricity and Gas Inspection Regulations (EGIR). For example, judicial proceedings (prosecution), while an effective option, often result in considerable costs to the federal government and to the individual and/or corporation involved.

The Fairness at the Pumps Act (FAPA) provided the legislative framework for an Administrative Monetary Penalty (AMP) system; however, it indicated that many details were to be prescribed by regulation.

Background

The FAPA (An Act to Amend the Electricity and Gas Inspection Act and the Weights and Measures Act) was introduced by the Government of Canada in the House of Commons in April 2010, and received Royal Assent on March 23, 2011. The new legislation marked a fundamental step in a longer term process of evolution and innovation in assuring measurement accuracy for Canadians.

Objectives

The Regulations will promote fair measurement practices in trade and improve confidence in the accuracy of measurement used in commercial transactions by giving Measurement Canada (MC) an additional tool that will be less severe than prosecution and will not pursue a punitive purpose, but will nonetheless be effective in promoting compliance with the EGIA and EGIR.

Description

To fully implement the AMP system, MC has developed regulations that set out the provisions of the EGIA and of the EGIR whose contravention may be proceeded with as a violation for which a penalty can be imposed, the method and criteria for determining penalty amounts, and details of when and how notices of violation are to be issued and when and how to make payments and requests to enter into a compliance agreement or for a review.

The Regulations will also make minor terminological amendments to the EGIR to ensure they take into account the terminology of both the common and civil law. The Federal Law–Civil Law Harmonization Act, No. 3 (S.C. 2011, c. 21) has already amended certain provisions of the EGIA with the same intent.

Designation of provisions subject to administrative monetary penalties

The Regulations add a schedule (Schedule 2) to the EGIR that sets out each of the provisions of the EGIA and of the EGIR whose contravention may be proceeded with as a violation for the purposes of the AMP system, and indicates whether that violation is classified as minor, serious or very serious.

Determination of the penalty amount

The EGIA prescribes that the maximum penalty for a violation is $2,000, subject to specific exceptions identified in the EGIA.

The Regulations establish a different baseline penalty for each of the three violation categories. The purpose of the categories is to associate the baseline penalty value of a violation with its level of regulatory significance.

Baseline penalties
Process for establishing penalties

For each case, determining the penalty amount begins with identifying the violation and its associated category. The penalty amount may then be adjusted by a percentage, as set out in Schedule 3, which has been added to the EGIR, to reflect the violator’s history of committing violations in the five-year period immediately before the day on which the current violation was committed. Both the number and seriousness of past violations are taken into account in determining the violator’s history.

Payment of the penalty

The Regulations provide details on when and how to make payments. They specify that if the penalty is paid within 15 days, the penalty is reduced by half. Otherwise, the full amount of the penalty must be paid within 30 days unless a request either to enter into a compliance agreement or for a review has been made.

Compliance agreements

In instances where the penalty is $1,000 or more, the EGIA permits the person named in the notice of violation to request to enter into a compliance agreement with the Minister to ensure compliance with the provision to which the violation relates. The Regulations set out the manner of making such a request, as well as the effect of the compliance agreement on the amount of the penalty.

Review by the Minister

The EGIA also allows the person named in the notice of violation to request that the Minister review the AMP (either the existence of the alleged violation or the amount of the penalty). The Regulations specify how the request for review may be made.

“One-for-One” Rule

The “One-for-One” Rule does not apply to these Regulations, as there is no change in the administrative burden imposed on businesses.

Small business lens

The small business lens does not apply to these Regulations, as there are no incremental costs imposed on small businesses.

Consultation

Consultation on an appropriate level of intervention in the marketplace has been ongoing through a trade sector review process. These consultations brought together industry representatives and associations, consumer associations, service providers as well as individual regulated parties and other government departments (both federal and provincial). MC estimates that over 3 000 stakeholders were consulted during these sector reviews. The use of an AMP system was recommended by consensus in the majority of these sector reviews.

The results of trade sector reviews are available online at www.ic.gc.ca/eic/site/mc-mc.nsf/eng/h_lm00215.html.

Measurement Canada consulted on its regulatory proposal for the introduction of AMPs under the FAPA, from June 20, 2011 to September 9, 2011. Approximately 1 700 stakeholders were contacted by email or phone during this consultation.

The results of this consultation are available online at www.ic.gc.ca/eic/site/mc-mc.nsf/eng/lm04524.html.

The majority of the comments received during this consultation were positive, and in many cases stakeholders were seeking clarification on issues related to the proposed changes and their implementation. Some stakeholders provided MC with suggestions on how to improve the implementation of the regulatory proposals.

The amendments were published in Part I of the Canada Gazette on December 14, 2013, and the consultation period lasted 45 days.

Two responses were received from two industry stakeholders representing electricity utilities and natural gas utilities. The responses were generally supportive, but some concerns were expressed about the application of AMPs and a few changes to the proposed Regulations were recommended.

Both industry stakeholders requested the removal of subsection 7(2) of the EGIA from the list of violations in Schedule 2, Part 1 of the proposed Regulations. This subsection provides that a contractor who has exercised the right of entry specified in subsection 7(1) of the EGIA is responsible for, and shall repair and make good, all damage caused by the entry or by other acts listed in subsection 7(1). In their view, the requirement in this subsection was a liability issue that did not impact measurement accuracy and therefore should not be subject to an AMP.

MC agreed that the requirement in this subsection should not be subject to an AMP. As requested, subsection 7(2) was removed from Schedule 2, Part 1 of the proposed Regulations.

The electricity stakeholder requested that the timelines for payment of AMPs be extended from 30 days to 60 days for full payment and from 15 days to 30 days for the reduced payment. The natural gas stakeholder recommended 35 days for the reduced payment. Their reasoning was that utilities are typically large companies with complex management structures and after receiving an AMP they would therefore need additional time to review and analyze the notice of violation to decide on the options for addressing it and to authorize payment.

MC’s response was that the proposed timelines are similar to those in AMP schemes used by other government departments, such as the Canadian Food Inspection Agency and Health Canada, and that AMPs are intended to promote timely corrective action – extending the payment period may cause the timelines for resolution of non-compliances to be extended as well. Also, as part of a graduated enforcement approach, MC may issue information letters and warnings letters prior to issuing a notice of violation. In addition, in instances where an AMP exceeds $1,000, the non-complying party will have the option to request to enter into a compliance agreement to resolve the issue.

The two stakeholders recommended that MC conservatively apply AMPs to the electricity and natural gas utilities. Their rationale was that compliance with the EGIA and EGIR was high in these two sectors and these utilities are committed to continuous improvement. MC’s response was that AMPs are not intended to replace the other tools that MC has traditionally used to promote compliance. Contractor education, information letters and warning letters will continue to be part of the graduated enforcement approach used by MC to promote compliance before resorting to AMPs or prosecution. AMPs would primarily be used as an alternative to prosecution when the purpose is not to punish and other options do not produce the desired results. MC will train its staff and monitor the application of AMPs to ensure they are applied fairly, consistently and only where warranted.

Both stakeholders also recommended that due diligence be defined in the Regulations. MC’s response was that due diligence is allowed as a defence in the amendments to the EGIA and the Weights and Measures Act and it is a standard defence to the contravention of a regulatory obligation. It will be up to the person receiving a notice of violation to establish that they have exercised due diligence.  This may be taken into consideration by MC prior to issuing a notice of violation.

The two stakeholders also requested that the violations related to sections 18 and 19 of the EGIA, i.e. availability of records and access to equipment and facilities, be reclassified from serious and very serious to minor and serious. In their view, these two requirements are administrative and not related to measurement accuracy, and should therefore have a lower classification. MC’s response was that the availability of records and access to equipment and facilities are critical in order for MC to fulfill its responsibilities.

The natural gas stakeholder also questioned the classification of the violations related to subsections 15(2) and 22(2) and paragraph 33(1)(e) of the EGIA. These prohibit that a meter with a broken seal be put into service or continued in use, require that a meter owner take all reasonable steps to comply with a notice requiring the withdrawal of a meter from service, and provide that a contractor shall not permit a meter to continue in service beyond a specific period. In their view, these requirements are more administrative in nature and do not directly impact measurement accuracy. MC’s response was that these requirements are very important in maintaining the accuracy of meters in service, the integrity of the meter verification and consumer confidence. Therefore, these violations were considered to have been classified appropriately.

The only change made to the proposed Regulations as a result of the feedback from the 45-day publication period in Part I of the Canada Gazette was the removal of subsection 7(2) of the EGIA from the list of violations in Schedule 2, Part 1.

Rationale

The Regulations will indirectly benefit the Canadian public by improving measurement accuracy as a result of the expected improvement in compliance with the EGIA and the EGIR.

The AMPs will provide a cost-effective tool to promote and maintain compliance with the EGIA and the EGIR. The AMPs regulations offer the advantage of an enforcement response which does not pursue a punitive purpose, is less severe and quicker than prosecution and, as is the case with other “ticketing systems” (e.g. traffic violations), acts as a deterrent.

There are no foreseen impacts on contractors or businesses that use meters that comply with the EGIA and its Regulations.

It should be noted that although the contravention of any designated provision is subject to an AMP, other tools may be used for ensuring compliance and prosecution will remain as an alternative where applicable and appropriate.

Implementation, enforcement and service standards

The Regulations do not add any new requirements; they simply create an additional system for promoting compliance with the EGIA and the EGIR. Therefore, the AMP system will be integrated into MC’s existing graduated enforcement policy.

While MC may use an AMP system to deal with violations of the EGIA and the EGIR, an AMP system is just one of the tools available to promote compliance. Other tools include contractor education, warning letters, and prosecution. The tool used in any instance will depend on the recommendations of the inspector and the decisions of a designated manager, in accordance with MC’s graduated enforcement policy.

In all cases of non-compliance, the response by MC will be tailored to achieve both compliance and deterrence. AMPs will generally only be imposed in instances where other tools cannot achieve that objective.

The use of AMPs will be phased in, so as to allow MC to build increased awareness amongst contractors about the program. The phased-in approach will also allow time to train MC inspectors and management and to communicate the relevant policies and procedures for implementing and using AMPs.

Contact

Gilles Vinet
Vice-President
Measurement Canada
Telephone: 613-941-8918