Tariffs



Discussion Paper on the Pilotage Act ReviewPacific Pilotage Authority2017BackgroundThe Pacific Pilotage Authority (PPA) is a federal Crown corporation and one of four Pilotage Authorities across Canada. Our mandate, as with the other Pilotage Authorities, is to establish, operate, maintain and administer, in the interests of safety, an efficient pilotage service within the region set out in respect of the Authority in the schedule to the Pilotage Act. (Pilotage Act of Canada, s. 18).The PPA’s area of responsibility is outlined in the Pacific Pilotage Regulations and is restricted to the west coast of Canada. The area extends from the Washington State border in the south to the Alaskan border in the north (areas 2 to 4), including the waters around Haida Gwaii (area 5) and the waters of the Fraser River (area 1) up to Mission. The mandatory pilotage waters extend approximately two miles seaward from every salient point of land along the coast. There are two groups of pilots who provide marine pilotage services on the West Coast of Canada. The BC Coast Pilots Ltd. is a private company presently consisting of approximately one hundred pilots. These pilots contract their services to the PPA under a service agreement for areas 2 to 5. The Fraser River Pilots (presently eight pilots) are employees of the PPA and provide pilotage service for area 1. Our pilotage jurisdiction is unique in the world and is the only one where the pilots are licensed for such a large geographical area; the entire BC coast. This unique model is in response to the regional demands of west coast maritime trade. The suitability and efficiency of this model is evidenced by our track record of safety, reliability and predictability, and the fact that we are perceived by many of our peers as a leader in maritime safety.The single biggest reason for supporting the present coast-wide model is the service provided to the many outlying ports. These small ports (24 in all) do not have sufficient traffic to sustain a local pilotage system. The coast-wide system allows them to receive pilotage services on demand, which is integral to our province’s economic well-being, as well as being in the national interest. Taken together, the primary ports such as Port Metro Vancouver and Prince Rupert account for over 80% of all the pilotage assignments undertaken on the BC coast. Safety is measured as a ratio of the number of incidents to the total number of assignments completed. From a safety perspective we have a consistent track record of over 99.9% incident-free assignments. In 2016 we had five minor incidents in 12,500 coast-wide assignments for a success ratio of 99.96%. Reliability is measured as the number of vessels delayed against the total number of assignments. There are separate measures for delays caused by pilots, dispatching errors or launch breakdowns and the average annual on time record exceeds 99.9%. Predictability is the assurance that every assignment under the same circumstances and vessel type will be handled in the same way by the pilots. This is the single biggest challenge that we face. The pilots have varying skill levels and risk tolerance, as do the shipboard bridge teams. With that said, we still see over 95% of the assignments complaint-free. We are actively working to improve this number by implementing standardized tug packages using bollard pull, the implementation of a quality assurance program to ensure that all the pilots will receive the same level of training with ongoing planned training throughout their careers, and a very extensive apprenticeship program. The issuesOrganization – Section 10 to 13Make-up of the BoardSince the inception of the Pilotage Act in 1972 there has always been a 2, 2, 2 board make-up plus the Board Chair. Two board members are nominated from the industry, two from the BC Coast Pilots and two public representatives. The Board Chair is appointed by the Minister.The existing structure has proved successful and provides for a balanced Board with all the required skill sets coming to the table. Members have always been well aware of their fiduciary duties and the need to recuse themselves if there was a hint of a conflict of interest. Recently the PPA took this a step further by ensuring that the issue of fiduciary responsibility and conflict of interest was clearly addressed during the five day compulsory orientation program that each PPA board member must complete.In my sixteen years at the PPA I have never come across an instance where any of the board members have been in a conflict of interest situation or abused their position to further their particular issue.Recently we were informed that every federal organization has to submit to the same on-line process for recruiting Directors and that the 2, 2 and 2 historical board structure of past years would no longer be acceptable. Our primary concern is that this new structure, while obviously transparent, could result in one or another of the groups being successful in getting more than 2 board members which will lead to an imbalance at the board and perhaps a reduction in the collective skill set. Recommended wording: 3?(1)?Each Pilotage Authority named in the schedule is hereby established as a body corporate consisting of a Chairperson and not more than six other members. Two of the six members to be nominated by the Marine Industry and two by the Pilots.Tariff Setting - Section 33 of the Pilotage ActThe West Coast, with the introduction and successful implementation of the Asia Pacific Gateway initiative, as well as the high level of interest in the many energy projects, is poised for a considerable increase in shipping in the near future. This interest in the supply and shipping of energy projects has presented the PPA (and many other entities) with some unique challenges. Many of the projects are facing severe opposition from NGOs and local communities and we need to position ourselves to be able to deal with the many new responsibilities imposed on us as a result of this opposition. The Oceans Protection Plan, and the initiatives that will flow from this, is one area in which the PPA can assist the government, but to do this we need to ensure that the Pilotage Act will support our need to act quickly with respect to the changing issues that we face, such as the need to implement or adjust tariffs quickly which under the present wording of the Act is extremely difficult.The current Pilotage Act was introduced in 1972 and reflected most of the recommendations drawn from the Royal Commission on Pilotage undertaken by Judge Yves Bernier. The Royal Commission was set up in 1962 with its final recommendations being made in 1968 followed by the establishment of the Pilotage Act in 1972. The current Pilotage Act has seen some minor modifications over the years but has remained generally unchanged in forty years. In the same period, transportation in Canada and more specifically, shipping has changed significantly.Budgetary restraints in the early 1990s required the Government of Canada to review all of its systems of service provision. At the time it decided that all Canadian Pilotage Authorities had to be financially self-sufficient and operate in a more transparent and commercial fashion. The Government amended the Pilotage Act in 1998 to stop all Parliamentary Appropriations to the Authorities, signaling to the Authorities, and the users of the system, that commercial and private industry practices should be adopted in the delivery of pilotage services in Canada. In most commercial operations, tariffs may be changed in less than 30 days when conditions require changes. However, the legislation was not adequately amended and failed to include a nimble and efficient tariff setting system to allow the Authorities to effectively deal with quickly changing commercial, economic and traffic situations. From beginning to end, the tariff approval process can easily take 8 months or more. The amount and complexity of the paperwork, the numerous steps involved in the approval process can be overwhelming and includes the involvement of Transport Canada, the Department of Justice, the Treasury Board Secretariat and ultimately the Governor in Council. Delays can also occur when federal elections are being held, or when higher priority regulatory changes are being worked on. The PPA and the other Canadian Pilotage Authorities are particularly susceptible to traffic swings, sometimes related to global or national economies, and sometimes related to local industry that require timely adjustment to tariffs. In 2016 we suffered almost a million dollars in lost revenue due to the length of time it took to get to the CTA Tariff hearing after an objection was lodged against a proposed tariff. More recently in 2017 we lost almost $150,000 as a result of a one month delay in getting our tariff approved and this was in spite of support from the marine industry we serve. The delays in implementing the tariff changes are systemic. They result in inefficiencies, and create obstacles to the proper financial and operational management of the Pilotage Authorities. Moreover, the tariff once approved becomes a regulation and cannot be adjusted downward (without undertaking the regulatory process again) to provide rebates or reductions to industry in situations where the Authorities have met their financial targets earlier than anticipated. Nor does the legislation allow special arrangements in terms of tariffs to help attract new business, or assist industry in remaining or becoming more competitive.Adapting the regulatory process for Pilotage Authorities’ tariff changes to a process similar to the port authorities’ framework?(or some such framework) would yield important benefits for the Authorities and the maritime industry. The Authorities could implement tariff changes within 60 days rather than 8 months, and make tariff adjustments when appropriate. In addition, such a framework would allow the Pilotage Authorities to offer rebates, incentives or establish special arrangements to attract new business and assist in the competitiveness of our respective regions and the marine transportation system as a whole.It is important to note that the above proposal for a timelier and more flexible tariff implementation process would not, in anyway, remove the safeguards and check and balances intended to protect clients and the public interest. We fully understand that as a regulated monopoly our customers have no choice but to use our services and as a result the Canadian Transportation Agency (CTA) would need to be part of any tariff improvement. Any change would include the continued ability of industry or stakeholders to file objections with respect to any tariff increase or modification before the CTA. This however would need to be time limited (say 60 days) otherwise we run the risk of a similar situation developing as did last year where 9 months lapsed from the time the objection was lodged to the actual hearing. Lastly we need to have the ability to charge for other administrative duties and processes that we are engaged in. An example is the waiver system, which is presently costing us almost $100,000 per annum. Another example would be the ability to charge for the use of our simulator or for our time consulting. These charges should not be borne by the industry hiring pilots but by the actual users of the service such as the operators seeking pilotage waivers or industry proponents seeking subject matter expertise from the PPA. Recommended wording:TariffsRegulations prescribing tariffs of pilotage charges33?(1)?An Authority may fix tariffs of pilotage services to be paid to that Authority for pilotage and, without restricting the generality of the foregoing, may fix tariffs of pilotage charges for(a)?the cancellation of a request for the service of a pilot;(b)?the carriage of a pilot on a ship beyond the area for which the service of the pilot was engaged;(c)?the detention of a pilot on board ship or otherwise;(d)?travel and other expenses incurred by a pilot that are directly associated with an assignment to pilot a ship;(e)?the use of a pilot boat;(f)?the use of telecommunication equipment; (g)?the service of a licensed pilot on board ship pursuant to a regulation made under paragraph 20(1)(l) requiring a licensed pilot to be on board; and(h) any service provided by the Authority, or any right or privilege conferred by it. Marginal note: IdemAn Authority shall be deemed to have fixed a pilotage charge if it prescribes a manner for determining a pilotage charge.Marginal note: Requirements to be met by tariffsThe tariffs of pilotage charges prescribed by an Authority under subsection (1) shall be fixed at a level that permits the Authority to operate on a self-sustaining financial basis and shall be fair and reasonable.R.S., 1985, c. P-14, s. 33;?1998, c. 10, s. 149.Notice of new or revised tariffs34 (1) Where an Authority proposes to fix a new tariff or revise an existing tariff for any of the pilotage services under section 33 (1), it shall give notice of the proposal in accordance with this section and no fee shall come into force before the expiration of sixty days after the last of the notices is given. Contents of notice(2)?The notice shall(a)?set out the particulars of the proposal;(b)?specify that a document containing more details about the proposal may be obtained from the authority on request; and(c)?specify that persons interested in making representations in writing to the authority about the proposal may do so by writing to the address set out in the notice.How notice is to be givenThe authority shall(a)?have the notice published in a major newspaper published or distributed in the place where the authority is situated;(b)?send, by mail or by electronic means, a copy of the notice to(i)?organizations whose members will, in the opinion of the authority, be affected by the new or revised fee, and(ii)?every user and other person who has, at least ten days before, notified the authority of a desire to receive notices or announcements under this Part; and(c)?post an electronic version of the notice in a location that is generally accessible to persons who have access to what is commonly referred to as the Internet.Notice of objection to Canadian Transportation AgencyAny interested person who has reason to believe that any charge in a proposed tariff of pilotage charges is prejudicial to the public interest, including, without limiting the generality thereof, the public interest that is consistent with the national transportation policy set out in section 5 of the?Canada Transportation Act, may file a notice of objection setting out the grounds therefore with the Canadian Transportation Agency, and the Agency shall consider the complaint without delay and report its findings to the authority, and the authority shall govern itself ernor in Council may vary or rescindSection 40 of the?Canada Transportation Act?applies, with such modifications as the circumstances require, to every report of the Agency made under subsection (4) as if the report were a decision made pursuant to that Act.Marginal note: Copies to be filedOn the filing of a notice of objection with the Canadian Transportation Agency, a copy thereof shall be filed with the Authority and the Minister forthwith.Obligation to reimburse35 (1)?Where the Agency recommends a charge that is lower than that prescribed by the Authority, the Authority shall reimburse to any person who has paid the prescribed charge the difference between it and the recommended charge, with interest at the rate quoted by banks to the most credit-worthy borrowers for prime business loans, as determined by the Bank of Canada for the day on which the Agency recommends the lower charge.Copy submitted to Minister(2)?The Agency shall submit a copy of its recommendation to the Minister immediately after it is made.Offences and PunishmentsSections 47 through 51 identifies the various fines on summary conviction as well as the fact that those fines shall be paid to the Authority concerned.The most important of these is section 47 which deals with a vessel proceeding through Pilotage waters without a pilot. The problem with this section is the level of the fine imposed and the fact that it is only on summary conviction. This means that you have to commence legal proceedings against the vessel who contravened the Act. This is a costly venture in itself, particularly when the maximum penalty is a mere $5,000. When you consider that a vessel requiring two pilots to transit the inside passage will likely generate an invoice of $10,000 the cost of the fine for contravention is actually less than the cost of hiring the pilots. The fine is not a deterrent for non-compliance.In the past several years we attempted to take a vessel to court for a contravention but the prosecutor refused to move forward. At present we have two court cases in progress. Both are against United States operators and the combined legal and court costs for both will cost the Authority in the region of $100,000. Our legal counsel will obviously press for our costs to be covered but there is always the chance that we will not get that consideration from the court. Thus for the cost of $100,000 to ensure that we are enforcing the Pilotage Act of Canada the best outcome that we can hope for is a $10,000 return only if the judge sets the fines for both offenders at the maximum allowable fine.In order to bring this into our present reality, this fine should be set at a maximum of $150,000. At this level of penalty we will still come out ahead even if our legal costs are not covered.Similarly section 48 should be set at $150,000 for the same reasons as mentioned for section 47.Section 48.1 states that a person who contravenes section 15.3, “A body corporate with which the Authority has contracted for services under sub-section 15(2) and the members and shareholders of the body corporate are prohibited from refusing to provide pilotage services while a contract for services is in effect or being negotiated” is guilty of an offence and liable to a fine of not more than $10,000 for each day on which the offence is committed or continued.Section 49 needs to be amended to read that all fines shall be paid to the Authority. The way this section presently reads there is no indication of who the fine gets paid to for a contravention under section 48.1 or even who levies the fine under section 48.1. Recommended wording:47?Except where an Authority waives compulsory pilotage, the owner, master or person in charge of a ship subject to compulsory pilotage that proceeds through a compulsory pilotage area not under the conduct of a licensed pilot or the holder of a pilotage certificate is guilty of an offence and liable on summary conviction to a fine not exceeding one hundred and fifty thousand dollars.48?Every person who contravenes or fails to comply with(a)?any provision of this Part, other than section 15.3,(b)?any regulation made by the Governor in Council, or(c)?any regulation of an Authority,is guilty of an offence and liable on summary conviction to a fine not exceeding one hundred and fifty thousand dollars. ................
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