RHI inquiry: Ofgem '˜reminded DETI about cost controls just before scheme imploded'

A senior figure in the GB energy regulator Ofgem has said that Stormont officials were repeatedly reminded about the issue of RHI cost controls, but were more interested in getting more people into the scheme.
Gareth Johns evidence to the inquiry casts fresh light on the situation as the RHI scheme ran out of controlGareth Johns evidence to the inquiry casts fresh light on the situation as the RHI scheme ran out of control
Gareth Johns evidence to the inquiry casts fresh light on the situation as the RHI scheme ran out of control

Ofgem ran the scheme for Arlene Foster’s Department of Enterprise, Trade and Investment (DETI) and it has already emerged at the public inquiry into the cash for ash scandal that Ofgem delivered a series of warnings to Stormont officials before the scheme was even launched in 2012.

Yesterday Gareth John, who was Ofgem’s associate director for the non-domestic Renewable Heat Incentive from 2014, said that he had met DETI officials in Belfast in April 2014 and had discussed “the implementation of cost controls”.

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It was the absence of cost controls which meant that as the scheme ran out of control in spring, summer and autum of 2015 there was no legal mechanism to protect taxpayers’ money.

However, in written evidence to the RHI inquiry, Mr John said he recalled that “the focus of DETI’s concern, as expressed at that meeting, was in relation to low uptake and how they could promote the scheme to encourage uptake”.

He said that in October of that year DETI informed him that they were only pressing ahead with expanding the RHI scheme to domestic properties, which meant that cost controls were not being implemented.

However, he said that there was further discussion with officials about cost controls at that point, particularly the complex degression system already running in GB, and whether Ofgem could implement that for the Northern Ireland scheme.

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Although DETI accepts that in 2011 and 2012 it was warned by Ofgem of the need for cost controls, officials who were not present at that point but came to run the scheme after a change of staff have disputed whether they were told of the issue in 2014.

When pressed on the issue yesterday, Mr John conceded that unlike earlier Ofgem warnings which were explicit about the problems of not having cost controls, in his raising of the issue he was making them aware of the issue of degression rather than telling them that they should implement it.

He said: “My recollection is that they confirmed they were aware of it and would consider it as appropriate in their plans ... they were seeking to follow and mirror DECC’s [GB] regulations where appropriate.”

Mr John accepted that the issue was not covered in the minutes of the meetings but insisted that he had a clear memory of it being raised.

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Mr John’s written evidence, which runs to more than 300 pages, also reveals more of the confused picture within DETI as in spring 2015 it began to realise that the scheme had run out of control.

In May 2015 – just a month into the financial year – DETI’s Stuart Wightman emailed an Ofgem manager to say that “due to the unprecedented increase in RHI applications over recent months it has become clear that we are currently overspent on our proposed budget this year”.

He said that DETI was seeking clarity on its budget but until that came “DETI requests that Ofgem queues all new applications for a period pending budget confirmation”.

Such a move was impossible under the law which DETI itself had got the Assembly to pass to set up the scheme and which provided no emergency brake or cost controls if the budget began to be threatened.

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Ofgem checked the legal position by asking its legal department to look at DETI’s regulations and confirmed that it could not stop accrediting applications.

Subsequently, DETI “confirmed by reply that we should ignore the previous request and operate as normal”.

Cost controls were not implemented for another six and a half months.