Belfast Telegraph

Cutting RHI payments was essential to stop money 'haemorrhaging' for years, court hears

By Alan Erwin

Cutting payments in Northern Ireland's botched Renewable Heat Incentive scheme was essential to stop public money "haemorrhaging" for at least a decade, the High Court heard on Monday.

Counsel for a Stormont Department argued that reduced tariffs were introduced to remedy a "catastrophic error" in the green energy initiative.

He also insisted the scheme was never meant to subsidise poultry farming and mushroom growing industries.

More than 500 members of the Renewable Heat Association NI Ltd are challenging the decision to reduce payments assured under the original 2012 regulations.

They claim it was an unlawful step taken by the Department for the Economy.

The scheme was set up to encourage businesses and other non-domestic users to move to renewable heating systems.

But with operators legitimately able to earn more cash the more fuel they burned, the cost to the public purse has been projected at up to £490 million - a figure disputed by the Association.

According to its lawyers the overspend could end up being as low as £60m.

The debacle led to the collapse of Stormont's power-sharing administration, and the establishment of a public inquiry chaired by retired judge Sir Patrick Coghlin.

Earlier this year former Economy Minister Simon Hamilton set out revised 2017 RHI Regulations as part of cost-cutting proposals.

Lawyers for the Association contend this was an illegal step against boiler owners with cast-iron 20-year contracts.

They allege that the whole scheme was let down by incompetence, hopeless oversight and failed opportunities to impose cost controls.

Responding for the Department on day three of the hearing in Belfast, Tony McGleenan QC said the case was not finding fault.

He accepted criticisms levelled by the Association's legal team, and told the court there had been "a fundamental, catastrophic error" in how the scheme's design.

Central to his case, however, was the public interest in introducing new tariffs.

"There have been failures in the cost control and there have been failures in adhering to the underlying principles of the scheme," Mr McGleenan said.

"Obviously mistakes have been made, but it would be improper for the Department, the Assembly and the Executive to allow those mistakes to continue and have repercussive financial implications for another decade or more."

The barrister agreed with submissions that cost control problems should have been spotted and addressed earlier than 2015.

But he claimed arguments advanced by the Association's senior counsel, Gerald Simpson QC, actually strengthened the case for amending the regulations.

"What Mr Simpson has exposed is the imperative need to introduce cost control measures, stop the haemorrhaging of public money and ensure that the scheme operates in the manner which the European Commission gave approval for in the first instance," he told the court.

Mr McGleenan also identified issues of fairness and public interest.

"The Department's case is that the imperative to take action and protect public funds required making these regulations in the public interest," he said.

"From its standpoint the Department, the Executive and the Assembly decided the balance of fairness lay in amending the scheme in the manner that brought it back to the original intention of those who created it."

Instead of attributing blame, he told Mr Justice Colton it was about about deciding if there had been legal power to introduce the 2017 regulations, and any breach to legitimate expectations.

The financial plight facing boiler owners who borrowed heavily to invest in new heating systems has been set out during the hearing.

According to Mr McGleenan, however, the scheme's sole aim was never about subsidising poultry and mushroom businesses.

"That was not part of the design concept," he said.

Earlier, Mr Simpson contended that a "grandfathering" clause in documents sent to Brussells for state aid approval, made clear that boiler owners on the 2012 regulations would be exempt from any changes.

"It's quite clear that the unfairness here is very substantial, and very significant financial commitments were entered into based on what was a crystal clear representation internally within the Department, publicly in consultation and at Brussells," he said.

"The tariff rates would be grandfathered and that provided, using the Department's and Brussells' own words, certainty for a period of 20 years."

The barrister added that a letter to banks in 2013 from the then Enterprise Minister, Arlene Foster, urging them to lend to businesses using the biomass boilers, backed his case.

He questioned who would rely on future government promises if the guaranteed tariffs can be abandoned.

"It's difficult to envisage any situation in which any subsequent scheme is attractive to participants who could have the rug pulled from underneath their feet," Mr Simpson said.

"The appropriate relief is for Your Lordship to declare that the 2017 regulations are outside the power of the Department to make, and therefore are unlawful."

The hearing resumes on Wednesday.

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