RHI Scandal: Officials highlighted cost of fuel to UFU before spike

UFU Poultry Committee Chairman Tom Forgrave met DETI officials in July 2015
UFU Poultry Committee Chairman Tom Forgrave met DETI officials in July 2015

Just before the spike in RHI applications, Stormont officials responsible for overseeing the scheme gave the Ulster Farmers Union a document which highlighted the cost of wood pellets.

The explicit nature of that document meant that if the farmers had looked at the RHI subsidy rates they would instantly have realised that the cost of fuel was lower than the subsidy – the heart of the ‘burn to earn’ problem.

Leaked internal Ulster Farmers’ Union (UFU) emails show the vigorous lobbying of some senior union figures to delay the introduction of cost controls on the scheme once they realised that the uncapped RHI payments were to be brought into line with the less lucrative GB scheme.

And documents obtained by the News Letter under an EU-wide environmental transparency law show that in July 2015 – four months before cost controls were put into what was an already over-budget scheme – civil servants met senior UFU figures and they discussed the looming cost controls.

The officials from the Department of Enterprise, Trade and Investment (DETI) then emailed the farming lobbyists a document which explicitly set out that the cost of fuel for wood pellet boilers was 4.1p/Kwh, while the cost of fuel for wood chip boilers was 3.8p/Kwh.

A cursory glance at the RHI tariffs which the department oversaw would have shown that the tariffs for 99Kwh boilers – the most lucrative and popular version – were at that stage far higher at 6.3p/Kwh.

The document which the officials gave to the UFU included estimated costs for electricity usage, boiler servicing and repairs.

Even with those, the cost per kWh of heat was just 4.8p/kWh (pellets) and 4.5p/kWh for wood chip – well below RHI rates. The document then included an estimate for the cost of “capital and interest repayment, depreciation and additional labour”, which it said could be approximately an additional 2p to 3p/kWh.

The document was drawn up by the College of Agriculture, Food and Rural Enterprise (CAFRE) and is dated July 2015. It is not clear whether the three-page document was drawn up specifically for the UFU meeting.

Stormont’s Department for the Economy, which replaced DETI last year, said that it did not have a formal minute of the meeting, but released an “informal” hand-written note in response to a News Letter request under the Environmental Information Regulations.

The note begins by saying “budget – over spent” and then says “state aid 12%”, perhaps a reference to a fear that the RHI scheme was so wildly generous that it may be in breach of EU State Aid rules.

The note then shows that the participants discussed that the change was coming in October (ultimately it was delayed to November 17, allegedly because of a DUP Spad) – even though that was not publicly announced until September. It also refers to tiering, showing discussing of the form of cost controls to be introduced.

Then, highly significantly, the meeting discussed poultry farmers’ use of RHI. It is now known that some of the biggest drains on public funds by RHI claimants are from poultry farmers because they have very large, but legitimate, heat requirements, which under the RHI scheme were uncapped.

The Audit Office last year said that in an “extreme case” such as with poultry farmers where a boiler was used 24 hours a day “very large profits could be realised, even though the use of the biomass boiler would still be in line with the spirit of the scheme”.

Auditors calculated that in such a scenario there could be an 82% annual return on investment, with an overall profit over 20 years of almost three quarter of a million pounds.

The hand-written note referred to “poultry 70% through to date”, seemingly an indication that 30% of poultry farmers had yet to convert to RHI boilers. And the note then refers to the 1,314-hour cap in the GB scheme, saying that “1,314 hrs too low for poultry (Tom)”. The Tom referred to is Tom Forgrave, the vice chairman of the UFU Poultry Committee at the time and the chairman of the Moy Park Growers Committee (Ballymena).

Separately leaked emails show that he emailed three DETI officials on 8 July 2015 asking them to “give consideration to not rushing through any changes. The proposed date of 1st Oct 15 does not give the poultry industry in NI time to adapt to a new tariff.”

He went on to say that “the poultry industry has a particularly large heat requirement and the NIRHI has proven to be very effective at encouraging farmers to be more environmentally friendly...”

He said that “many farmers, myself included” were in the planning process “to build new poultry sheds for Moy Park”.

He said that cash flow projections “have been presented to banks to prove the ability to repay loans of between £350k and £1m over a 10 yr period. These cash flow projections were submitted based on including an NIRHI of 6.3p/kw (pre-April 15) alongside the income from the poultry”.

He said that if the cost controls were introduced before the sheds were passed by planners “it will put in jeopardy the viability of many of these expansion plans”.

He admitted that the two-tier payment structure in GB “is a proven model” but asked for “a period of grace to be put in place for those who are currently in the process of planning or building”.