Stewards Consultation

1
Stewards Consultation

• September 1, 2005

2
Welcome
3
Morning Agenda
4
Todays Instructions

• New participants in all stakeholder groups
• Webcast available in archives 180 days
• 2nd audience listening on-line
• well note the number as we change slides
• email questions/comments ? from your regular
  email program ? to the address below

info_at_stewardshipontario.ca
5
Consultation Process Timing
6
Blue Box Program PlanUpdate Amendments

• Derek Stephenson

7
BBPP Update 2005 Program Year

• First full calendar year for program
• Met all legal requirements under WDA
• On track for
• 51.3M direct payments to municipalities
• approved 5.1M in competitive grants to improve
  effectiveness efficiency of municipal programs
• direct administration costs less than 5 of
  program cost

8
BBPP Update 2005 Program Year

• Successfully negotiated cost containment plan
  with AMO
• 2.5M investment in new glass market development
  approved
• Received processed 2,000 reports from stewards
• 500 potential additional stewards identified but
  not yet reported

9
BBPP Update 2005 Program Year

• First charges have been laid under Act
• failure to report
• failure to pay fees
• both company officers charged
• Completed first on-site audits of steward reports

10
BBPP Update 2005 Program Year

• Original BBPP projected 815,000 tonnes recycled
  municipal payments of 54M by 2004
• End 2004 results 824,000 tonnes recycled
  municipal payments of 55.5M

11
Amendments to BBPP for 2006

• Ministers decision on in-kind payments for
  CNA/OCNA members with regards to their
  obligations to municipalities
• Cost containment strategy including agreements
  with AMO on reasonable cost bands municipal
  administration costs

12
Amendments to BBPP for 2006

• Ministers requirement that Stewardship Ontario
  WDO administration costs be capped
• no more than 5 of total program costs
• Ministers direction on voluntary stewards

13
Amendments to BBPP for 2006

• Revised Stewardship Ontario governance model
  (when approved by Minister)
• Changes to program rules
• 2006 fee rates

14
Proposed 2006 Program Rules

• Gordon Day

15
Background

• Rules changed annually
• update fee rates dates
• improve clarity
• address shortcomings
• Board is considering three changes to Rules for
  which they would like stewards to provide comment

16
Todays Rules Presentation

• Copy of proposed 2006 Rules provided
• Changes to Rules denoted in 1 of 3 ways
• Underline annual change
• Bold Italics new additions for your information
  only
• Boxed 3 boxed sections changes for comment

17
Brand Owner Definition What has been our
experience?
1

• Many business models in place
• some not clearly covered by Rules
• Licensing arrangements wide-spread
• resulting in 2 possible brand owners in Ontario
• Need to assign obligation
• must be logical, clear, fair meet intent of
  program
• Companies who have organized corporate structure
  for other purposes - exempt from fees related to
  Designated Blue Box Waste (DBBW)

18
Proposed Changes Brand Owner
1

• Recognize that trademark owner licensee may
  both reside in Ontario
• Clarifies Private Label manufacturers not
  classified as licensee

19
Proposed Changes Brand Owner
1

• In event of 2 brand owners in Ontario, obligation
  assigned to party more directly connected to
  production of DBBW, except Franchisor who shall
  be the steward.
• Reinforce that Franchisor is Brand Owner of DBBW
• Add any person whose corporate name or business
  name registration includes trademark.

20
Impact of Proposed Change
1

• Close gaps in current Rules
• currently exploited by small number of companies
• Clarifies obligation in case of trademark owner
  licensee
• Captures companies registered in Ontario who
  benefit from sale of products, but do not meet
  current test of residency

21
Designation of Steward What has been our
experience?
2

• Confusion around who is obligated for service
  packaging, specifically unbranded packaging
• Previous franchisee supply rule confusing to
  understand difficult to monitor
• created un-level playing field within certain
  sectors
• Most franchisees under sales or 15 tonne
  threshold
• Franchisor owns trademark benefits from sale of
  products with trademark

22
Proposed Changes Designation of Stewards
2

• Add Service Packaging to defined terms
• Include Service Packaging to Brand Owner, First
  Importer Franchisor designation
• Add new section (iv) to capture Any person who
  delivers Service Packaging to consumers in
  Ontario
• to cover mail order/internet shopping

23
Proposed Changes Designation of Stewards
2

• In a franchise system, Franchisor owns brand
  trademark
• consistent with Ministers direction rules for
  other stewards
• Franchisor will be responsible for all DBBW
  within their franchise system

24
Impact of Proposed Change
2

• Improves clarity around Service Packaging
• including mail order/internet shopping companies
• Levels playing field for franchise operations
• obligations consistent across similar competitors
• Increases number of franchisors obligated to
  report pay fees
• Reduces quantity of exempted DBBW

25
Steward Exemptions What has been our
experience?
3

• Two tonnage thresholds confusing raises
  questions about fairness of program
• Some stewards attempt to report business
  operations separately to avoid obligations

26
Proposed Changes Steward Exemptions
3

• Remove 75,000 kilogram (kg) threshold exemption
  for newspapers
• Resulting in only one 15,000 kg weight exemption
  for all DBBW
• Clarify weight exemption test in (ii) to include
  the steward and its Affiliates as currently
  applies in (i) sales exemption

27
Impact of Proposed Change
3

• One consistent clear weight exemption
• Clearly defined 15,000 kg applies to steward
  Affiliates
• net impact will reduce number of exempted
  stewards
• Handful of exempt OCNA stewards will be obligated
• however financial impact would be lt150/yr

28
Other Important Change

• Reporting payment schedule added as Schedule C
• Stewardship Ontario moving to quarterly payment
  schedule as originally planned
• Reporting deadline remains March 31st
• First payment of 25 in 2006 obligation due March
  31st
• penalty interest if payment received after
• March 31st
• last quarter payment due December 1, 2006

29
Questions Answersinfo_at_stewardshipontario.ca
30
2006 Stewards Fees

• Guy Perry

31
Topics to Cover

• Basis for calculating 2006 fees
• Proposed 2006 Stewards Fees
• Next steps

32
Blue Box Stewards Fees

• Total industry cost down
• 61.2M for 2006 vs. 64.3M for 2005 (5)
• 74.3/tonne for 2006 vs. 82.5/tonne for 2005
  (10)

33
Cost Containment

• Negotiated cost containment strategy with
  municipalities
• apply reasonable cost bands based on better
  performing programs
• instituted performance measure as basis for
  payments
• reduction in Blue Box System cost of 24M over
  next two years
• cap municipal administration cost
• payment to best practice costs in 2008

34
Agreed Net Blue Box Cost
140
120
100
80
Net Cost (actual gross cost less 3-year average
revenue)
Net cost (million )
60
Agreed Net Cost
40
20
0
2001
2002
2003
2004
Municipal Reporting Year
35
Key Elements of Fees
Program Delivery, MOE Enforcement WDO Charges 5
Payments to Municipalities 91
Administration Start-up 3
Anticipated Shortfall 1
Due to difference in reported sales quantities
generation estimates used to calculate previous
years fees
36
Key Elements of Fees Generation Rates

• Generation estimates largely based on waste
  composition audits some industry data
• Used last year generation rates
• accounting for population growth (1.26)
• extensive waste audit program underway, but
  incomplete
• As for 2005, used most recent stewards data for
  newsprint, telephone directories, paint cans
  LCBO glass packaging
• these represent more reliable generation figures
  than waste audit results

37
Recovery Rates
Overall recovery up 6 from 779,843 tonnes to
823,627 tonnes
75
60
45
Recovery Rate ()
30
15
2002
2002
2002
2002
2002
2002
2003
2003
2003
2003
2003
2003
2004
2004
2004
2004
2004
2004
0
Printed Paper
Paper-based
Plastics
Aluminum
Steel
Glass
Packaging
Taken from 2004 annual municipal datacall
reported by WDO
38
Gross Costs

• Reported by WDO from 2004 municipal datacall
• up 6.5 from 182.4M to 194.4M
• includes interest on municipal capital (4.2M)
• deferred to 2006 negotiated as part of cost
  containment strategy
• Use material specific costs from last years
  allocation study
• conditions not changed substantially across
  province
• preliminary work underway to address
  implementation of single-stream recycling
  combined recycling organics collection in
  Toronto

39
Revenue

• Reported by municipalities to WDO
• 83.7M in 2004 from 65.6M in 2003
• 3-year average (used for obligation)
• 73.6M for 2006 fees from 64.9M
• Relative prices will affect relative net costs
  allocation among materials

40
Industry Share of Blue Box Cost
140
Total 120.92 M
Total 117.55 M
120
100
Industry
Industry
55.46M
58.78M
Program Cost (millions of )
80
Cost Band 10M
60
40
Municipal
Municipal
58.78M
55.46M
20
0
2003
2004
41
On Track with Program Plan

• Compared to original Blue Box Program Plan . . .
• for 2004
• plan forecast 814,700 tonnes to be recovered with
  an industry obligation of 54M
• actual recovery was higher at 823,600 tonnes with
  an industry obligation of 55.5M

42
Allocation Factors

• No change to the funding formula for 2006
• same allocation factors weighting
• recovery rate 40
• net cost 40
• equalization 20

43
Program Delivery Costs for Market Development

• 2003/2004 fees ? 2.5M for glass
• 2005 fees ? 100K for plastics
• preliminary market development underway
• For 2006
• no additional market development fees
• glass plastics work ongoing progress
  continues toward 60 diversion goal
• this will be reviewed on an annual basis

44
Program Delivery, Admin Start-up
Total 5.2M
WDO Charges MOE Enforcement 1.20M
Direct Program Delivery 1.93M
Administration 1.17M
Start-up 0.89M
45
Stewards Reports vs. Fee Estimates
Packaging Printed Paper Generation For 2004
Fees
Difference between tonnes reported by stewards
estimates used for previous years fees
100
Estimated Generation for 2004 Fees
1,578,500 tonnes
80
Stewards Reports
60
1,285,000 tonnes
40
20
46
Revenue Against Target

• For 2003/2004
• Previously estimated 1.1M
• Board decision to spread over 3 years ? pay 369K
  each year
• Actual 1.6M (as of Dec. 31 2004)
• higher re-filing, lower new stewards
• For 2005
• Additional 2003/2004 fees interest of 635K in
  2005
• Projected net shortfall at Dec. 31 2005 of 1.15M
• Recovery in 2006 Fees
• 50 (575K) in 2006 fees

47
Proposed Fee Rates Printed Paper
Proposed
2005 Fees
Material
2006 Fees
Change
(/kg)
(/kg)
CNA/OCNA Newsprint
0.076
0.182
Non-CNA/OCNA Newsprint
0.786
0.757
Magazines Catalogue
0.862
1.522
Telephone Directories
1.302
1.213
Other Printed Paper
9.029
7.668
48
Proposed Fee Rates Packaging
Proposed
2005 Fees
Material
2006 Fees
Change
(/kg)
(/kg)
Paper Packaging
7.904
7.673
Plastics
13.907
13.556
Steel
4.745
4.601
Aluminum Food
-1.093
-0.476
Beverage Cans
Foil Other Aluminum
5.502
3.577
Glass
4.003
3.41
49
Looking Forward to 2007

• Cost Pressures
• further increases in recovery
• cost of living program changes
• capital investment
• increase in municipal administration allowance
  to 3 5
• commodity prices revenue
• Negotiated cost band for 2007 ? 14M reduction
• Ongoing cost containment work implementation of
  EE Fund

50
Consultation on Further Amendments to BBPP

• Derek Stephenson

51
Consultation on Further Amendments to BBPP

• Fee setting methodology options include
• revise current allocation factor weightings
• modify the allocation factors
• alternative fee setting approaches
• Aggregation/dis-aggregation of material types
• aggregation of paper grades
• dis-aggregation of packaging grades

52
Consultation on Further Amendments to BBPP

• Base year data to be used for 2007 fee setting
  purposes
• use previous year steward reports for Blue Box
  generation estimates
• harmonization with other provinces (e.g.
  reporting years)

53
Consultation on Further Amendments to BBPP

• Harmonize de minimis levels for all stewards

54
Process Timing
55
2007 Fees Jan. to Sept.
56
Questions Answersinfo_at_stewardshipontario.ca
57
LunchWebcast Resumes at 130