Proposed cuts to RHI rates would see underspend

A year and a half after emergency legislation was rushed through the Assembly to retrospectively slash RHI tariffs which were meant to be immutable, the Department for the Economy yesterday finally set out its long-term suggestions for how the scheme could work.

A consultation document published by the department sets out eight options for how the scheme could operate – everything from going back to the uncapped lucrative scheme which ran out of control in 2015 to ending the scheme immediately with claimants being given a lump sum to buy out their rights under the rest of the 20-year scheme.

As well as that suggestion of a compulsory buy-out, officials are considering a voluntary buy-out option where “in return for surrendering their right to ongoing RHI payments, participants would be provided with compensation”.

All of the proposed changes relate to small and medium biomass boilers which make up 95% of claimants.

Although there are eight options, only two of them appear to have the potential to be accepted by the department because they would – under the department’s calculations – provide a rate of return of less than 22%, within the parameters of what the EU agreed would not constitute unlawful state aid.

In court proceedings taken by boiler owners unhappy at the cut to their subsidies, the department argued that the rate of return was the crucial criteria for setting the tariff.

Ominously for boiler owners, the department now says that the current reduced tariffs are still providing a typical rate of return of 50%.

If that means the department chooses either of the two options which would address that issue, it would mean a huge cut to claimants’ subsidies which would lead to Stormont underspending on the money which Treasury has offered it for renewable heat.

The document says that for every option other than returning to the uncapped old scheme there would be an underspend and “the department may have the option of using any remaining funding to promote the generation of renewable heat by some other method”.

The consultation document is heavily reliant on a report which the department commissioned from Ricardo Energy and Environment, a specialist consultancy.

Earlier this year the RHI Inquiry revealed that CEPA, the private consultants paid £100,000 by Stormont to advise on whether and how an RHI scheme should be set up, “negotiated” with the department about the findings of its report after civil servants made clear that a draft version with a recommendation not to proceed with an RHI was not what they wanted.

However, civil servants now running the RHI scheme yesterday insisted that there had been no such pressure put on Ricardo and that its findings were independent of government.