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Exception to the Rule:

Large Asset Owners and Operating Permits

By

Anjum Mutakabbir, Allison Nelson, Chelsea Notte, Dan Ramroop

Simon Fraser University, School of Public Policy

May 20, 2016

Graduate students in the School of Public Policy prepared this report as part of

their course work for Policy 812 – Regulation-, under the supervision of their

professor, Nancy Olewiler. The course adheres to Simon Fraser University

standards for research ethics. The conclusions, findings, recommendations,

statistics and research contained within the report solely represent the work of

the student research team and do not necessarily represent the opinions or

position of BC Safety Authority or BC Safety Authority employees.

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Table of Contents

Table of Contents ............................................................................................................ 1 List of Tables ................................................................................................................... 3

Chapter 1. Introduction .............................................................................................. 4

Chapter 2. Context ..................................................................................................... 6 2.1. Regulation by the BC Safety Authority .................................................................... 6 2.2. Operating Permits ................................................................................................... 6 2.3. Current Compliance Techniques ............................................................................ 8

Chapter 3. Methodology ............................................................................................. 9 3.1. Literature Review and Jurisdictional Scan .............................................................. 9 3.2. Expert Interviews .................................................................................................... 9

Chapter 4. Literature Review ................................................................................... 10 4.1. Enforcement and Compliance Theory ................................................................... 10 4.2. Game Theory ....................................................................................................... 12 4.3. Choice Architecture Theory .................................................................................. 13 4.4. Common Regulatory Barriers ............................................................................... 14

Chapter 5. Jurisdictional Scan ................................................................................ 18 5.1. Ontario Electrical Safety Authority ........................................................................ 18 5.2. United States ........................................................................................................ 20 5.3. Compliance and Enforcement in South Australia .................................................. 22 5.4. Oil and Gas Regulation in British Columbia and Alberta ....................................... 23

Chapter 6. Interviews ............................................................................................... 26 6.1. Increased Enforcement ......................................................................................... 26 6.2. Better Education ................................................................................................... 27 6.3. Accidental or Intentional Non-Compliance ............................................................ 28 6.4. Use of Incentives .................................................................................................. 28 6.5. Data Sharing Between BC Hydro and the BCSA .................................................. 29 6.6. The Role of Insurance and Insurance Providers in Compliance ............................ 29 6.7. Peer Effects and Social Policing ........................................................................... 30

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Chapter 7. Considerations ....................................................................................... 31

Chapter 8. Policy Options and Analysis ................................................................. 32 8.1. Policy Option 1: Tying Permits to Insurance ......................................................... 32 8.2. Policy Option 2: Increase Enforcement ................................................................. 33 8.3. Policy Option 3: Incentives Programs .................................................................. 34 8.4. Policy Option 4: Education and Awareness .......................................................... 36 8.5. Policy Option 5: Data Collection and Reporting .................................................... 39

Chapter 9. Recommendations ................................................................................. 44 9.1. High Priority .......................................................................................................... 44 9.2. Middle Priority ....................................................................................................... 45 9.3. Low Priority ........................................................................................................... 45

References 46 Appendix 1. Sample Interview Questions (Group 1B: Exception to the Rule) ............. 51 Appendix B. Sample Interview Questions (Pertinent to both groups) .......................... 52

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List of Tables

Table 8-1 Volunteer Incentivised Program ..................................................................... 34

Table 8-2 Data Collection .............................................................................................. 40

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Chapter 1. Introduction

Of the large asset owners regulated by BCSA, perhaps as many as 15% of them

with high voltage electrical services do not have an operating permit. In other words, a

considerable number of commercial properties, plants and factories, mills, multi-story

buildings and schools, hospitals and municipal facilities do not have a permit allowing

them to operate electrical equipment and services. This may seem like a small

percentage; however, without a permit, asset owners are putting the safety of their

employees and the public at significant risk. Unpermitted electrical machines and

equipment are more likely to be under-maintained and are subsequently more likely to

malfunction. Due to the high voltage associated with these projects, potential

malfunctions of equipment can have a devastating effect on people and property. The

risks associated with equipment malfunctions and/or the unsafe use of electrical

equipment can range in severity from mild electric shocks to electric arcing, explosions

and fires. Reduction in these risks requires full compliance by an asset owner of high

voltage electrical services. We summarize our policy problem as the following:

Absence of operating permits can indicate heritage or under-maintained

infrastructure: moreover, unpermitted large assets pose a greater-than-average safety

risk and can pose substantial economic costs and risks to human health and safety,

including loss of life.

The following questions guide our research:

Why do some large asset owners fail to have operating permits?

Is this number is accurate?

What are/could be the barriers to compliance?

What are the available options to improve compliance, guided by BCSA objectives and evidence?

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The methodology section of this report describes how we address these

questions. We develop a series of policy options that will target non-compliant asset

owners in an attempt to reduce barriers to compliance. The policy options derive from a

literature review and jurisdictional scan and through a series of stakeholder interviews.

The resulting policy options include tying permitting with insurance, a Volunteer

Incentivized Program (VIP), increased enforcement, data collection and reporting, and

an awareness/education campaign. We analyze the policy options using criteria

identified by BCSA. These criteria include effectiveness in reaching the objective of

increased safety through better compliance, stakeholder acceptance, administrative

complexity, and the public reputation/confidence in the regulator. The report concludes

with a discussion of the implications of the analysis.

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Chapter 2. Context

2.1. Regulation by BC Safety Authority

BC Safety Authority (BCSA) is a non-profit organization that has the

responsibility in BC of over-seeing the safe installation and operation of technical

systems (BSCA, 2015a, p.1) in the province with the exception of some municipalities in

Metro Vancouver and Victoria. BCSA is responsible for administering the Safety

Standards Act and parts of the Railway Safety Act. Through the BC Safety Authority Act

and the Railway Safety Act, BCSA is responsible for regulating the following types of

equipment (BCSA, 2016b):

Electrical equipment and systems.

Boilers, pressure vessels and refrigeration systems.

Natural Gas and Propane appliances and systems, including hydrogen.

Elevating devices, such as elevators and escalators

Railways, including commuter rail

Passenger ropeways, such as aerial trams and ski lifts

Amusement devices

Complex and integrated technical systems involving several technologies

2.2. Operating Permits

Operating permits are required in BC for the operation or maintenance of specific

equipment included within the Safety Standards General Regulation. The permits can be

provided on an annual basis or temporarily in the case of construction (BCSA, 2015c,

p.13-4). The permit outlines the responsibilities of Field Safety Representative (FSR)

and their qualifications. To renew an operating permit, the asset owner must include a

declaration of compliance signed by the FSR from the original permit (BCSA, 2015c,

p.14)

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Operating permits are required because they ensure operation and maintenance

of the equipment by a qualified individual. As part of the permit, the Asset Owners are

legally obligated to ensure that their employees are industry certified to operate the

electrical equipment1 and ensure that the equipment is inspected for potential safety

risks (BCSA, 2015c, p.5-7). It is the role of BCSA certified FSR to ensure that owners

have the information necessary to train properly their employees about the risks of

operating the equipment and to inspect the electrical equipment (BCSA, 2015c, p.5-7).

The inspection of the electrical equipment allows BCSA to determine potential hazards

and address them collaboratively with the Asset Owner (BCSA, 2015c). Furthermore,

the operation permit provides the asset owner with access to

“BCSA certified field safety representatives2 who can provide them with technical guidance and direction, and can provide assistance for the development of a continuous preventative electrical safety program. The FSR named on the operating permit provides the owner with dedicated technical knowledge and is responsible for conducting regular inspections of electrical equipment at the facility. The FSR also provides advice and oversight of electrical work being performed for the facility owner.” (BCSA, 2015, p.4)

If an asset owner does not apply for a permit or is non-compliant, it is likely that

the asset owner lacks the technical knowledge to properly identify and manage safety

hazards (BCSA, 2015c, p.5). This can result in under-maintained equipment and lead to

the potential damage of the equipment with significant risk for the operators of the

machine and the public (BCSA, 2015c, p.8), especially for high voltage electrical

services. Asset owners of electrical systems with an electrical supply of over 250 kVA

(750 V) or a “building with this type of equipment or supply” (BCSA, 2016c) must have

an operating permit. Typically, this would refer to owners of commercial properties,

plants and factories, mills, multi-story buildings and schools, hospitals and municipal

facilities (BCSA, 2016d).

1 If an employee is not certified, it the responsibility of the owner to identify this to the Field Safety

Representative and to provide training to said employee (BCSA, 2015c, p.5-7). 2In the case of high voltage electrical services (over 750 V), the Field Safety Representative must

have a Class A Certificate of qualification (BCSA, 2015, p.9)

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2.3. Current Compliance Techniques

Currently, BCSA provides inspections for operating permits based on their

Resource Allocation Program (RAP). A BCSA Safety Officer will not inspect every permit

issued, instead inspections are prioritized based on a series of risk calculations. BCSA

“uses current and historical data, which is based on the scope and stage of work being

performed; equipment environment, and safety history” (BCSA, 2016e). The goal of RAP

is to ensure effective use of BCSA’s limited resources. According to the 2014 State of

Safety report, BCSA issued 92,609 new operating permits and conducted 34,208

physical assessments (BCSA, 2015b, p.2).

If an asset owner is found to be non-compliant (by either not having a permit or

not following the safety regulations properly), BCSA has the authority under the Safety

Standards Act to provide the non-compliant owner with a warning notice, a compliance

order, a monetary sanction, and/or a discipline order (BCSA, 2016f). According to the

2014 State of Safety Report, 55 warning notices, 31 Compliance orders and 5 monetary

sanctions (ranging from $750- $5,000) were issued by BCSA in the electrical services

sector (2015,p.120-122).

In addition to the use of traditional enforcement techniques, BCSA has hosted a

number of client education events to increase awareness of electrical services safety

standards amongst industry workers. These include “29 Electrical Tech Talks, two

Breakfast & Learn events, two Client Appreciation events and two Technology

Conferences in 2014, covering 13 topics and reaching 1188 stakeholders across BC,”

(2015, p.18).

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Chapter 3. Methodology

3.1. Literature Review and Jurisdictional Scan

We conducted a substantive literature review and jurisdictional scan to provide

the theoretical background necessary to determine the barriers and incentives to

compliance and to identify existing policy solutions. The literature review focused on

three important areas of theory that are most relevant to this project: 1) Enforcement and

Compliance Theory, 2) Game Theory and 3) Choice Architecture.

The jurisdictional scan identified policy approaches to non-compliance of

large asset owner with high voltage electrical services in similar jurisdictions in Canada

and abroad, such as Alberta, Ontario, the United States, and Australia. This was

important for the development and analysis of the policy options

3.2. Expert Interviews

To determine the barriers and incentives to compliance, as well as to inform

policy option development and analysis, we conducted six expert interviews with

stakeholders and included:

BC Hydro

BCSA Risk, Compliance & Policy leadership

BCSA Technical: Electrical Safety Officer and Educator

Compliant Operator of Assets with High Voltage

Province of BC – Building Safety Standards Branch policy team

The BC Safety Authority provided the contact information for the majority of these

stakeholders.

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Chapter 4. Literature Review

4.1. Enforcement and Compliance Theory

Regulation is successful insofar as the regulated entities are persuaded and able

to comply. Malcolm Sparrow (1994) noted over twenty years ago that traditional

enforcement and compliance mechanisms were under stress. In particular, he stated

that this was because “there are too many violators, too many laws to be enforced, and

not enough resources to get the job done,” (Sparrow, 1994: ix). Evidence and

experience across a myriad of regulated sectors of society shows that these challenges

persist. Reasons for non-compliance may vary, particularly where regulated entities are

not homogeneous. Freiberg (2010: 271-272) identifies the following as factors of non-

compliance:

Regulated entities may not understand what is required of them;

Regulation may be overly legalistic;

Regulation may conflict with market incentives or cultural practices;

Prior consultation with target groups may never have happened or may have been inadequate; or

There may be some aspect of the regulatory process that is procedurally unjust.

Assuring safety in potentially hazardous industries has been predicated on

achieving rule-compliance and, more recently, risk-management through making

rational, democratic, and analytical choices (Freiberg, 2010; Sparrow, 2000). Hopkins

(2011) describes these methods as being “coexisting and complementary, not

contradictory”. For these reasons, regulatory instrument and framework design must

carefully counterbalance attaining consistency and addressing the aforementioned non-

compliance factors, but also flexibility and innovation to improve performance criteria

(Carrigan & Harrington, 2015).

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Conversely to the indicators of non-compliance, Baldwin et al. (2012: 236-238)

draws on numerous enforcement and compliance theories to distill a list of compliance

inducing factors:

Knowledge of the rules

Costs and benefits of compliance

The extent to which a policy objective and its effects are acceptable to the target group

The target group’s respect for authority

Forms of social control

Risk of being reported or found out

Risk of inspection

Risk of detection

The anticipated “hit-rate” of inspections

Risk of sanctions imposed

Severity of sanctions

The first five factors on the list address the “spontaneous compliance”

dimensions, while the latter six relate to enforcement dimensions. None are mutually

exclusive and all may be affected by, or closely related to another factor. For example, a

target group’s respect for the regulators authority and its own implementation of internal

standards and values may be directly proportional to enforcement dimensions. For

example, the literature finds inspections and the threat of inspections to have beneficial

effects on compliance rates for an entire target group when there are punitive measures

imposed (Carrigan & Harrington, 2015; Earnhart, 2004; Lanoi et al., 1998; Laplante &

Rilstone, 1996). Additionally, factors such as “forced shut-downs, environmental

damage, criminal prosecution, corporate reputation, community pressure and customer

pressure” are stronger drivers of target group behaviour outcomes than financial

penalties alone (Carlough 2004: 2).

US Environmental Protection Agency (EPA) literature states: “Inspections remain

the backbone of agency compliance monitoring programs. Government officials make

independent judgments as to the compliance status of a facility. Even with widespread

requirements for self-monitoring, inspections play a major role in assuring quality and

lending credibility to self-monitoring programs” (Wasserman, 1984). Magat and Viscusi

(1990) note that imposed sanctions can be civil or criminal. Average fines levied by the

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EPA were $89,437 (in USD during the 1970s and 1980s), and violations could result in

one year of imprisonment for a first offense and two years in prison for a second case of

non-compliance (Magat & Viscusi, 1990). Thus, research has found that punishing

individuals as well as corporations for egregious offenses has worked well to induce

rule-compliant behaviour where there is no tolerance for adverse impacts on public

health and safety.

4.2. Game Theory

Inspection games are an applied subfield of game theory. Like most scenarios in

game theory, inspection games consist of two players with different incentives. A simple

inspection game that is relevant to the context of this paper would include a regulator

and an operator. Inspection games can be used to analyze the effectiveness of various

incentives in order to induce compliance (Nosenzo, et al., 2010).

Most compliance incentives can be categorized as either a bonus or a fine. In

inspection games, the regulator can choose to inspect or not, and an individual or

operator can choose to comply or not. The regulator can reward the operator that is

inspected and was found in compliance, or it can impose sanctions or fines on those

who are inspected and found to be noncompliant.

The results for these games reveal that fines for non-compliant behaviour

increase the equilibrium probability of compliance. However, an interesting finding shows

that bonuses for compliance actually reduce the equilibrium probability of compliant

behaviour. In other words, from the perspective of the operator, fines and bonuses make

non-compliance less attractive and push them towards compliance. For the regulator,

fines increase the expected benefit of inspections but bonuses decrease the benefit

because they are costly. The ability to impose fines allows the regulator to recuperate

some of the costs associated with inspection. If the regulator only employs bonuses,

then it will accrue costs associated with the bonus and the inspection. This decreases

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the incentive to use inspections compared to the game with fines, thus leading to the

result that bonuses can reduce compliance (Nosenzo, et al, 2010).

4.3. Choice Architecture Theory

In many cases, individuals do not make decisions based on well-reasoned

thought. The behavioural psychology and behavioural economics literature challenges

the notion of homo economicus. That literature argues that people often base their

decisions on “rapid, intuitive [thought] that is not associated with what we would

traditionally consider thinking (emphasis theirs)” (Thaler, et al., n.d., n.p.). In light of this

reliance on gut instinct in decision making, choice architecture attempts to design

decision points in such a way that people are nudged towards making choices which are

either of benefit to themselves, such as eating healthier, or of benefit to the community,

such as reducing energy consumption.

Designing a nudge takes knowledge regarding what an individual is inclined to do

and uses that information to help create good decision outcomes. Nudges help create

paths of least resistance to good decisions by establishing the desired outcome as the

default option (Thaler, et al., n.d., n.p). In addition, it is important to design decision

system that recognizes that people will make mistakes (Thaler, et al., n.d., n.p). An

example is checklists or automatic prompts that show where mistakes have been

made. Complicated decisions should be structured to promote good decisions. This

could be as simple as putting the desirable option first in a list that includes many other

options, or presenting information about various complicated options in an easy

digestible way (Thaler, et al., n.d., n.p.). Finally, the use of incentives is

important. Incentives must be salient to decision makers. For instance, in cases where

regulatees do not fully understand the benefits of permitting, some individuals might

avoid permitting to save the permitting cost. This suggests inadequate communication

by the regulator of the benefits of permitting. To correct this, the value of permitting

must be greater than the cost saved by not permitting to elicit the proper choice.

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Is choice architecture effective? Many critiques of choice architecture revolve

around moral arguments about governments’ use of libertarian paternalism (Kosters &

Heijden, 2015). Few systematic evaluations exist for nudge-based governmental

programs (Kosters & Heijden, 2015). Anecdotal evidence finds successes, e.g.,

increasing organ donation rates by establishing an opt-out system rather than an opt-in

one, and failures, e.g., monetarily rewarding people for activities they used to do

voluntarily decreases performance quality (Kosters & Heijden, 2015). Even rarer is direct

evaluative comparison of nudging with more traditional governance

strategies/instruments. As Kosters and Heijden (2015) point out, nudging strategies

often get added to existing governance strategies or instruments in order to revitalize

them, instead of replacing them. The result is that “it remains unclear whether nudging

has a comparative advantage over other governance strategies or instruments”

(p.285). Kosters and Heijden point out four questions to ask when undertaking a nudge

program, which can lead to improvements in regulatory performance (p. 285 –

286). First, what are the lessons learned? Second, even if the nudge is unsuccessful

has it provided information that can improve policies? Third, has the nudge resulted in

the collaboration of actors who ordinarily would not have collaborated? Finally, what

learnings arise about people’s behaviour in the event that a nudge fails?

4.4. Common Regulatory Barriers

Understanding compliance and non-compliance of regulated entities is a difficult

process. Failures to comply can be intentional or unintentional. In both of these cases,

there are often multiple barriers at play, which influence the regulated entity’s

behaviour. It is paramount that the regulating bodies have as robust a sense as possible

of the factors influencing non-compliance in order to understand how to improve the

regulatory environment to facilitate greater behavioural change on the part of the

regulated entities. This project draws heavily on the work of Kent Weaver (2014) to

identify potential barriers to compliance.

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The level of incentives influences behaviour. As Weaver (2014) points out, “high

rates of target compliance are unlikely where positive incentives and/or negative

sanctions are not sufficient or certain enough to ensure compliance” (p.246). An

example of a positive incentive is a rebate on renovations to make a house more energy

efficient. By contrast, an example of a negative sanction is something like a “sin tax” on

the purchase of cigarettes. In both these cases, rebates will not incentivize certain

renovations if they are not generous enough and the “sin tax” will not curtail the

purchase of cigarettes effectively if it is too low.

Monitoring is also an important component. If the regulated entity expects the

regulator is likely to monitor their activities, then they are more likely to be within the

bounds of the regulations. Weaver points out that “high rates of target compliance are

especially hard to achieve where compliance is difficult or costly to monitor” and that

“monitoring is likely to be especially problematic where the activities involved are illegal,

take place in private, or both” (Weaver, 2014. p.247). These are important

considerations for BCSA. While the organization wants to avoid “sticks” and work with

the entities it regulates, it might be difficult to push the 15% of those non-compliant large

asset owners into compliance without a full range of carrots and sticks. The policy

section assesses options that BCSA increases the number of enforcement officers it

employs and makes greater use of potential data sharing partnerships.

An important aspect of BCSA is its role in enforcing its regulations to preserve

public safety. However, enforcement itself could be a barrier. The experiences of front

line enforcement staff represent an important subset of data. Since BCSA has

jurisdiction over a large area of the province while maintaining a modest number of

safety officers it is important to understand what constraints these officers experience in

attempting to do their jobs. Important considerations are whether officers might overlook

certain infractions due to being overwhelmed, are available to perform investigation

requests, and have the right data to find sites for inspection.

Information cognition also might be a barrier. Regulated entities may not have

the information they need to comply, or know how to process that information. This

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affects their capacity and willingness to follow regulations (Weaver, 2014. p.247). For

instance, if upon the transfer of a property the new owner does not know that they need

to re-permit their asset or does not see the benefit of re-permitting, they are unlikely to

comply. It is important to identify which of these factors, if not both, is taking place.

Attitudes and beliefs also play an important role in compliance. Are, for example,

regulations in or out of step with the cultural practices that have developed around the

regulated entity or activity? For instance, it is common for tradespeople who receive

their Red Seal see this as a lifelong certification, and do not see the need to update their

skills. Thus, tradespeople could view a regulation for recertification onerous and

potentially paternalistic. Equity is another cultural value. Regulations perceived as

inequitable run a greater risk of non-compliance.

A community of regulated entities can have an impact on one another. Peer

effects can work both ways. An environment where the non-compliance of regulated

entities is widely known “signal[s] that non-complaisance is unlikely to be detected and

punished” (Weaver, 2014, p.247). This is problematic for BCSA as its ability to

undertake enforcement and inspections is limited by its small staff of safety officers and

its relatively large jurisdiction. However, peer effects can be beneficial when framing

non-compliance as being socially unacceptable (Weaver, 2014, p.247). Education that

attempts to inform potential non-compliant entities about the harms of their activities

could help in achieving a reformulation of attitudes regarding what is socially

unacceptable practice.

The availability of resources is an important consideration to whether a regulated

entity can comply. The cost of compliance might be too high for some regulated entities

to engage with the system (Weaver, 2014, p.249). Furthermore, an entity might be

constrained not just financially but also in terms of human capital. The proximity to

important regulatory locations (like permitting offices) can also affect the ability to be

compliant (Weaver, 2024, p.249).

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Whether there is an ongoing component to the regulation is also an important

consideration. Compliance based on an ongoing requirement, such as permitting,

presents a more complicated route to compliance than a single time requirement

(Weaver, 2014, p.250-251). This is an important consideration for BCSA. While this

project looks at attaining greater compliance of high voltage asset owners, these asset

owners face an ongoing requirement for compliance. More critically however, is that

these asset owners are likely to have many permits out, all expiring at variable

times. This further complicates the actions required to be compliant.

Finally, BCSA’s regulatory environment is highly heterogeneous, another

challenge to compliance. This is because different regulated entities might experience

different combinations of barriers than others. Some may have problems in information

cognition, while others do not have the capacity to achieve compliance. All of these

issues make it important that BCSA engage in effective data collection to see where

particular barriers exist and who is affected by them.

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Chapter 5. Jurisdictional Scan

5.1. Ontario Electrical Safety Authority

Ontario’s Electrical Safety Authority (ESA) is an administrative regulatory

authority mandated by the Government of Ontario pursuant to The Electricity Act and

The Safety and Consumer Statutes Administration Act. Their role is to enhance public

electrical safety by identifying and targeting leading causes of electrical safety risk;

ensuring compliance with regulations; promoting awareness, education and training; and

collaborating with stakeholders to improve the state of electrical safety in Ontario (ESA,

2016). ESA’s mandate guides all activities and objectives: “To promote and undertake

activities which enhance public electrical safety including training, inspection,

authorization, investigation, registration, enforcement, audit, and other regulatory and

non-regulatory public electric safety quality assurance services” (ESA Objects of

Corporation, 1999).

Operating permits for large asset owners come under ESA’s Continuous Safety

Services. OESC Rule 2-300 General Requirements for Maintenance and Operation

states: All operating electrical equipment shall be kept in safe and proper working

condition and defective equipment shall either be put in good order or permanently

disconnected. Asset owners demonstrate compliance and safety due diligence by

completing regular work records for electrical maintenance. ESA substantiates reporting

by regular safety audits and inspections (ESA, 2016). Moreover, there are rigorous

requirements for documentation and data-collection pursuant to OESC Rule 2-003

Record of Electrical Installation Work, which must be kept on site for regulator perusal at

all times.

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Compliance and enforcement comprise the majority of ESA activities. For

example, in fiscal year 2014, ESA:

Executed more than 425,000 wiring inspections;

Handled more than 490,000 customer service calls;

Licensed more than 19,000 organizations and people; and

Undertook hundreds of investigations, laid charges and undertook other disciplinary action (ESA, 2015).

ESA’s stated goal is to improve compliance without a parallel increase in

resource demand, or overburdening those already in compliance. They use a risk-based

management system to triage responses to complaints, and execute audits and

inspections (ESA, 2015). As per the Electrical Product Safety (Regulation 438/07) ESA

is also responsible for initially connecting all asset owners to the safety system. This

puts ESA in a unique position to be informed about the condition and status of large

electrical assets given their involvement at the time of first connection.

ESA is cognizant that the regulatory system itself can present barriers to

compliance (See Baldwin et. al., [2012] referred to in previous sections). Therefore, ESA

removes barriers by working with stakeholders to improve awareness of regulatory

obligations. Specifically, this was achieved by surveying and measuring rates of

awareness of obligations among key stakeholders, and developing targeted programs3

to improve awareness and understanding where it is most needed (ESA, 2015). This

permits ESA to allocate resources efficiently, maintain good relationships with compliant

stakeholders, and reach out to potentially non-compliant ones while offering them the

benefit of the doubt for first-time and low-risk offenders.

3 For example, ESA requires that all electrical distributors include a public safety measure in the annual Safety Scorecard report. The Public Awareness of Electrical Safety component is meant to “measure the level of awareness of key electrical safety precautions among the public within the electricity distributor’s service territory. It measures the degree of effectiveness for distributor’s activities on preventing electrical accidents,” (ESA, 2015, p.2).

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5.2. United States

Enforcing regulations regarding electrical hazards in the United States is under

the authority of the Occupational Safety and Health Administration (OSHA). OSHA’s

authority comes from the Occupational Safety and Health Act of 1970. Although this

program operates federally, state governments are encouraged to develop their own

“own job safety and health plans and permits state enforcement of OSHA standards if

the state has an approved plan,” (US Department of Labour, 2002). OSHA provides

these state-level organizations with 50% of the programs' operating costs. In order for

the state plan to be accepted, they must set standards and develop enforcement

programs deemed equivalent to the programs and policies provided by the OSHA.

OSHA has a number of programs meant to reduce the risks associated with electrical

hazards in the workplace. Next is a brief summary of the enforcement and compliance

programs used by OSHA.

OSHA has a consultation assistance program. This program is available to

employers with less than 250 employers at a fixed site who need assistance ensuring

workplace safety. This program is:

Primarily developed for… employers with more hazardous operations, the consultation service is delivered by state governments employing professional safety and health consultants. No penalties are proposed or citations issued for hazards identified by the consultant. The employer's only obligation is to correct all identified serious hazards within the agreed-upon correction time frame (US Department of Labour, 2002).

Only when serious and frequent hazards are identified in the same workplace will

any safety hazards be directly reported to OSHA enforcement team (US Department of

Labour, 2002).

This program also provides incentives for employers to partake in the program.

Some of these incentives include OSHA’s Safety and Health Achievement Recognition

Program (SHARP). Employers become eligible for SHARP if they: (1) Receive a

consultation visit from OSHA; (2) address all safety hazards; and (3) they develop their

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own health and safety program (US Department of Labour, 2002). Once accepted into

SHARP, the employers will be exempt from inspections for a period of 1 year. This is not

the case for inspections cited by a report or an incident.

OSHA also has a Voluntary Protection Program (VPP). The VPP is an incentive-

based program meant to encourage employers to develop their own health and safety

management team and to develop a cooperative relationship with OSHA. When an

employer applies to be a part of the VPP, OSHA conducts an onsite evaluation to ensure

compliance with the safety standards. OSHA then conducts regular evaluations of the

sites (US Department of Labour, 2002). The frequency of the evaluation depends on the

status of the employer in the VPP. There are three levels of employers in the VPP: Star,

Merit, and Demonstration. Evaluations occur on an annual basis for employers at the

Demonstration level, every 18 months for Merit employers and every 3-5 years for Star

employers (US Department of Labour, 2002). In February of each year, all employers

involved in the VPP program must send in their most recent safety evaluation report,

which includes the incidence and prevalence of injuries and illnesses at work (US

Department of Labour, 2002). The main logic behind this program is that:

Voluntary, cooperative partnerships with employers, employees, and unions can be a useful alternative to traditional enforcement and an effective way to reduce worker deaths, injuries, and illnesses. This is especially true when a partnership leads to the development and implementation of comprehensive workplace safety and health management system,” (US Department of Labour, 2002).

Another collaborative program implemented by OSHA is the Strategic

Partnership Program (OSPP). OSPP allows for collaboration between labour, unions,

management and government on a broader scale than is provided by the VPP program.

Rather than focusing on individual worksites, the OSPP entails relationships amongst

entire groups of employers and employees (US Department of Labour, 2002). There are

two types of OSPP: comprehensive and limited. Comprehensive refers to developing

safety management plans for partnering worksites. Limited focuses on eliminating

specific types of workplace hazards. Finally, the OSHA also offers occupational and

safety health training for employers and employees.

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5.3. Compliance and Enforcement in South Australia

In South Australia, the regulation of electrical services is under the authority of

the Office of the Technical Regulator (OTR), which is a government organization (South

Australian Government, 2016). The Electricity Act of 1996 and the Energy Products

(Safety and Efficiency) Act of 2000 provides its authority (Government of South

Australia, 2015b). South Australia does not use a permitting program; however, they

have developed programs designed to increase compliance to the electrical services

safety regulations (South Australian Government, 2016). Some of these programs

include (South Australian Government, 2015a):

“Roadshows, technical sessions and workshops”- these programs engage electricity workers and to ensure that the workers have access to updated information regarding regulation and any technical issues that are relevant to their industry. In the year 2014/15, the OTR conducted 76 presentations across Southern Australia with various industries (South Australian Department of State Development, 2015, p.1). Companies can request a presentation by the Technical Regulator for in-house training purposes (South Australian Department of State Development, 2015, p. 23).

The OTR publishes a newsletter every six months titled the “Regulation Roundup” that is distributed to all licensed electrical workers to help increase awareness regarding the OTR, as well as keep workers notified of any changes in regulations or standards. OTR provides both a hard copy and electronic format (South Australian Department of State Development, 2015, p. 24). This publication’s success: “the response from industry members who contact the Technical Regulator to discuss items addressed in the particular edition demonstrates that Regulation Roundup has become a valued source of information to the electrical industry, “(South Australian Department of State Development, 2015, p. 25).

The Government of South Australia also conducted a survey of the public to determine the public’s awareness of electrical safety hazards and the electrical safety regulations and codes (South Australian Department of State Development, 2015, p.25).

OTR targets all of these programs towards increasing awareness of its role and

any changes in its regulations and codes. OTR uses traditional forms of enforcement as

well, such as oral and written warnings, inspections, etc. For example, the Technical

Regulator conducts audits at least once a year to ensure that electricity entities are

23

following the appropriate policies and standards (South Australian Department of State

Development, 2015, p.5). However, the inclusion of programs meant to engage the

regulated bodies ensures that the electricity workers remain aware of their

responsibilities and obligations.

In 2014/ 2015, OTR also ran a public awareness campaign. It delivered

brochures to all South Australian councils and had information online. OTR’s goal is its

“Be Energy Safe” campaign, provided in print and in other media, was to increase public

awareness regarding electrical safety, as well as increase awareness of its role and

responsibilities (South Australian Department of State Development, 2015, p. 36).

5.4. Oil and Gas Regulation in British Columbia and Alberta

Regulatory agencies responsible for overseeing all aspects of upstream

petroleum development employ risk-based regulation to respond to economic, social,

and environmental externalities. Both British Columbia and Alberta have independent,

single-window regulatory agencies responsible for overseeing oil and gas operations in

their respective provinces, including exploration, development, pipeline transportation,

and post-development reclamation. These agencies are the Oil and Gas Commission

(OGC) in BC and the Alberta Energy Regulator (AER).

Both the OGC and AER work closely with government ministries to harmonize

and enforce regulations for petroleum industry operators. Both regulators employ some

version of Metzenbaum and Vasisht’s (2015) definition of keys to regulatory excellence,

including: well developed mission statements and goals; adequate funding and

resources to achieve objectives; sufficient data to inform decision-making; and well-

trained, knowledgeable personnel who are able to make judgments according to key

criteria (Metzenbaum and Vasisht, 2015). These four components are critical to the AER

and OGC’s ability to affect outcomes in real-time.

24

Current regulations that relate to compliance and enforcement include in BC a

new feature of the Pipeline Regulation (as of 2011) is that, in addition to utilizing Integrity

Management Programs to manage risk, operators are also required to implement

damage prevention programs. Both regulators utilize Integrity Management Programs as

to employ self-monitoring mechanisms to triage risk and identify priority levels to

inspections. The AER’s Compliance and Enforcement Program identifies the framework

to carry out coordinated risk-informed inspections and audit activities, known as the

“OSI” model (described below). BC’s bases its compliance and enforcement framework

on that of AER. Criteria considered when planning inspections and audits include:

Operator performance and compliance history

Sensitivity of areas where operations take place Inherent risk, and

Significance of regulatory requirements (AER, 2016a)

AER issued its newest iteration of the Integrated Compliance Assurance

Framework in February 2016. It continues to use the aforementioned criteria to calculate

operator risk in both provinces for many years. Over the years, the AER has noted that

regulatory requirements set in consultation and relationship with stakeholders have

significantly better compliance outcomes than those set in adversarial conditions (AER,

2016b). This is the case even where there are escalating penalties for non-compliance.

That all stakeholders have a better understanding of the costs and benefits (economic,

social, and environmental) of a policy is a significant benefit of consultation.

Nevertheless, a 2011 audit by the Forest Practices Board in BC criticized the model,

finding it deficient in the following ways:

The model does not distinguish between distinct activities with different risk sets [or compounding risk-factors]

The type and age of equipment does not appear to be factored fully into the model (this is one of the factors most commonly referred to as a risk driver in our discussions with staff).

It deals with sites mainly from the perspective of proximity to populations, and is not designed at a level of resolution to take into account environmental features in close proximity (Forestry Practices Board, 2011).

25

New iterations of compliance and enforcement frameworks in both BC and AB

have been predicated upon addressing issues discovered by external audits. The

enforcement and compliance framework is similar in both provinces. The “deficiency

notice and corrections process” specifically enables industry operators to remediate

issues without immediately being found non-compliant (BC OGC, 2015a). This process

enables the OGC to gather significant volumes of data from monitoring, inspections

results, complaints, and self-reporting. Results are considered robust because industry

operators have less incentive to give false information or hide non-compliance.

Additionally, enforcement actions are the last resort after exhausting all other means in

the communication and remediation process.

Both provinces are increasingly moving to site-specific regulation in recognition

of the unique characteristics of individual operations. The AER predicts that site-specific

regulation will produce better conservation, public safety, and economic development

outcomes (AER, 2016c). Likewise, in BC, the process sets clear objectives, maintains

clear values, and obtains sufficient scientific data and evidence that to utilize, map, and

publicly share (BC OGC, 2015). The framework makes provisions for specific stated

outcomes and provides expectations for how industry operators can achieve them. For

these reasons, both BC and AB increasingly utilize performance-based regulations in

order to maximize innovation and voluntary operator cooperation.

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Chapter 6. Interviews

Interviews conducted with representatives from: Mott Electric, BC Hydro, the

Province of BC – Building Safety Standards Branch Policy Team, and BCSA Technical,

illustrated a number of key themes.

6.1. Increased Enforcement

Each interview participant noted that enforcement was vital to maintaining high

levels of compliance, as without enforcement, people will start to deviate. There was

significant agreement that BCSA does not engage in enough enforcement, and that

enforcement was essential to BCSA delivery of its mandate. They saw that in a lax

environment, where inspection appears to be infrequent, regulated parties would

naturally drift from compliance to non-compliance. The lack of enforcement has also

lead to some concerns from major stakeholders in the regulatory environment. For

example, some of the stakeholders felt that they were taking on responsibilities, which

they believed was beyond their regulatory scope. Furthermore, stakeholders view

inspections as a service that they pay for through permitting fees. There is concern from

organisations that the rate at which BSCA engages in requested inspections (about 8-

10% according to the stakeholders) is not adequate value as compared to the rate of

inspection offered by municipalities, such as Vancouver, and Surrey, which are near

100%.

Frontline personnel identified the need for increased enforcement resources as

well. The need for more officers and more time to do their jobs came up. This is

important not only with reference to inspections. Interviewees noted that having more

27

time per individual would also allow enforcement agents to engage better in education, a

vital activity from their point of view.

6.2. Better Education

Education came up quite frequently in discussions. In fact, one stakeholder felt

that lack of education was the major barrier to compliance. This stakeholder felt that

some asset owners might not know that they require permitting because they do not fully

understand the criteria determining the requirement for permitting an asset. In other

words, they may understand some of the regulation but not all. This is a problem when

asset owners see they are outside of the need to regulate on one aspect, while not

knowing that they meet the criteria for permitting on another aspect. This participant

also felt that there has been insufficient communication to potentially affected parties of

changes in regulatory requirements.

Furthermore, participants often have misconceptions about the

permitting/enforcement process. As noted above, regulated parties often do not see the

monetary value of permitting versus the cost. As a result, they felt that there needed to

be better education on this aspect. In addition, regulated parties fear inspections

because of the potential for high associated costs. Regulated parties that have a

number of issues that need to upgraded or fixed think that if an inspector comes they will

need to fix every violation immediately. However, it was noted through the interviews

that enforcement agents will work with them in order to triage what needs to be done

immediately while working with them to determine what can be put off to a later date to

decrease the financial burden. BCSA needs to improve its communication of this

message with their clients through education programs.

As mentioned in the previous section, safety officers are key disseminators of

information to regulatory parties. Therefore, it was felt that the capacity for BCSA to

educated only increases with the number of safety officers available.

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While not discussed in detail, interviewees viewed the idea of using technology

and web-based means of distributing information positively. The use of technology would

free up time for safety officers who, instead of taking time to clear up confusion and

answering questions, could be performing higher priority enforcement duties. They

viewed the use of a phone “app” positively in being able to reduce the complexities

involved in applying for a permit.

6.3. Accidental or Intentional Non-Compliance

There was no consensus as to whether the lack of compliance by certain groups

was accidental or intentional. Some participants felt that the lack of education could lead

to accidental non-compliance. This could be the result of transfers in asset ownership

where the new owner does not know the permitting requirement. Additional accidental

non-compliance could be a result of having many different permits expiring at different

times and not having the human capital to manage that complexity. However, other

participants felt that non-compliance was intentional and a function of trying to reduce

costs.

As a note, it seems that because of BC Hydro’s requirement to have a permit in

place before they attach an asset owner to their electrical grid, non-compliance must

start either after expiry of the original permit, or upon the transfer of the asset to a new

owner.

6.4. Use of Incentives

The use of direct incentives appeared as a contested theme. Some participants

felt that incentives could be an effective way to promote compliance. However, other

participants suggested caution with the use of incentives. As an example, the use of

“good standing” regulations were seen as potentially problematic. Instead of reducing

inspections for those who have achieved good standing through being compliant in the

past, good standing should be maintained by having to go through a minimum number of

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inspections. The principle is that compliance will naturally drift to non-compliance when

regulated parties experience a lax inspection environment.

6.5. Data Sharing Between BC Hydro and BCSA

The idea of additional data sharing agreements between BC Hydro and

BCSA arose as a means for BSCA to track where large asset owners were located,

since BC Hydro data could indicate where such assets connect to the electrical

grid.4 However, some interviewees expressed concern about this idea primarily because

of administrative complexity and the lack of benefit to BC Hydro from sharing data with

BCSA.

6.6. The Role of Insurance and Insurance Providers in Compliance

Many participants felt that those non-compliant with BCSA’s electrical regulations

were often unaware that their insurance would be void in the event that something goes

wrong. They suggested that better education in this area could create stronger

incentives for compliance rather than risk being uninsured for an adverse event.

They also discussed the idea of making permitting a prerequisite to holding

insurance. Many participants viewed this option favorably. However, one participant

noted that there is no incentive for the insurance companies to agree to this requirement.

Insurance companies can refuse to pay for damages incurred by an insured party not in

compliance with permitting regulations that experiences damages due to unpermitted

equipment. In other words, there is a perverse benefit to non-compliance from the point

of view of the insurance industry.

4 BCSA and BC Hydro have a data sharing practice between Operations' departments.

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6.7. Peer Effects and Social Policing

Ideas related to peer effects and social policing were not a source of significant

discussion and there was some disagreement about their efficacy. One participant said

that they felt social policing was ineffective because individuals that were going to cheat

would do so regardless of what people say. However, when pushed to see if they

thought whether BCSA could do anything to make social policing more effective, they

suggested that an anonymous tip-line that was actively used for enforcement would be

beneficial. Another participant also suggested this idea.5

5 BCSA has a confidential public tip-line.

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Chapter 7. Considerations

We base our analysis of the policy options on a number of considerations

provided by BCSA at the beginning of the project. These considerations include:

1. Effectiveness - The degree to which the option affects the compliance rate of a large asset owner

2. Administrative Complexity- The degree to which the option implies substantive changes/challenges for current administrative organization and expertise

3. Stakeholder Acceptability- The degree to which the option exerts regulatory burden and/or is acceptable to stakeholders

4. Public Reputation/ Confidence in the Regulator- Degree to which the policy option will affect the reputation of BCSA

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Chapter 8. Policy Options and Analysis

8.1. Policy Option 1: Tying Permits to Insurance

The purpose of this policy option is to increase compliance by tying operating

permits to insurance, which would essentially make receiving an operating permit

mandatory. In other words, in order for an asset owner to acquire or renew their

insurance, they would first have to prove to the insurance agency that they have

received an operating permit from BCSA (or from one of the municipalities).

Most asset owners acquire insurance from private companies. However, the

insurance company does not require the owners to provide proof of operating permit

prior to insuring them. This gap between insurance and operating permits can be used to

incentivize owners to get permits for their large assets. This option has a large

catchment because most large asset owners end up getting insurance and this should

reduce the non-compliance rate significantly. It creates more data as insurance

companies will have a comprehensive list of all asset owners and when their permits

expire. From the perspective of BCSA, this potentially reduces the need for enforcement,

as any asset owner with insurance will have an operating permit. Insurance policies tend

to have annual renewals, and asset owners will now have to more aware of BCSA

requirements for permits because this information is tied to their ability to renew their

insurance.

However, this policy has some drawbacks. It is an administratively complex

option in terms of development and implementation. Insurance companies would have to

coordinate with BCSA to establish the validity of operating permits and maintain a

database that tracks the expiry of permits. This means there will be additional costs for

the insurance companies and could result in an increase in rates. The insurance

33

companies do not have any business incentives to make permits a mandatory

prerequisite. Under the status quo, insurance companies can deny a claim filed by a

large asset owner if the insurance company determines that their permit is not valid. If

permits become mandatory, insurance companies might have to pay out more in claims.

This option also does not capture those owners who are not taking out insurance for

their large assets. Furthermore, it would require legislative changes in order to make

permits mandatory for insurance. Overall, this would require buy in from the insurance

companies and there does not seem to be enough incentive for them to do so. If

implemented, this option would drastically reduce the non-compliant numbers.

8.2. Policy Option 2: Increase Enforcement

This policy option would require BCSA to increase their enforcement action.

Essentially, BCSA would increase their rate of inspection of asset owners. This should

result in an increase in compliance because it creates a strong incentive for asset

owners to get the operating permit to avoid penalties. From the interviews conducted for

this report, many stakeholders have commented that BCSA should be increasing their

enforcement rates. This will improve the reputation of BCSA as an effective regulatory

body and demonstrate that they are meeting their mandate.

Interview subjects have said that they would prefer more inspections, as it would

indicate to them that it is worth paying for the operating permit. The low rate of

inspection is not enough to incentivize getting the operating permit. Evidence from the

literature review also revealed that the best way to increase compliance is to ensure that

there is a viable threat of enforcement. One interviewee said that without proper

enforcement, there will be a tendency to move away from compliance and BCSA will fail

to meet its mandate.

This option does require BCSA to devote significant additional resources towards

their enforcement department. BCSA will have to hire additional safety officers and

dedicate more human resource capacity in order to increase inspection numbers.

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Budget constraints might limit the actual amount of resources BCSA can dedicate to

greater enforcement, but in order for this option to be effective additional resources are

necessary. A potential way to reduce the impact on the budget could be to increase the

price of the permit.

8.3. Policy Option 3: Incentives Programs

We base this policy option on incentive programs developed in the US. The

Volunteer Incentivized Program (VIP) would be an extension of the existing Resource

Allocation Program, basing inspections on risk assessment and safety requirements. It

would differ in that it would have a social pressure and/or a business benefit aspect that

it is not included in the current RAP. The VIP would have three designated categories of

asset owners, which would be determined based on the history of non-compliance, size

and capacity of the asset and other risk management assessments.

Table 8-1 Volunteer Incentivised Program

Category Level of Compliance Inspection Rate

Bronze Lowest level of Compliance/ May be newly permitted

Inspections every 3-6 months

Silver Medium level of Compliance Inspections every 6-9 months

Gold Highest Level of Compliance Inspections every 12-15 months

Table 9-1 shows that a potential breakdown of the three categories and the

associated inspection rates. BCSA could update the relative ranking of the asset owners

on an annual basis and publish these rankings on its website. This would provide an

incentive for companies to work to improve their compliance rating on a yearly basis.

This policy option has multiple benefits. Firstly, it coincides with BCSA’s desires

to maintain positive relationships with their stakeholders. It provides a “carrot” for

companies to comply with operating permits, without requiring strict enforcement from

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BCSA. According to a report from the Fourth International Conference on Environmental

Compliance and Enforcement (Olman and Rimer, 1996, p.2), voluntary compliance is

driven by:

1. Public Opinion 2. Global Competitiveness 3. Enforcement 4. Self-motivation and Awareness 5. Requirements of Suppliers and Buyers

This program would drive compliance by positively affecting public opinion,

business competitiveness, and self-motivation and awareness. For example, by

becoming a part of the VIP, organizations would become more aware of their own

compliance status, which may motivate them to increase efforts to maintain compliance.

Furthermore, highly compliant organizations can state that they are “gold-standard

compliant.” This would have the benefit of making their organization seem more

attractive to the public, which would therefore increase their competitiveness.

Secondly, this policy option creates defined inspection expectations for asset

owners. The stakeholder interviews findings show that asset owners want to know how

many inspections they will be receiving with the purchase of their permit. With the VIP,

asset owners would know the amount of inspections they should expect throughout the

year based on their compliance categorization.

Finally, this program would not require significant resources, although the

implementation of this program may involve some administrative complexity as the

category standards would have to be developed and updated on an annual basis. There

may also need to be an increase in the number of inspectors depending on the

frequency of inspections required.

Despite the benefits of this program, the literature review revealed that there is

some disagreement over the effectiveness of incentive programs in maintaining

compliance. The study by Nosenzo et al (2010, p. 1) states, “perhaps paradoxically,

bonuses for compliant behavior reduce the equilibrium probability of compliant behavior.

Thus, according to standard game theoretical reasoning, fines, and not bonuses, should

36

be used to encourage compliance in such settings”. An article in the Harvard Business

Review (Kohn, 1993) revealed that incentivized compliance programs tend to only

encourage temporary compliance and therefore do not necessarily result in a

sustainable change in behaviour. This evidence seems to suggest that this program may

not provide a long-term solution to the non-compliance issue for large asset owners with

electrical services.

Secondly, the results of our expert interviews seem to show that stakeholders

actually want to have inspections and would prefer that BCSA had a higher enforcement

rate. As noted above, many of the interviewees felt that they were not getting enough out

of BCSA’s permit to make it worth acquiring. Fewer inspections may not be the type of

incentive that non-compliant asset owners are looking for.

8.4. Policy Option 4: Education and Awareness

Results from our interviews, the literature, and the case studies show that

awareness of regulations and policy is related to positive compliance rates. Education is

the best way to ensure that the target group is as well informed as possible, offering

them the best chance of compliance. Ensuring that industry operators have knowledge

of the rules minimizes the likelihood that unintentional violations will take place (Baldwin

et. al., 2012). Interviews conducted during this project phase indicated that lack of

education likely leads to accidental non-compliance. Education and outreach programs

to inform large asset owners who do not know that they are in violation could lead to

reductions in non-compliance and improve data on the target group as a whole.

Moreover, educating asset owners who are knowingly non-compliant about the real

costs and benefits of expired operating permits could positively affect the compliance

rate of that subset. If operators had a true valuation of all the advantages and

disadvantages of compliance or non-compliance, expressed in time, money, and other

resources, they should be more likely to comply with BCSA rules.

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The Dutch Ministry of Justice (DMJ) discusses the principles underpinning the

process of ensuring education and awareness of the rules6. DMJ (2004) notes that

knowledge of the rules prompt a specific set of questions because compliance and non-

compliance are the result of a myriad of factors. Education and awareness is the best

way to ensure that the target group knows the rules, that they are applying them

correctly, and that the rules themselves are presented in such a way that can be

understood. Implementing the BC OGC compliance and enforcement model, for

example, is one useful way to determine the extent to which operators are familiar with

the rules and can apply them correctly.

Educating and making large asset owners aware of their regulatory requirements

is only one aspect of this option. Making the public more aware and educated about the

role of permits is also beneficial. Public pressure can have significant impacts on firm

behaviour. BCSA would be wise to utilize this aspect of social pressure influencing

safety outcomes in the same way that it publicizes the addresses of buildings operating

dangerous single-bottom elevator infrastructure.

Awareness and education campaigns are beneficial because they are a low-risk

way for the regulator to establish a positive relationship with the target group. Thus, it is

highly congruent with Nudge and Choice Architecture Theory. This option is scalable

and sustainable; therefore, it can be adapted dependent upon resources and capacity to

implement campaigns according to target groups. The option can begin immediately

according to various timelines and planning phases. This option implies positive

communication and learning experiences going both ways between the target group and

BCSA. It is adaptive and flexible. Education opportunities may present ways for the

regulator to better allocate resources, identify gaps, or assist all actors in developing

individualized triage protocols. Launching awareness and education campaigns does not

necessarily imply substantive changes or challenges for current administrative

6 See Dutch Ministry of Justice. (2004). “The Table of Eleven: A Versatile Tool.” Law Enforcement Expertise Centre, The Hague: The Netherlands. Retrieved from: http://www.sam.gov.lv/images/modules/items/PDF/item_618_NL_The_table_of_Eleven.pdf

38

organization and expertise. Administrative burden is case-dependent. This option is

highly suitable for implementation as a pilot project, or series of pilot projects with

different target and control groups.

Awareness and education campaigns are only effective to a point. It is

improbable that this option will be able to address persistent or flagrant non-compliance.

Therefore, we cannot presume that this option alone will be effective in significant

improvements to compliance. Nevertheless, because interviews have identified that

there may be a large population of the target group that is ignorant of the rules,

campaigns may offer a good return on investment of BCSA resources. There may be

some danger of loss of public reputation of the regulator, in cases where education and

awareness campaigns are used without appropriate interventions for repeat offenders.

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8.5. Policy Option 5: Data Collection and Reporting

Option 5 establishes a framework for BCSA to determine potential barriers to

compliance experienced by its target population. It is essential for the organization to

know what barriers to compliance exist for two reasons. First, some non-compliance is

inevitably unintentional. Some organizations simply cannot cope with the existing

regulations. As such, by understanding what barriers exist, BCSA can work to

ameliorate these conditions for affected organizations to help bring them into

compliance. The second is that some organizations are willfully negligent of the

regulations. BCSA can work to improve regulations by understanding what barriers

contribute to conditions of active non-compliance. An example of this is low monitoring

levels. The following table presents an example of the framework in action. It presents

and defines areas for examination. In addition, data collected through the course of

creating this report are included as a starting point for the type of useful information.

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Table 8-2 Data Collection

Barrier Barrier Description Data Currently Collected

Incentives Are positive and negative incentives sufficient to influence behaviour?

Unclear. Whether the majority of the remaining non-compliance is a result of poor education or willful negligence requires assessment. However, the idea of legitimization through being compliant is an incentive for some.

Monitoring Is the level of monitoring sufficient to make the regulated entities feel there is appropriate oversight?

No. Major stakeholders feel that monitoring is not sufficient to provide a sense of oversight.

Enforcement Are safety officers constrained in accomplishing their duties?

Yes. There are insufficient safety officers for the jurisdictions that BCSA regulates; they do not have the resources, in time or labour to undertake effectively their enforcement duties.

Information Cognition: Capacity Are regulated entities getting the information they need in order to be compliant?

Unclear. Many stakeholders feel a lack of education impacts compliance. However, those who are compliant seem to do well with the information currently provided.

Information Cognition: Willingness Do regulated entities know how to use the information they have in order to achieve compliance?

Unclear. Here, again, education could be a factor. It is important for BCSA to assess whether their target population is using the provided information as intended.

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Barrier Barrier Description Data Currently Collected

Attitudes & Beliefs: Cultural Are there particular cultural considerations that need to be addressed that affect rates of compliance?

Unclear. While not discussed in enough detail to warrant its own sub-section in the interviews portion of this report, foreign ownership did come up in one interview as a potential for non-compliance. Asset owners from a different cultural background might not understand their role in the regulatory environment in BC. Furthermore, language barriers might contribute to non-compliance.

Attitudes & Beliefs: Equity Does the target community view the regulations in place as fair and reasonable?

Yes. At least one major regulated stakeholder feels that for the most part BCSA’s regulations are credible and fair.

Peer Effects Does the behaviour of the target community reinforce compliant or non-compliant behaviour?

Unclear. Some within the industry feel peer effects have little effect. However, increasing social policing could increase compliance.

Target Resources Do the regulated entities have the money, human capital, and proximity to important regulatory locations to be successful in compliance?

Unclear. While not discussed in enough detail to warrant a place in the interview section some data were provided. With the exception of cost, one major stakeholder felt that the potential for other resource constraints was minimal. However, it is important to consider the highly heterogeneous nature of this target group. It is unlikely that their experience can be extrapolated to all actors. BCSA should engage in further examining what possible resource constraints exist.

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Barrier Barrier Description Data Currently Collected

Ongoing Requirement Does compliance require the target population engage in repeated actions to maintain compliance?

Yes. Permitting is an ongoing process, which requires the active participation of the target population. BCSA should examine whether this has an impact on compliance and note that asset owners may have multiple permits, which require re-permitting at different times. This has the potential to reduce compliance for resource-constrained organizations.

Target Heterogeneity Is the target population diverse in nature?

Yes. BCSA should explore the heterogeneity of target populations. Current regulations might be more difficult to comply with for some organizations than others might.

It is important for BCSA to have a sophisticated and nuanced understanding of

the regulatory barriers to compliance, which exist in its jurisdiction. By formalizing a

process of data collection, which keys into recognized areas where barriers to

compliance exist, BCSA will increase its capacity to understand where, why, and how

regulatory failure is occurring. As a result, BCSA can better design regulations, which

help bring into compliance organizations that are non-compliant through accident, as

well as reduce conditions, which lead to environments where willful non-compliance can

take place.

A drawback of this policy option is that it does not immediately deal with the issue

of current non-compliance. The process of data collection and analysis produces a lag

time before regulatory change could be take place. Since the issue of non-compliant

large high-voltage asset owners is a matter of public safety, it might be morally

incongruent with BCSA’s mandate to wait before trying to ameliorate the compliance

problem. Furthermore, formalized data collection in this way would likely be resource

intensive. It would likely require significant stakeholder engagement throughout BCSA’s

43

expansive jurisdiction, as well as the use of other means of data collection, and

analysis. BCSA might not have the capacity in terms of time, money, or human

resources to adopt fully this policy option.

As part of Policy Option 5, we also considered the possibility of establishing

additional data sharing agreements between BCSA and BC Hydro. BC Hydro would

provide data on where they have linked high voltage assets to the electrical

grid. Because BC Hydro requires permitting of high voltage assets before they can be

connected to the grid, BCSA can use this data to figure out locations where the original

permit has lapsed without being renewed. However, the drawbacks are administrative

complexity and the lack of direct benefit to BC Hydro. BC Hydro has also stated that the

ability to triangulate the locations of potential non-compliant entities is likely more difficult

than assumed by other stakeholders.

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Chapter 9. Recommendations

Since BCSA has expressed an interest in trying out a number of potential

solutions in dealing with its large high-voltage asset compliance problem, this report

combines all of its options into a portfolio recommendation broken down based on

relative priorities. It should be noted that while BCSA is interested in utilizing non-

punitive means of social control, information derived from the literature suggests that

sufficient monitoring and enforcement needs to be in place to ensure their success. As

a result, top priority recommendations center on increasing BCSA’s monitoring and

enforcement capacity, and increasing their knowledge of the regulatory

environment. Middle priority recommendations are those that produce potential benefits

that are likely contingent on robust monitoring and enforcement. Low priority

recommendations are those that have the potential for beneficial impact, but have major

constraints that limit their feasibility.

9.1. High Priority

Increased Enforcement - The need for increased enforcement was a consistent

theme throughout the stakeholder interviews. This report firmly states that BCSA is not

performing enough monitoring or enforcement. Furthermore, monitoring and

enforcement are essential to the success of non-punitive means of social control.

Data Collection Framework - This policy option will help BCSA determine

where monitoring and enforcement should take place, and how. Overall, it will allow

BCSA to be more responsive to the needs of its target population when crafting future

regulations or reforming current ones.

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9.2. Middle Priority

Incentive Programs - A strong incentive can reduce non-compliance by

increasing the relative value of being compliant. However, the success of incentives is

limited. The gains in compliance derived from this option are likely to be less than (and

likely somewhat contingent on) those gained through increased enforcement.

Education and Awareness - Education and awareness is an important

component in remediating the behaviour of those who are accidentally outside of

compliance. However, education and awareness has a hard limit in that it is likely not

going to correct the behaviour of those who are flagrantly non-compliant. Here, again,

increased monitoring and enforcement is essential if BCSA wants to reduce non-

compliance as much as possible.

9.3. Low Priority

Tying Permits to Insurance - While this would be an innovative idea in creating

a “path of least resistance” default to permitting as described in nudge literature, the

likelihood of uptake on the part of insurance companies is low.

BC Hydro Data Sharing Partnership – It may be difficult to triangulate to non-

compliant entities. In addition, there are drawbacks from the point of view of BC Hydro,

which limits their buy-in to the partnership.

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References

Alberta Energy Regulator. (2016a). Integrated Compliance Assurance Framework. AER: Calgary, AB. Retrieved from: https://www.aer.ca/documents/enforcement/IntegratedComplianceAssuranceFramework_February2016.pdf

Alberta Energy Regulator. (2016b). Who We Are. AER Website: Calgary, AB. Retrieved

from: https://www.aer.ca/about-aer/who-we-are

Alberta Energy Regulator. (2016c). Play-Based Regulation: Piloting a New Approach to Oil and Gas Development. Calgary, AB: Alberta Energy Regulator. https://www.aer.ca/documents/about-us/PBR_Brochure.PDF

Baldwin, Robert, Martin Cave, and Martin Lodge. (2012). Understanding Regulation: Theory, Strategy and Practice, 2nd Edition. Oxford University Press.

BC Oil and Gas Commission. (2015). Supplementary Information for Area-Based Analysis. BC OGC Website. Government of BC: Victoria, BC. Retrieved from: http://www.bcogc.ca/node/12693/download

BC Oil and Gas Commission. (2015a). Compliance & Enforcement Manual. BC OGC Website. Government of BC: Victoria, BC. Retrieved from: https://www.bcogc.ca/node/6096/download

BC Safety Authority (2015a). Board Governance Manual. 1-58. Retrieved from: http://www.safetyauthority.ca/sites/default/files/bcsa_governance_manual_dec_2015.pdf

BC Safety Authority (2015b). Safety Authority Fact Sheet. Retrieved from: http://www.safetyauthority.ca/sites/default/files/2015_bcsa_fact_sheet_-_may_2015.pdf

BC Safety Authority (2015c) Information Bulletin: Operating Permits. Retrieved from http://www.safetyauthority.ca/alert/electrical-operating-permit-requirements-bulletin#_Toc42117560

BCSA (2016a). Acts, Regulations, and Agreements. Retrieved from: http://www.safetyauthority.ca/about/legal-and-policy

https://www.aer.ca/documents/enforcement/IntegratedComplianceAssuranceFramework_February2016.pdfhttps://www.aer.ca/documents/enforcement/IntegratedComplianceAssuranceFramework_February2016.pdfhttps://www.aer.ca/about-aer/who-we-arehttps://www.aer.ca/documents/about-us/PBR_Brochure.PDFhttp://www.bcogc.ca/node/12693/downloadhttps://www.bcogc.ca/node/6096/downloadhttp://www.safetyauthority.ca/sites/default/files/bcsa_governance_manual_dec_2015.pdfhttp://www.safetyauthority.ca/sites/default/files/bcsa_governance_manual_dec_2015.pdfhttp://www.safetyauthority.ca/sites/default/files/2015_bcsa_fact_sheet_-_may_2015.pdfhttp://www.safetyauthority.ca/sites/default/files/2015_bcsa_fact_sheet_-_may_2015.pdfhttp://www.safetyauthority.ca/alert/electrical-operating-permit-requirements-bulletin#_Toc42117560http://www.safetyauthority.ca/alert/electrical-operating-permit-requirements-bulletin#_Toc42117560http://www.safetyauthority.ca/about/legal-and-policy

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BCSA (2016b). About US. Retrieved from: http://www.safetyauthority.ca/about

BCSA (2016c). Electrical Oper