RHI: Ofgem's 'regret' at failure to flag up risks of scheme
The energy regulator tasked with running the Renewable Heat Incentive behaved "very poorly" by failing to flag up the risks.
Dermot Nolan, the head of Ofgem, told the RHI inquiry yesterday of how no risk assessment was carried out for the Northern Ireland scheme.
Ofgem also failed to put the Department for Enterprise (Deti) on its guard when they encountered clear abuse of the scheme in Great Britain.
This included internal emails from a senior Ofgem official, Jacqueline Balian, who was told farmers in England were selling off their sheep to "rake in" RHI money. Panel member Dame Una O'Brien called the revelation "unbelievable".
"Here we are in the last week of the inquiry and you can still be shocked by how blunt these emails are," she said.
Mr Nolan said he "deeply regretted" the evidence coming forward. While unaware if warning Deti would have helped, he said: "I accept it's very poor behaviour."
On the lack of a risk assessment before the Northern Ireland RHI scheme was launched in November 2012, Mr Nolan said they could only work within their budget.
Inquiry chair Sir Patrick Coghlin added Deti should have known the consequences of failing to provide proper funding.
Panel member Dr Keith Mac-Lean said trying to save money this way was a "false economy".
That summer, Ofgem officials had circulated emails warning of how the RHI scheme could be abused by burning excessive fuel and that cost controls would be needed.
Mr Nolan said the warning should have been officially passed on to Deti, but said Stormont officials had been given a sense of the risk. The problem, he said, was that "they were determined to go ahead come what may".
Sir Patrick agreed, saying Deti officials were focused on delivery rather than cost controls.
Mr Nolan accepted that Ofgem and Deti failed to work properly together to stop claimants exploiting loopholes.
Sir Patrick said that although the rules were clear that claimants should not burn heat just to make money, he didn't see any evidence that Ofgem was monitoring their behaviour.
The abuse that followed included 'gaming', where applicants would install multiple smaller 99kw boilers instead of one larger and more efficient boiler.
Sir Patrick said Ofgem should have seen these "clearly obvious examples".
A further example was an article in the national publication Farmers Weekly, which detailed how a poultry farmer in England with 11 boilers could earn nearly £12m in 20 years.
Ofgem's Jacqueline Balian warned colleagues it would be wrong to proceed this way. This wasn't shared with Deti, despite the Northern Ireland model being based on the GB scheme.
At this point there were fewer than 30 RHI claimants in Northern Ireland, a figure that would later rocket to over 2,000.
Inquiry counsel Joseph Aiken said this was a "seminal" moment when Ofgem should have acted, which Mr Nolan accepted.
In Mr Nolan's previous evidence session, the panel heard Ms Balian had also been told a Scottish farmer sold his entire herd of cows to fill his sheds with biomass boilers.
In December 2014, Ofgem was told about a poultry farm in Shropshire that became an "energy centre" by setting up eight separate biomass boilers in eight sheds.
Officials for the Department for Energy and Climate Change (Decc) in Britain said they couldn't understand why this was cost-effective, given the extra effort needed to install multiple boilers. They failed to grasp just how large the RHI returns would be.
The department's head of market intelligence said: "If people feel morally justified in gaming or exploiting the taxpayer, that's something they'll have to live with."
The panel members said they couldn't understand how a senior civil servant in charge of public money could respond like this.