Civil service failure meant key RHI law was unlawful

Civil servants made a basic failure which meant that a law passed by MLAs was unlawful '“ but are now seeking to wash their hands of the situation after it cost a family business half a million pounds, the News Letter can reveal.

By The Newsroom
Saturday, 30th September 2017, 8:15 am
Updated Wednesday, 4th October 2017, 3:13 pm
From left to right: Liam McGuckian, Colin Newell and  Barney McGuckian at the Cloughmills site. Picture:  Arthur Allison/Pacemaker Press
From left to right: Liam McGuckian, Colin Newell and Barney McGuckian at the Cloughmills site. Picture: Arthur Allison/Pacemaker Press

In an interview with this newspaper, the three businessmen who have been left out of pocket set out an extraordinary tale of previously unknown incompetence by the Stormont department behind the RHI scandal, the Department for the Economy (DfE).

The men said that they now face a grossly unfair situation where the civil servants who failed to carry out a crucial step to ensure that the legislation was lawful have escaped censure while they are being punished.

The department declined to comment, citing the public inquiry into the RHI scheme and a legal action which the businessmen are now mounting against the department.

The three men – farming brothers Barney and Liam McGuckian, who also run an animal feeds business, and Colin Newell – now find their detailed plans left in tatters after they were told that there now is no lawful scheme into which they can be admitted.

The businessmen have also demanded that civil servants explain the role of Northern Ireland’s dominant poultry company in the decision.

A Stormont memo shows that Moy Park privately expressed concerns to civil servants about the proposal. Moy Park last night said it had not lobbied against the plant.

The men had in autumn 2014 begun planning to build a state of the art Combined Heat and Power (CHP) plant in Cloughmills which would have manufactured wood pellets for biomass boilers and also generated 2.3MW of electricity.

From left to right: Barney McGuckian, Colin Newell and Liam McGuckian at the Cloughmills site. Picture: Arthur Allison/Pacemaker Press

The installation, which would never have been on the ‘cash for ash’ RHI tariffs and would have been paid at a lower rate than similar plants in England, was actively encouraged by civil servants and promoted in government literature, which they said led them to invest £500,000 in designing the project, securing planning permission and getting it to a stage where it is ready to be built.

Having believed that they had been given preliminary accreditation – and having been told in a letter last December from a senior departmental official that they were “the operator of an accredited installation under the [RHI] scheme”, the department has now turned down their proposal.

The reason given for that refusal effectively relates to a failure by the department. In January of this year, under pressure to deal with the RHI scandal, the DUP voted through the Assembly retrospective cost controls for the scheme. That legislation, known as the 2017 regulations, went to the European Commission (EC) which has to approve such schemes which involve a form of state aid for companies.

After examining what had been sent to it, in February the EC alerted the department to the fact that it was now clear that it had never applied for state aid approval for the crucial 2015 RHI regulations, which belatedly introduced cost controls, effectively rendering them unlawful.

From left to right: Barney McGuckian, Colin Newell and Liam McGuckian at the Cloughmills site. Picture: Arthur Allison/Pacemaker Press

In a letter to the McGuckians’ at the end of August, Stormont’s Departmental Solicitor’s Office set out in detail how the department had failed to notify the EC of the 2015 regulations – but denied that the department had led them to have a “substantive legitimate expectation” that they would be part of the scheme.

The letter said that the new tariff for larger CHP plants “was introduced in November 2015” but that the regulations which made the changes “were not the subject of prior notification to the Commission”.

The letter suggests that this failure was only realised in January of this year when the department went to the Commission asking it to approve the retrospective cost controls which the DUP rushed through the Assembly in response to the public outcry at the start of this year.

The letter said that the Commission then advised the department in February 2017 that because it had not been notified of the CHP aspect of the 2015 regulations that it would have to be formally considered by the commission and asked the department for further information.

According to the letter, the commission said that this would take time and that if it was to first work on the 2015 regulations then it would not have time to approve the 2017 regulations prior to when they were due to come into force, in April.

Crucially, the letter then said: “The department therefore asked the commission to proceed with its consideration of the notification in respect of the 2017 regulations only.”

The department gave the commission an assurance that it would not approve any CHP plants prior to March 2018.

The letter said that the department “does not consider that it is in the public interest to proceed without notification and to assume the risk that approval is not subsequently granted by the commission”.

Liam McGuckian said that they had been working with the department and with Ofgem, which administers the RHI scheme, over a long period and had received a letter from the then Economy Minister Simon Hamilton last September which said that “subject to satisfying all Ofgem’s eligibility criteria will be entitled to the CHP tariff” and went on to refer to “the current RHI CHP tariff of 3.5 pence per KwH”.

He said that they had a “reasonable expectation” that they would be approved by the department because they met the criteria which had been relayed to them and that on that basis they had engaged an international energy expert, Dr John O’Shea, to advise them.

He added: “We were led up the garden path by DETI and DfE to something that they were unable to fulfil.”

Mr Newell said that Mr Hamilton’s letter had given them “a level of comfort”. Liam McGuckian said that in the letter “he was more or less confirming that there was CHP available – but there wasn’t; it simply wasn’t there”.

Mr Newell said that in the rest of the UK CHP plants were being paid 4.2p/kWh but they were only going to receive 3.5p/kWh, but that they had never complained about this because it was still financially worthwhile.

“This wasn’t like the other RHI scheme,” he said.

The McGuckians said that they were so dismayed at their experience of officialdom and politicians that they would never again get involved with any Stormont scheme.

The News Letter asked the department who was responsible for the failure to notify the EC in 2015, who took the decision this year to prioritise the 2017 regulations with the EC, whether it accepted that it had any duty of care to people to whom it promoted this scheme and who now stand to lose out because of its failures and whether it had at any point passed information about the McGuckian plant to Moy Park or whether Moy Park’s view played any role in its decision to turn down the application.

In a one-sentence statement the department said: “With the public inquiry and other legal proceedings underway, the department is unable to comment.”

Document shows Moy Park privately expressed ‘concern’

A Stormont memo obtained under the Freedom of Information Act and passed to the News Letter by the McGuckians shows that at a meeting between Department of Finance (DoF) officials and Moy Park on January 9 this year the McGuckian plant was discussed.

A note of the conversation, taken by the DoF’s head of supply division, Emer Morelli, and circulated to senior figures including David Sterling, who is now head of the civil service, set out three “key issues” raised by Moy Park. The first of those related to the McGuckians’ plant. The note said: “The Moy Park team expressed a concern that one of the large combined heat and power plants with preliminary accreditation may not met [sic] the eligibility criteria due [sic] planning permission being granted 25 days after the scheme closed.

Ms Morelli said: “I would be grateful if DfE could follow up on this point and, subject to DfE’s consideration of Moy Park’s concerns, bring this to C&AG’s [the Comptroller and Auditor General’s] attention as appropriate.”

Barney McGuckian said: “We have never contacted Moy Park at any stage of the development of this plant. However...for some reason Moy Park had concerns over our wood pelleting project. I am totally amazed, disgusted and shocked as to why Moy Park should be discussing my affairs with a government department and why a government department have discussed this with Moy Park at any stage.

“Why is Moy Park talking to DfE about our project which had absolutely nothing to do with Moy Park?”

In a statement, Moy Park said: “The purpose of the meeting with the Department of Finance was to offer insight and suggestions to secure the NI RHI scheme within budget, based on Moy Park’s experience of benchmarked energy use in poultry farming in GB and NI.

“At the meeting, the Combined Heat and Power plant was discussed in the context of the Auditor General’s report, in an effort to understand how the then projected overspend figures were arrived at. We did not lobby against its development.”

Official letter said they were on scheme

Despite now turning them down, the department appears to have viewed the McGuckians as being in the same category as those already on the RHI scheme because on December 15 last year officials wrote to them – along with all the RHI claimants – to warn that they could be named as claimants.

The letter, from Lucy Marten. head of renewable heat at the Department for the Economy, was sent on the day that Jonathan Bell’s explosive interview with Stephen Nolan was broadcast. The letter began: “I am writing to you as you are / your business is the operator of an accredited installation under the above scheme.”

However, the McGuckians said that they are not RHI claimants and their only involvement with the scheme was the application for the CHP plant.

Change cuts cost of RHI

The scheme would have cost the department between £60m and £75m over 20 years. There is a second planned CHP plant, whose owner remains unknown.

It has been projected that the department would have faced a total bill of £160m for CHP plants.

Without CHP plants, the RHI overspend will fall overnight from £490m to £330m. RHI boiler owners believe that there are other areas in which the overspend is much less than the department has claimed.