The High Court has comprehensively dismissed an attempt to reinstate the lucrative tariffs on the ‘cash for ash’ scheme in Northern Ireland.
The Renewable Heat Incentive (RHI) was meant to encourage green energy but due to a series of fundamental flaws it ended up as a perverse incentive to waste heat, with the subsidy higher than the cost of fuel for wood-fuelled boilers.
Amid a huge scandal which led to the collapse of devolution in January, the DUP – whose leader Arlene Foster had set up the scheme in 2012 while she was energy minister – rushed through the Northern Ireland Assembly emergency legislation which retrospectively slashed the amount which boiler owners could claim under the scheme.
Hundreds of the boiler owners came together and legally challenged that decision, arguing that it was unfair to them because they had in many cases taken on vast borrowings on the basis of what was a Government guarantee that the tariffs could not be changed for 20 years.
In law, they argued that they had a legitimate expectation of the payments continuing, that the legislation which retrospectively altered their payments was ultra vires and that there had been an interference with their human right to property.
Every ground of challenge rejected
In a lengthy judgment delivered over the course of more than 90 minutes in Belfast High Court this morning, Mr Justice Colton rejected every one of their grounds of challenge in the judicial review.
He said that although Stormont had interfered with their property rights, it been acting proportionately and its actions were justified by the wider public interest.
Mr Justice Colton held that Stormont’s decision did not represent an abuse of power and that “there is a compelling public interest justifying the interference with the rights of the affected persons”.
He said that a significant factor was that while the legislation was retrospective in changing tariffs which were meant to be guaranted, the changes would only later subsidies in the future and did not have a retroactive effect.
And, in a significant part of the judgement, Mr Justice Colton said he was satisfied that RHI payments are in some cases being used to subsidise businesses and are not just helping with their heating, something which then has implications for EU state aid rules because it could be argued that government intervention is skewing the market.
He went on to say: “In conducting the ultimate balancing test between the demands of the general interests of the public and the requirements of the protection of the individual’s fundamental rights I am particularly influenced by my conclusion that the tariffs are being used to subsidise and support businesses rather than bridging the gap between the cost of converting heating systems which is their real purpose.”
One claimant set to get 204% return on investment
Mr Justice Colton discussed the impact on ‘DA’ the farmer in whose name the challenge was taken.
The judge said: “To date he has already received payments amount to £226,589 against capital costs of £111,000 in his application form.
“On the basis of the methodology underpinning the scheme this has already resulted in a 204.1% payment as a percentage of capital spend. If he continues to receive payments on the original basis then he has estimated that he will receive a total of £2,549,276.
“Under the old tariff he would continue to receive an annual payment of £117,443 as opposed to an annual payment of £49,617 which on the respondent’s figures is well in excess of the annual payment for a 12% rate of return being £32,259.
“These figures demonstrate that the second applicant in this case, absent the 2017 Regulations, will receive payments way beyond what was anticipated for this scheme. They clearly constitute ‘overcompensation’. “The reduced figures payable are much closer to the original intention of the scheme.”
A £60m overspend or a £700m overspend?
There was dispute between Stormont’s Department for the Economy and the boiler owners (who took the case as the Renewable Heat Association of Northern Ireland) as to the level of the overspend on the RHI scheme if the original regulations were to stand.
The boiler owners argued that the overspend could be as low as £60 million, while the department increased its initial estimate of a £500 million overspend to £700 million, although in the hearings it did not explain how that larger figure had been calculated.
Mr Justice Colton said that his court was not best placed to resolve the true cost of the overspend. However, he lent towards the department’s figure, saying that although it represented the absolute worst case scenario it was reasonable for the department to approach the issue in that way.
In a statement Andrew Trimble, executive chair of the Renewable Heat Association NI, said that his members were “naturally disappointed” but would consider the next step.
He said that the judgment has “significant consequences for the wider renewables sector in Northern Ireland, Great Britain and the wider common law jurisdictions”.
Stormont’s Department for the Economy, which is responsible for the scheme, said it welcomed the ruling and confirmed that the retrospective regulations passed in January with the intention of giving the department a year in which to formulate a long-term solution would now be extended for a second year.
It added: “Since the introduction of the 2017 Regulations, the overall cost of the scheme has reduced and the return on investment for participants has been brought more into line with the original intention of the scheme.
“It is our intention, subject to the necessary legislative approval, to extend the 2017 regulations up to a further year, until 31 March 2019. This will be a temporary measure to provide us with the opportunity to develop and consult on the long term arrangements needed for the lifetime of the scheme to balance our obligation to the scheme beneficiaries with our wider responsibility to safeguard the public purse."
Full judgment summary
A summary of the 96-page judgement has been published here by the Lord Chief Justice’s office.