Ontario Regulation 450/07 was established to recover a portion of the costs of provincial water quantity management programs.
The regulation defines a Phase 1 industrial and commercial water user as a facility that uses more than 50,000 litres of water a day and that falls into one of the following classes of facilities:
- Fruit and vegetable canning or pickling facilities, where water is incorporated into a product;
- Ready-mix concrete manufacturers;
- Non-metallic mineral product manufacturers, where water is incorporated into a product;
- Bottled water manufacturers;
- Beverage manufacturers, where water is incorporated into a product;
- Pesticide, fertilizer and other agricultural chemical manufacturers, where water is incorporated into a product; and
- Inorganic chemical manufacturers, where water is incorporated into a product.
These Phase 1 facilities began paying $3.71 for every million litres of water used as of January 1, 2009. The charge applies to all water used within a calendar year.
Ontario Regulation 450/07 requires the Ministry of the Environment to review the charge every five years to determine if the charge is set at an appropriate amount given:
- the costs the government incurs in the administration of the Ontario Water Resources Act and any other Act for the purpose of promoting the conservation, protection and management of Ontario’s waters and their efficient and sustainable use; and
- the portion of the costs that may be attributed to Phase 1 industrial or commercial water users.
The Ministry of the Environment has recently completed a review of the current water charge. The findings of the review are summarized below.
In 2012, it was determined that the Ontario government spends approximately $16.2 million annually on water quantity programs to promote the conservation, protection and management of Ontario’s waters and their efficient and sustainable use. These programs are distributed across three ministries – Environment, Natural Resources, and Northern Development and Mines – and involve activities such as managing water takings (including under low water conditions) and water monitoring and research. Although the government continues to fund water quantity management in a number of key areas, program costs have declined from the 2007 program cost estimate of $27 million. This change reflects the conclusion of one time start-up costs associated with the establishment or expansion of ongoing provincial programs and other initiatives with short term funding requirements.
It is estimated that approximately $750,000 of the 2012 program cost to government is attributable to Phase 1 facilities. The remainder is attributable to other industrial and commercial water users or other sectors.
Since 2009, the current water charge from Phase 1 facilities has generated approximately $200,000 per year. Revenue covers part of program costs for the following reason; the current charge rate of $3.71 per million litres was set based on maximum permitted water taking volumes. Actual water taking data was unavailable in 2007 when the charge was developed. Water charge rates are determined by dividing program costs by the volume of water withdrawn by industrial and commercial water users. Actual water use is typically much lower than maximum permitted volumes. The use of permitted volumes had the effect of overstating the volume of water used by industrial and commercial facilities. Since 2008, all Permit to Take Water holders have been required under the Water Taking Regulation (Ontario Regulation 387/04) to collect and annually report their actual water takings to the Ministry of the Environment.
Coinciding with the required review of the water charge under Ontario Regulation 450/07, the report from the Commission on the Reform of Ontario’s Public Services (i.e. the Drummond report) recommended that Ontario “move towards full cost recovery and user-pay models for environmental programs and services,” partly by implementing a revised water charge to increase annual revenue and recover a greater portion of the costs of water quantity management programs. Following this recommendation, the 2012 Provincial Budget states that the government will “review the current charge framework to assess the adequacy of the charge rate and ensure that the program
recovers costs as fully as possible.”
The Ministry will consider the findings of the review in future water charges policy development and will consult with stakeholders on future options for water charges.