RHI scandal: Foster’s officials wanted cost controls in 2013, document shows

Arlene Foster, seen here yesterday in Belfast, was alerted to the lack of RHI cost controls in 2013.

Photo by Kelvin Boyes / Press Eye.
Arlene Foster, seen here yesterday in Belfast, was alerted to the lack of RHI cost controls in 2013. Photo by Kelvin Boyes / Press Eye.

Arlene Foster’s officials formally suggested the introduction of cost controls on the disastrous RHI scheme just months after it was set up - and the minister was aware of their proposal, the News Letter can reveal.

The revelation puts intense scrutiny on Mrs Foster’s repeated claim that she never went against civil service advice about what we now know was the critical failure of the scheme, leading to the signing of RHI contracts which will take almost £500 million out of Stormont’s budget if they are honoured.

Documentation shows that Mrs Foster’s officials in the Department of Enterprise, Trade and Investment (DETI) made the proposal in July 2013 – just months after the non-domestic scheme had been launched in November 2012 and prior to a whistleblower contacting Mrs Foster personally in late 2013 to warn her of what would turn out to be the disastrous shortcoming of the scheme.

The July 2013 document shows that even at that point the department was acutely aware of the possibility that the costs of the RHI scheme could balloon out of control and they proposed measures to prevent such a situation developing.

Last month Mrs Foster referred to the situation in 2013, telling the Assembly: “I did not receive any indication that cost control of the Non Domestic scheme was an urgent priority at that time.”

DUP: civil servants did not follow up on RHI cost controls

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The proposals are contained within a 45-page consultation document on phase 2 of the Northern Ireland Renewable Heat Incentive. That document was largely focused on setting up a domestic RHI scheme (which had cost controls and has been largely without problem), but also made several changes to the fledgling non-domestic scheme.

A public consultation of this nature would have to have been approved by the minister.

The document itself contained a personal foreword from Mrs Foster.

The foreword itself again links Mrs Foster personally to the details of the budget for the RHI scheme. She wrote: “I am conscious that whilst this is a sector that requires significant support, budget levels are finite and cannot be breached.”

However, inexplicably the consultation proposal that cost controls be introduced was abandoned. A DUP election leaflet currently being circulated states as “fact” that “at all times Arlene followed Civil Service advice, including that there was no need for cost controls called ‘tiering’.”

The consultation document also raises questions about evidence which one of Stormont’s most senior civil servants gave to the Assembly a fortnight ago.

Andrew McCormick, permanent secretary at the Department for the Economy, (into which DETI was amalgamated last year), told an Assembly committee that civil servants had never made a recommendation to Arlene Foster that cost controls should be introduced.

Two weeks ago Dr McCormick - the permanent secretary in the Department for the Economy - told the committee: “There was an expectation among some of those who were leaving the roles that cost-control action would be taken, given that it featured in the consultation in 2013.

“The point stands that it was not given priority. It was not highlighted and, certainly, at no point was advice given to the Minister — it was Minister Foster throughout that period — that we really needed to get cost controls in.”

It may be that Dr McCormick’s comments - which relate to a period prior to his arrival at the department - refer to specific and formal advice to the minister in the form of a dedicated submission on cost controls.

The News Letter asked the Department for the Economy how Dr McCormick’s evidence to the PAC could be reconciled with what is contained within the consultation.

A departmental spokeswoman said: “The 2013 consultation document sought views on possible proposals for cost control. However, neither before the consultation nor afterwards was any recommendation put to the minister to introduce cost controls as outlined in the consultation document.”

The 2013 consultation document led to the existing non-domestic RHI regulations being amended in several areas - each of which was far less important than the need for cost controls. That shows that it was possible to amend the scheme at that point if the issue had been prioritised.

The document dedicated one entire section to cost controls, saying that “a method of cost control is to be introduced that will ensure budgets are not overspent and will hopefully remove the need for emergency reviews”.

It went on to say: “Given the introduction of tariffs for larger systems and the need to maintain confidence and consistency in the scheme DETI is proposing to introduce cost control measures that would ensure budgetary levels wouldn’t be breached and to remove the need for emergency reviews or reductions in tariffs at short notice.

“DECC [DETI’s Whitehall counterpart] are in the process of introducing a system of tariff degression in GB whereby tariffs will automatically reduce when deployment levels reach set trigger points.”

The document then went on to set out in considerable detail - which shows that officials within the department had engaged in considerable work on the subject - just how the various cost controls would operate.

It said: “DETI expect to introduce similar measures in the future but in the interim it is proposed that a simpler system is put in place.

“The RHI is different in nature to the NIRO [another Northern Ireland-specific renewables subsidy system] in that there is a finite budget for new installations and these budget limits cannot be breached.

“Whilst tariffs are designed to ensure that the budget is adhered to there is always a risk that renewable heat technologies might be deployed in greater numbers than what is forecast and payments exceed expectations.

“The risk of this increases as tariffs become available for larger technologies such as biomass over 1MW, biomass/bioliquids CHP and deep geothermal.

“Therefore DETI must retain the right to suspend the scheme if budget limits could be breached; however this will only happen at a last resort and, at this stage, is not envisioned to happen.”

Detailing further information on how the cost controls would operate, the consultaiton document went on: “In order to ensure confidence in the scheme continues DETI proposes to introduce a number of trigger points that will provide forewarning to potential applicants that the committed budget is nearing the set limit. The trigger points are set out in table below.”

There then follows a detailed table which shows what would happen as more and more of the avilable budget was claimed. It said that the first ‘trigger point’ would be when 50% of the annual budget is committed. At that point, DETI proposed to make a public notification “so all applicants are aware of budget levels and potential DETI actions”.

That would be followed by four further trigger points, the final of which would take effect when 90% of the annual budget was committed.

At that point, it proposed that “DETI will make a public notification of the committed budget and will begin procedures to close the domestic RHI for the financial year. The scheme will remain open for 4 weeks, with only schemes receiving full accreditation within this timescale being supported.”

The News Letter asked the DUP why Mrs Foster had not introduced cost controls after the consultation ended, whether she played any role in the decision not to introduce cost controls at that juncture and, if so, what possible reason could she have had for such a decision.

In response, a DUP spokesman said: “The questions raised are exactly the kind of matters that the public inquiry has been established to consider. It is the appropriate forum to address these questions and should given be the space to consider the matters such as those that you have raised.”

* After this article was published, the DUP released another statement which said: “The issue of the minister’s 2013 consultation which included consideration of cost controls is not a new story and has been covered extensively in the press over the last two months. As confirmed by the department in the article on foot of the consultation outcome no submission was brought to the minister to introduce cost controls.”

DUP: civil servants did not follow up on RHI cost controls

Sam McBride: RHI document prompts a perplexing question