Your editorial in the April/May issues was of great interest to beverage consumers, bottle depot operators and readers.
In 1995 the British Columbia bottle depots asked Encorp for the same handling fees paid in Alberta despite the fact that costs in B.C. are higher. Encorp refused and the depots took them to arbitration — where Encorp tried unsuccessfully to introduce financial evidence that the arbitrator found to be false — after which he awarded what he considered to be fair handling fee rates.
We know that in 1997 Encorp had a net profit of $7.3-million. If you do your math, taking into consideration return rates in 1995, 1996, 1998 and 1999, you will find that Encorp should have entered the year 2000 with about $30-million in the bank. However, they returned all this money to the brand owners on a pro rata basis and now claim they need a “recycling fee” to survive.
We firmly believe Encorp’s mandate in B.C. is to destroy the deposit-refund system.
We hope that other provinces will not be fooled by these tactics. Numerous studies have shown that a deposit based depot system is the most cost-effective way of getting high volume returns and balanced costs. The brand owners have fought deposit legislation all over the world — they want the public to pay for cleaning up their mess through Blue Box programs or whatever. Perhaps audits by the provinces are called for to reveal what really goes on.
Your editorial in the April/May edition invites a response. Here is our perspective on recycling fees. Encorp Pacific (Canada) is a federally incorporated, not-for-profit corporation; this status does not allow Encorp to accumulate profits or to pay them out to shareholders. We fulfill the requirements of the B.C. Beverage Container Stewardship Regulation on behalf of more than 200 non-alcoholic brand owners grouped in three industry sectors, each sector holds a minority position on the Board of Directors.
Charges to brand owners in excess of the required deposit, that is, recycling fees, are needed when the unredeemed deposit pool and value of materials collected is less than the costs of recovering a specific type of container. System costs have risen to the point that now virtually all containers carry such a fee. The other major change is that, in many cases, the fees are now visible to the consumer.
Early in 2000, Encorp recommended to brand owners that these fees should be visible and this information was passed along by brand owners to retailers. Encorp does not have the ability to require retailers to show the fee; our role is to identify the options available.
Recycling fees are not mentioned in Encorp’s stewardship plan since information on financial operations is not a requirement and, when the plan was submitted in 1998, the costs of operating the system were much lower. In addition, the Beverage Container Management Board has an express policy of exempting itself from matters that involve the financial administration of individual stewardship plans.
The arbitrator’s award of a handling fee of 3.8 cents per unit represented a 25 per cent increase. Your comment that this increase “…will partly offset declining revenue from unredeemed deposits…” is confusing. Because handling fees constitute about 66 per cent of our total operating costs, this award aggravates the impact of declining unredeemed deposits. It does not offset them.
I can assure you that the fees are justified, legal and are described clearly in our consumer awareness program as not being a tax. We provide independently audited financial information to the provincial government and work with them to determine what additional information may be appropriate.
Our province-wide consumer information program has been in place since the middle of March and our research indicates that consumers will support such a fee if they are assured that their containers will indeed be recycled.
On behalf of industry, Encorp Pacific has created a network of 160 depots and implemented a smooth expansion of the deposit system; through these efforts we have achieved a recovery rate of nearly 75 per cent in the first year of the expanded system. We intend to continue this success. Our program benefits from an equitable and sustainable funding mechanism; the container-recycling fee is that mechanism.
We are fully committed to our responsibilities to recover containers in a cost-effective, consumer-friendly manner. These objectives are best achieved by an informed consumer who’s aware of both the value of the system and its actual costs.
Encorp Pacific (CANADA)