Oregon E-Waste Rulemaking Proposes Significant Fee Hikes

The revenue that E-Cycles generates “is highly variable under the existing fee structure,” in which manufacturers have been divided among four “tiers,” depending on their market share, the notice said. Manufacturers in Tier 1 have market shares of 1 percent or larger and have paid $15,000 a year to register. Those in Tier 2 have market shares between 0.1 percent and 1 percent and have paid $5,000, while those in Tier 3 have shares between 0.01 and 0.1 percent and have paid $200. Those in the bottom rung, Tier 4, have shares less than 0.01 percent and have paid $40 a year.

"Although the number of manufacturers has remained relatively steady, a drop in the number of manufacturers in the highest-fee tiers has caused revenue to decline,” the notice said. “The fee amounts also vary significantly among tiers, which magnifies revenue impacts of any redistribution of manufacturers among the existing tiers,” it said. In its preliminary market share assignments for the program’s 2012 fiscal year, DEQ lists 16 manufacturers as occupying Tier 1, including Best Buy, LG, Panasonic, Samsung and Sony among the biggest names in consumer electronics. The lists would need to be redrawn if the proposed changes go through because the market share thresholds would change and the number of tiers would increase.

In addition to the revenue shortfall, E-Cycles also has run over budget because DEQ costs “have exceeded those originally estimated before the program began,” the notice said. Labor and other costs have increased, and startup costs “exceeded estimates,” it said. In addition, DEQ “incurred higher than expected costs to plan for a data system to manage the program -- a need not fully understood until DEQ implemented the program,” it said. “DEQ has made efficiencies in the program’s operations to help reduce costs, and DEQ will identify additional reductions to hold program costs as steady as possible as cost factors such as health insurance or salary adjustments increase. Nevertheless, DEQ does not believe program operating costs can be reduced to the current revenue level without significant changes in program design, which would require legislative action."

The proposed rules would increase the number of E-Cycles tiers to six from four, and dispense with flat registration fees in each tier, except for the lowest Tier 6 in which manufacturers with market shares less than 0.01 percent would pay $200 annually, up from the $40 they pay now, the notice said. Another big change is that the market share threshold in Tier 1 would increase to 5 percent or more from 1 percent in the current structure.

In a complicated formula that would replace the flat fees, the registration fees for manufacturers in Tiers 1 through 5 “will equal the revenue need remaining after subtracting the revenue from Tier 6 fees,” the notice said. In Tiers 1 through 5, “the total registration fees for each tier will be a percentage of the remaining revenue need that is equal to the total market share of the manufacturers in that tier,” it said. The registration fee of each manufacturer in any one tier “will be the amount of the remaining revenue need that the manufacturer’s tier is responsible for,” divided by the number of manufacturers in that tier, it said. But the registration fee for manufacturers in any tier won’t exceed $35,000, it said.

DEQ estimates it will need $415,000 in revenue to run the program for the 2012 fiscal year beginning July 1, the notice said. Program costs are estimated to rise to $435,000 in the 2013 and 2014 fiscal years and to $465,000 for 2015 and the subsequent fiscal years, it said. DEQ is confident the new structure “would help ensure that registration fees generate sufficient revenue to cover DEQ’s costs for administering the Oregon E-Cycles Program,” the notice said. DEQ representatives didn’t immediately comment on how much E-Cycles would fall short of its revenue targets if the proposed new fee structure were to not take effect.

The proposed changes were drawn up in recent months by a DEQ advisory committee comprised of representatives of all E-Cycles stakeholders, including manufacturers, the notice said. The advisory committee weighed several alternatives for bringing program revenue in line with costs, including imposing surcharges on the largest manufacturers or simply hiking the registration fees in the existing tier structure, it said. But in the end, the committee deemed that those alternatives would not “consistently produce the necessary revenue” and wouldn’t be the most equitable system, it said.

CEA is not pleased with the proposed registration fee hike in Oregon, said Walter Alcorn, vice president-environmental affairs and industry sustainability. CEA regards the hike as “a symptom of the inefficient patchwork of more than two dozen state laws with electronics recycling mandates,” Alcorn said. “There is a long-term danger that state-specific programs will be tempted to build state-specific bureaucratic empires for this national issue. CEA supports a national approach and this is reflected in our eCycling Leadership Initiative and goal to arrange for recycling nationally at least a billion pounds annually by 2016 -- our Billion Pound Challenge.”