I knew subsidy was higher than cost of fuel, top RHI official admits

Fiona Hepper giving evidence to the RHI inquiry
Fiona Hepper giving evidence to the RHI inquiry

The senior official responsible for setting up the RHI scheme has admitted that she knew at the outset that the subsidy was higher than the cost of biomass fuel - one of the critical flaws which led to a perverse ‘burn to earn’ situation developing.

Fiona Hepper – whose seniority was such that she personally briefed the then minister, Arlene Foster, about the scheme as it was being set up and who was subsequently promoted by the civil service – is the first person involved in the creation of the scheme to state that they knew from before it launched that the tariff was higher than the cost of fuel.

However, she told the public inquiry into the scandal that she did not realise that it was a problem because she had a “narrative” in her head with she and her colleagues believing that they had expert advice from consultants who had explained that the tariff should cover other costs on top of fuel, such as paying for the boiler and ‘hassle costs’.

During exchanges at the close of a six-hour evidence session yesterday, Ms Hepper made clear that she was aware of the subsidy being higher than the cost of fuel.

She said: “I had a narrative in my head which was accepted around the team as to how you got from the cost of the fuel to the price of the tariff.”

When asked if she or her team ought to have spotted the critical flaws in the CEPA report, she said: “I don’t know. It looks very clear now when you see the figures written down, but at the time we had a rationale for how this was put together.

“We had the expert advice from consultants that tiering was not required and there was an element of challenge to that - we went back, we asked questions - and the expert advice was consistent. So I do believe that we scrutinised as best we could and when the experts stood by their advice I think that was when we said ‘Right, that’s right’.”

Inquiry chairman Sir Patrick Coghlin interjected to say: “But you didn’t need to be an expert to see this differential. All you had to be able to do was to see that the tariff was a higher figure than the price of biomass fuel and that appears three times separately in the CEPA report; it appears in the business case within three pages. You wouldn’t need to be an expert in economics - or indeed in energy - to see that if you have a tariff that is paying more than the fuel you are using to burn to achieve that tariff there’s a problem.”

Ms Hepper replied: “The point I was making was that our rationale for how that tariff was put together....in working that through what we did was we said ‘the price of the fuel is X, you take the efficiency of the boiler into account because you pay out on heat combustion; that takes you up to 5.2p and then you add in the other elements of the tariff’. That was our logic and our thinking at the time.”

Sir Patrick replied: “I don’t understand that. Are you saying that the tariff wasn’t higher than the fuel?”

Ms Hepper said: “No, no, no. I’m saying it was higher. But what I’m saying is that in our thinking about how that came to be we took the price of the fuel, we...”

Sir Patrick interjected again to say that “any common sense person would have seen that difference and if they didn’t appreciate the significance of it they would have asked because it’s so clear in a number of documents”.

Ms Hepper said: “It is clear now, I agree.”

Sir Patrick said: “It was clear then, too.”

Ms Hepper said: “But when we were thinking of it from a different angle we worked through a logic as to how that tariff came to be.”

Inquiry panel member Dame Una O’Brien then asked: “So you did notice at the time...it’s implied in what you’re saying that you did notice there was a difference between the cost of the fuel and the tariff.”

Ms Hepper said: “We would have seen what the cost of the fuel was and we would have seen the tariff...”

Dame Una said: “So you did notice?” Ms Hepper said: “We did notice. But then we had a logic as to how you got from the price of the fuel and the other elements that had to be worked through to cover the other elements of it.

“Now I appreciate that with the benefit of hindsight and everything that had happened it is maybe very obvious now but it wasn’t at the time. It wasn’t to the team. It wasn’t to the scrutiny process and that is where we are.”

Sir Patrick said: “It doesn’t really matter if you saw how you got to the tariff or not - you may be right; there may be different ways of looking at it - but once you got the tariff which was there in the table at 5.9 and you knew that the price of the biomass was less than that, I don’t follow any explanation or justification as to why it wasn’t seen as a significant matter.”