Belfast Telegraph

RHI overspend could hit £700m, High Court hears

By Alan Erwin

Overspend in Northern Ireland's botched Renewable Heat Incentive scheme could have reached £700m, the High Court heard on Wednesday.

Counsel for the Stormont Department which ran the flawed initiative argued that without new cost controls the bill would potentially have outstripped earlier £490m estimates.

A judge was also told 40% of claimants from the original scheme have now been paid more than what they invested.

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

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

The green energy initiative 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 had 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.

On day four of the hearing Tony McGleenan QC, for the Department, contested the Association's assessment of the potential bill to taxpayers.

Without the introduction of cost controls, the court heard, the bill for the scheme could has risen to £1.4bn in worst-case estimates.

With Treasury footing £700m of that, the remaining £700m would have come out of Northern Ireland's block grant, according to counsel.

He told Mr Justice Colton that the failure to include cost controls in the original scheme had been recognised by the Department as "a critical error".

But he rejected claims that boiler operators were now being treated unfairly.

Instead, the barrister argued, some of them could be overcompensated due to flaws in how boiler sizes and tariff rates were calculated.

"That resulted in the 2012 recipients receiving substantial funds towards their capital costs, if not the entirety of capital costs, and a 12% return within the first two to three years of the scheme operating." he said.

Emphasising the project was to run for 20 years, he continued: "That has happened much earlier in the scheme than was intended.

"Reimbursement happened in the early years because of the manner in which this tariff was set up in the first instance.

"That goes to the underlying question of fairness and public interest which is at the root of each of the legal questions the court will have to grapple with." 

According to the Department's case, reduced payments were essential to stop public money "haemorrhaging" for at least a decade.

It was set out during the hearing how one poultry farmer who spent £111,000 on installing four boilers has received a subsidy of £226,000 to date.

With that business said to be receiving more than £100,000 annually in subsidy before cost controls were introduced, it could have earned £2.5m over the lifetime of the scheme.

Mr McGleenan contended that a "significant proportion" of those who signed up to the 2012 regulations have also received more than they put in.

"The Department's analysis is that it's writ large across the scheme," he said.

"Forty percent of the 2012 participants have received more than 100% of capital investments."

The hearing continues.

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