Charging for gas transportation activities: a guide

Introduction

This guide has been prepared for operators of gas transportation networks and others who have an interest in how the cost recovery scheme will operate. It provides information on the scope and nature of the activities undertaken by HSE for which costs are recovered. It also explains how the costs recovered are calculated. This edition shows the hourly fee from 1 April 2024.

What is cost recoverable?

Cost recovery was introduced for the gas transportation industry in October 1999 to recover the cost of HSE's work in certain defined areas. Cost recovery regulations have been made under the Health and Safety at Work etc. Act 1974 (HSWA), which gives HSE the power to cost recover from operators for gas transportation and the enforcement of relevant statutory provisions. Specifically, regulation 21 of the Fees Regulations gives HSE these powers in relation to gas transportation.

The fee boundary

The regulatory regime affecting gas transportation is based on the Gas Safety (Management) Regulations 1996 (GSMR). The general provisions of HSWA are also relevant to regulating operations in the industry. HSE will cost recover for all its safety case advice and assessment work; inspection to ensure compliance with the safety case in the gas transportation sector; and the enforcement of any of the relevant statutory provisions in so far as such enforcement is for the purpose of protecting persons from risks arising from the manner in which gas is conveyed or used in the network covered by the safety case. (The Relevant Statutory Provisions are defined in HSWA as including the provisions of Part I of the Act and any health and safety regulations).

Cost recoverable activities

To provide guidance to duty holders on the exact nature of the work to be covered by a fee, the general scope for cost recovery has been broken down into descriptions of 'activities for which costs are recoverable' framed around the main functions which HSE undertakes as follows:

assessing safety cases submitted by gas conveyors and the Network Emergency Co-ordinator (NEC) as provided under GSMR, regulation 3, and communicating the results of the assessment to operators;
assessing material changes to a gas conveyor's safety case as provided by GSMR, regulation 4(2);
providing advice with respect to the preparation of a safety case or revision to a safety case which is proposed to be sent to the Executive pursuant to any provision of GSMR;
assessing whether an exemption from any requirement or prohibition required by GSMR may be granted and the terms and conditions attached to that exemption under regulation 11;
enforcing any of the relevant statutory provisions (insofar as such enforcement is for the purpose of protecting persons from risks arising from the manner in which gas is conveyed or used) against a person conveying gas who has prepared a safety case under GSMR, a network emergency co-ordinator, or a contractor in relation to work carried out in connection with that network. This includes both formal enforcement such as issuing notices and other enforcement activity such as carrying out assessments, inspections or investigations.

Assessment

Safety Cases

GSMR regulation 3 - Assessment and acceptance of Gas Conveyor and Network Emergency Co-ordinator safety cases

No person shall convey gas in a network unless:

he has prepared a safety case containing the particulars specified in Schedule 1 and that safety case has been accepted by the HSE
where any other person is conveying gas in that network, there is a sole network emergency co-ordinator for the network

For the purposes of these Regulations, a Network Emergency Co-ordinator is, subject to paragraph (3), a person who has prepared a safety case containing the particulars specified in Schedule 2 and has had that safety case accepted by the HSE All persons conveying gas in a network must prepare a safety case, submit it to HSE and have it accepted before beginning operations (unless they have been granted an exemption). The time taken for the assessment will depend on the quality, completeness and complexity of the submitted safety case, and can be affected if resources are diverted by the need for reactive work on incidents.

Duty holders should take this into account when submitting cases. HSE will normally attempt to complete the assessment within three months of receipt of the case.

Assessment of the safety case is to see if it addresses adequately the particulars in Schedule 1 to the Regulations (or Schedule 2 in the case of the Network Emergency Co-ordinator) and thereby provides a demonstration of safe operation. A safety case will not be considered for acceptance unless it contains all of the particulars specified in Schedule 1 to the Regulations.

Assessment will be undertaken by considering the information provided in the safety case and will not involve site visits. The work will be carried out in accordance with procedures set out in the Safety Case Handling and Assessment Manual (SCHAM). How much time is spent on the assessment will depend on the quality and completeness of the submitted case and the complexity of the duty holder's operation. Assessment is an iterative process which may involve assessors requesting further explanations and information from the duty holder.

Material changes to Safety Cases

GSMR regulation 4(2) - Assessment of material changes to a Gas Conveyor's safety case

Where a revision proposed to be made under paragraph (1) will render the safety case materially different from the last version accepted by the HSE pursuant to these Regulations, the revision shall not be made unless the HSE has accepted the revision, and for the purposes of this paragraph in determining whether a proposed revision will render the safety case materially different from the version referred to above, regard shall be had to the cumulative effect of that proposed revision and any previous revisions made under paragraph (1) but not subject to this paragraph.

Where proposed modifications have a material effect, the safety case, or relevant parts of it, should be resubmitted to HSE for assessment. Changes should not be implemented until the new safety case (or parts) has been accepted by HSE.

The time taken for the assessment will depend on the nature and complexity of the revision, but HSE will normally attempt to complete the process within three months of the receipt of the material revision.

Advice and guidance

Safety case assessment can be assisted by advance discussion between duty holders and HSE on key safety issues. Duty holders are encouraged to discuss and resolve such matters with HSE in advance of safety case submission, thereby avoiding any difficulties imposed by the tight timescales for the assessment process. General advice on what a safety case should contain is not included as a cost recoverable activity. This is likely to apply to most requests for general advice, which can be resolved quickly through a telephone call are likely to fall in the non-cost recoverable category. However, advice in connection with the preparation of a specific safety case prior to its submission will be cost recoverable; for example where it is to the benefit of both the duty holder and HSE to discuss how the information is to be presented within the safety case or what specific features are or are not likely to be acceptable.

Exemptions from the requirement to produce a Safety Case

GSMR regulation 11 - Assessment associated with the issue of exemption Certificates

The HSE may, by a certificate in writing, exempt any person or class of persons from any requirement or prohibition imposed by these Regulations, and any such exemption may be granted subject to conditions and to a limit of time and may be revoked at any time by a certificate in writing.

The type of exemption under consideration here is where the duty holder applies to be exempted from the requirement to produce a safety case. The time taken to process an application for an exemption will be related to the complexity of the duty holder's operation. Like the assessment of safety cases, the work will follow SCHAM procedures. In effect, inspectors will have to consider and judge a mini safety case submission to assure themselves that an exemption is appropriate and that the risks to health and safety will be properly controlled.

Inspection

Inspection of the relevant statutory provisions includes all regulatory and directly linked activity, assessment, inspection, and investigation, for the purpose of protecting persons from risks arising from the manner in which gas is conveyed or used. GSMR and the Pipelines Safety Regulations 1996 are the main provisions relating to this. Also included in the cost recoverable activities are preparatory activities such as planning and reviewing inspections; reading relevant documentation; and the carrying out formal enforcement activities such as the preparation and serving of improvement or prohibition notices.

Inspection - Dutyholders

HSE will carry out inspections and assessments to verify that the duty holder is controlling the risks arising from the conveyance or use of gas in the network. Inspection and assessment will consider the adequacy of:

the arrangements for the safe management of gas flow through networks or parts thereof
the design and construction of pipelines in the network
the procedures or arrangements relating to operation and maintenance
the arrangements for dealing with supply emergencies
the arrangements for dealing with reported gas escapes and the investigation of gas incidents and certain gas escapes
the arrangements for monitoring gas pressure and composition to ensure requisite specifications are met
in the case of the Network Emergency Co-ordinator, the arrangements for preventing a supply emergency and for managing it, should one occur

This work will usually involve visits to the site from which the network is controlled, but may also include visits to other locations, for example, the duty holder's head office.

All duty holders will be inspected following assessment and acceptance of their safety case. In practice, the nature and extent of inspection undertaken by HSE will be dependent upon the scale and complexity of the duty holder's operation. Inspection may also be triggered by other events such as incidents which indicate that compliance with the procedures set out in the accepted safety case is in question.

Inspection – Contractors

Inspection of the activities of contractors working on or in connection with a network are cost recoverable to the duty holder, insofar as such inspection is for the purpose of protecting persons from risks arising from the manner in which gas is conveyed or used. For example, if an inspection of a contractor responsible for laying gas services involves checking that the design, construction and installation complies with the procedures set out in the duty holder's safety case, this would be cost recoverable. However, checking the standards of general site safety for the contractor's employees carrying out the work would not be cost recoverable.

If, during an inspection, it becomes clear that it is necessary to commence an investigation with a view to its being ascertained whether a contractor (or both the contractor and the duty holder) should be prosecuted for an offence under the relevant statutory provisions, this will be cost recoverable.

Inspections of contractors which do not relate to a specific network or a specific duty holder will not be cost recoverable. This would include, for example, the corporate audit of a contractor (even if this involved visits to one or more sites) or to the general application of the law to a contractor's activities concerning various networks which are not operated by a single duty holder.

Investigations

Investigations may commence as a result of notifications made under RIDDOR or GSMR, or where HSE becomes aware of any other incident which has caused or is liable to cause injury to persons. Investigations may also arise from complaints received. The word "incident" may describe any accident, dangerous occurrence, incident or complaint.

When a possible offence comes to the attention of HSE, any activities carried out to enable HSE to decide whether to prosecute will be cost recoverable. These activities may include:

consideration of the facts given in a report or in a telephone conversation
a visit to a site
the gathering of evidence (including forensic testing)
the taking of statements

Investigative work is reactive in nature and cannot be pre-planned. It is therefore difficult to give an estimation of typical cost. However, experience has shown that such work may utilise significant resources resulting in a serious impact upon HSE's planned work.

Subject to the exclusions in paragraph 6 below the cost connected with investigation activities will be recovered from the duty holder who is required to have their safety case assessed by HSE and who is the subject of the investigation.

Formal Enforcement

HSE may take formal enforcement action, that is serve an improvement or prohibition notice, to secure compliance with the relevant statutory provisions. Duty holders who contravene the relevant statutory provisions may be prosecuted. Subject to the exclusions outlined below the costs connected with enforcement activities will be recovered from operators.

All work associated with formal enforcement of the relevant statutory provisions which impose duties on:

operators of gas networks
contractors working at, on or in connection with a gas network

insofar as such enforcement is for the purpose of protecting persons from risks arising from the manner in which gas is conveyed or used will be cost recoverable.

This includes all communications to ensure compliance between HSE and operators or contractors, for example the preparation, service, and checking compliance of improvement and prohibition notices.

Cost recoverable formal enforcement activity will start as soon as HSE decides that action is necessary to ensure compliance and will finish either when HSE is satisfied that the operator complies with the relevant regulation or at the commencement of legal proceedings. The costs associated with following up that remedial measure and improvements have been undertaken will be recovered in appropriate costs.

Formal enforcement work is reactive in nature and cannot be pre-planned. It is therefore difficult to give an estimate of typical costs. However, experience has shown that such work may utilise significant resources resulting in a serious impact upon HSE's planned work.

Appeals Against Notices

The costs of HSE incurred in connection with the service of improvement or prohibition notices are recoverable, including those cases where an appeal is successful. However, the costs incurred by HSE from the date on which a notice of appeal has been received by the Employment Tribunal are not recoverable.

Exclusions

In England and Wales, no costs will be recovered for work done after a summons has been obtained from a Magistrate's Court. HSE may, however, apply to the court to recover its prosecution costs at the end of the trial.

In Scotland, no costs will be recovered for work done after the inspector undertaking a criminal investigation or prosecution refers the case to the Procurator Fiscal or the Procurator Fiscal intervenes in the investigation, whichever is the sooner. In Scotland, unlike in England and Wales, HSE is not given the power to recover its prosecution costs at the end of the trial.

Investigation costs, as described above, incurred prior to the date:

in England and Wales, that the summons is obtained
in Scotland, that a report is submitted to the Procurator Fiscal for his decision as to whether a prosecution should be brought or the Procurator Fiscal intervenes, whichever is the sooner; are recoverable from the dutyholder.

Fees

These are made on an 'actuals' basis. That is, the recovery of the full costs of the time spent by HSE carrying out a relevant activity for a particular network on any particular occasion or occasions. The way in which HSE has approached the identification of the relevant costs for inclusion in the cost recovery rate follows the guidance in HM Treasury's Fees and Costs Guide (see Ref 1).

From 1 April 2024, the cost recovery rate is £165 per inspector hour.

Who will be subject to the cost recovery?

Costs will normally fall to the duty holder, the person who has responsibility for controlling the risks. For a network this is the person conveying gas or the Network Emergency Controller, the person who is in control of the network. Where the network is to be constructed, persons who commission the design or construction of the pipelines forming the network fall within the definition of "operator" as used in Schedule 18 of the Fees Regulations.

Generally, HSE will notify Duty Holders in advance of the reasons for an inspection and what is to be inspected.

Methodology used for calculating the costs to be recovered

Costs to be recovered are calculated on the basis of the time spent on that particular cost recoverable activity multiplied by a predetermined cost recovery rate. HSE operates a work recording system to generate the relevant information. Cost recovery is calculated in accordance with HM Treasury's Fees and Charges Guide and includes the full cost of all the resources used in carrying out that cost recoverable activity. These costs are included in the Memorandum Trading Accounts prepared annually (see paragraph 19) and which are set out on the basis of six main headings. The costs included in these headings are as follows:

Gross salaries of direct staff
- staff actually carrying out the work, their line managers and support staff
Gross salaries of Operational Management and Strategy
- staff who deal with the consistency and quality of operational work as well as finance and planning issues specific to that directorate
General Administrative Expenditure
- accommodation costs
- use of information technology
- travel and subsistence
- staff development and training
- office services (for example, postage and telecommunications)
- services bought from external suppliers
- any other appropriate costs that may arise
Corporate services
- common services (for example, finance and planning, human resources, senior management and business services)
Capital costs
- Depreciation of fixed assets, cost of capital and insurance
Executive delivery costs
- depreciation of fixed assets, cost of capital and insurance
- internal guidance to inspectors (e.g. to achieve consistency of regulation)
- consulting and discussing current problems and their effective control with duty holders and their representatives
- industry specific research and development.

Administrative and Financial Arrangements

HSE will issue invoices and receive payments for all cost recoverable activities (irrespective of who carried out the work, for example, HSE or a contractor). HSE will be responsible for debt recovery. Invoices will identify:

each separate cost recoverable activity
assessment
inspection
investigations
enforcement
date of activity
location
the number of hours
the rate to be applied to the number of hours
the name of the inspector doing the work
the total payable

Invoicing and debt recovery functions are carried out centrally; inspectors are not responsible for the issuing of invoices nor for any follow up actions relating to non-payment of invoices. In addition, they are not well-placed to discuss cost recovery policy. Queries on invoices should be referred to the contact point given below.

Invoicing takes place within thirty working days of the end of a quarter. Invoices will be issued on the pattern of quarters March to May, June to August, September to November and December to February.

Payment is due to HSE within thirty days of the date of invoice. HSE has assumed that duty holders' accounting systems allow part payments to be made. If this is not the case, a note to this effect should be sent to Finance Unit (see contact details below) so that HSE's standing duty holder data can be amended and the appropriate action taken.

HSE will actively pursue outstanding debts in accordance with its own debt recovery procedures.

HSE will prepare annual Memorandum Trading Accounts which will be subject to scrutiny by HSE's Internal Audit and also externally by the National Audit Office.

Procedures for handling queries and disputed invoices

If a duty holder has a query about an invoice, they should contact the HSE to seek to resolve it informally. If it is not possible to do this, then the duty holder is advised to refer to the CA's procedure for handling queries and disputed invoices. These are described in 'HSE Procedure for Queries and Disputes' on the HSE website Please note that there are time limits at each level within which queries should be submitted.

Procedure for resolving operational issues

Where matters of dispute arise on operational issues which have implications for the cost recovery regime, these will first be considered by the Gas Transportation Cost Recovery Review Group which has the overall responsibility to keep under review the effectiveness and operation of the gas transportation cost recovery regime's financial and administrative arrangements. The membership of the Review Group will comprise representatives from industry and trade associations as well as HSE officials.

If the matter cannot be resolved by the Review Group, it will be referred to senior officials in HSE.

Contact for queries, advice and guidance

Should you need advice on the operation of the charging system or have a specific query, please telephone or write to HSE at:

HID HQ 1A
Redgrave Court
Merton Road Bootle
Merseyside L20 7HS
E-mail: [email protected]

For queries about making a payment

Health & Safety Executive
Finance Unit
Redgrave Court
Merton Road
Bootle
Merseyside
L20 7HS

References

1. A priced publication available from HMSO Books: ISBN 0 11 560043 4