Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I welcome back to the Committee Alan Smith and Catriona Harkin. I hand over to you, colleagues.

Ms Catriona Harkin (Department for the Economy): Good morning, everyone. Thanks so much for having us. I have a brief opening statement —

The Chairperson (Mr Brett): Sure, no problem at all.

Ms Harkin: — as I was advised that brevity is key.

The purpose of the RHI (Closure of Non-Domestic Scheme) Bill is essentially to give the Department the legal tools that we need to formally close the renewable heat incentive (RHI) scheme, following the Executive's decision earlier this year to proceed with closure. The Bill lets us convert all existing accreditations into closure; move participants on to annual payments for the rest of their original 20-year term; and step in where an installation no longer meets the eligibility requirements.

The Bill itself does not deal with tariffs or payment levels; that is all picked up in the draft regulations. We shared the draft regulations with the Committee, so members have had sight of the detailed framework that we intend to implement. That was done to, hopefully, support transparency and give the Committee time and space to consider the regulations fully. The regulations set out how closure will work. They bring the 2012 scheme to an end and replace quarterly metered payments with annual payments based on deemed level of use, using the 2017-19 period as the reference point. They also set out the ongoing obligations for participants; the inspection and compliance arrangements; and what happens in cases of non-compliance.

You are aware that we made several adjustments after the public consultation. We got 216 responses, in which people raised important points. As a result, we have expanded the usage declaration model to four bands; introduced a right of review where that reference period does not fairly reflect someone's usage; and confirmed that transfers and relocations of installations will remain possible, with appropriate safeguards.

On the operational side, Ofgem has agreed to keep administering quarterly payments until the end of June. The extension is really about reducing the likelihood of any gap between the last payment under the current system and the first payment under the new closure arrangements, based on the current legislative timeline. It also gives us more time to build out additional system functionality before go-live, so that we will be in a better position operationally when the Department takes over.

Hopefully, taken together, the Bill and the regulations give us a fair and clear way to close the scheme. I hope that I have given the Committee a useful overview. We are, of course, happy to take any questions.

The Chairperson (Mr Brett): Catriona and Alan, on behalf of the Committee, thank you for your work on this. I think that all members are pleased to see that we have got to this stage. I have a couple of questions.

Some of the evidence that we received from stakeholders related to their metering collection. Will there be flexibility if they wish to provide more reliable readings?

Ms Harkin: We have been considering that, particularly since our last visit to the Committee. At our last appearance, we went into the difficulties of bringing that flexibility in metering into the regulations, because there are issues such as differences in the calibration of meters. On the wider evidence base that we expect to use in our compliance inspections functions, we will take a common-sense approach in the guidance. If the metering evidence is available — if participants are able to supply that evidence — we will consider it in the round, with all the other evidence, as we go through the inspection and compliance process. I do not think that that will come in formally in the regulations.

The Chairperson (Mr Brett): That is fine. For clarity: the Executive have approved the draft regulations; is that correct?

Ms Harkin: They approved the closure proposals following —. The actual draft regulations document did not go to the Executive; it was the proposals that informed the regulations that went to the Executive.

The Chairperson (Mr Brett): OK, so the regulations themselves have not gone to the Executive, and there is no intention that they will.

Ms Harkin: I do not think so.

The Chairperson (Mr Brett): OK, no problem. Treasury approval is already in place.

Ms Harkin: Yes.

The Chairperson (Mr Brett): Not to think about your next project, but, once this is done, how do we ensure that, for the next seven or eight years, the underutilised annually managed expenditure (AME) funding is —?

Ms Harkin: As we move towards resolving — that is the word that I will use — RHI, the future use of AME has drawn more focus in the Department. The specifics of how we will utilise AME are still being worked out in other areas of the group. We will be in a position to share more information about our thinking on that shortly.

The Chairperson (Mr Brett): OK. My final one is about the participants who took the court action on the, in their view, historical underpayment. The court judgement was that there was a disproportionately low payment rate between 2017 and 2019. We are not utilising the full AME, because we are saying that the business case has been approved by Treasury and is value for money.

Ms Harkin: Yes.

The Chairperson (Mr Brett): Is that the answer if you are asked, "Why have you not looked back at that period, for which the courts made clear that the payments have been underutilised?"?

Ms Harkin: I think so, Phillip; yes.

The Chairperson (Mr Brett): OK. That is perfect.

Mr Buckley: One of the key issues that the Committee has been trying to deal with is the overriding trust. First, from a trust perspective for Committee members and, indeed, the general public: there are adequate safeguards in place to ensure that there is no abuse of the scheme.

Ms Harkin: Uh-huh.

Mr Buckley: You have talked about that, in some detail, as regards metering, inspections etc, where a degree of flexibility is built in to ensure that it is foolproof, which is welcome. On the other side, we had genuine participants who still very much feel a lack of trust that perhaps —. I see it particularly when I look at clause 1(6). The Department says:

Will you talk us through that subsection of clause 1 and demonstrate how genuine participants can have faith that we will not see a repeat of the past, with litigation between participants and the Department because the Department alters the scheme in a way that, in participants' view, is counterproductive to the spirit of the scheme and their genuine participation?

Ms Harkin: Absolutely, Jonathan. It is a good point well made. There are two sides to those powers in the Bill as they stand. We need the powers to make the changes that we propose in these regulations. The last time that we were here, I spoke about subsections (6) and (7) of clause 1. Participants had brought it to our attention that they really wanted those discussed to make sure that everybody is clear on them before we reach closure. We do not intend — there is no plan in the Department — to use subsections (6) and (7) of clause 1 to go beyond what we are proposing .

What I said the last time — it still holds true — is based on the lessons learned from the public inquiry and the original development of the scheme. If something unexpected, unplanned and unforeseen happened in the future — I do not know what that would be — and we were left in a position where we did not have the powers in a primary Bill to be able to make any changes, that would cause significant difficulties. We have balanced that by making everything draft affirmative. Therefore, if something unexpected ever happened — I genuinely do not know what that would be: we do not know what we do not know — and there was a reason to come back and make a change, all of that would be done under the full scrutiny of the Committee and Assembly and in consultation with participants.

Mr Buckley: You have pretty much answered it. That safeguard needs to be in place to address the concerns that were presented to the Committee. It is draft affirmative, so if there were any need to use subsections (6) and (7) of clause 1 to alter the scheme, there would be a formal vote in the Assembly on that change.

Ms Harkin: Yes.

Mr Buckley: OK, that is fine. Thank you.

The Chairperson (Mr Brett): And in the Committee in the first instance.

Ms Harkin: Yes.

Mr Honeyford: I just want to tease it out. Users told us several times that they actually want to give more evidence. They feel that they can give surety that there is nothing untoward going on [Inaudible.]

You have said that you will take that evidence. Will you talk us through what that will look like for you?

Ms Harkin: On the operational side — we spoke about this last time, David — because of the Ofgem extension to the legislative timeline, we have slightly more time to build out the functionality, but the IT system will very much be about the annual declarations and issuing payments. When I talk about the wider evidence base, I see that as being more on the compliance and inspections front. If there is a routine inspection at a property, I would expect the inspector to look through the evidence provided.

The wider compliance and desk-based audits is where that evidence will really come into play. I do not have the detail on those exact processes yet; that will be in the guidance. I do not want to mislead by saying that we have worked out all the details of the exact operational back and forth between participants and the Department. Guidance documents are under development, and I will be more than happy to share those when we get them. We are trying for a really measured, common-sense approach to these things that does not overwhelm participants with, perhaps, unreachable evidence requirements, where we say, "Everybody needs to provide —. You have to hold your meter readings and calibrate —". We know that that will not happen. The meters are sensitive pieces of equipment, and a lot of them are 13 years old at this stage. At the same time, we have to protect the public purse, so it is a balance. I am more than happy to come back when we have our guidance.

Mr Honeyford: That will be useful. The extra band is really welcome. Those changes are needed, and it has to be flexible. I just wanted that reassurance. Users are saying, "We want to give you the evidence"; we should take that evidence when it is available.

Ms Harkin: Absolutely. Even that conversation speaks to the improving relationship between the Department and the participants. I do not feel that we are in the same conflict as we may have been in a number of years ago.

Mr Honeyford: Brilliant.

Ms McLaughlin: I have a small query, Catriona. The Department has said that it will monitor the impact of the closure on rural groups. Will that be done through the normal processes?

Ms Harkin: It will be done through the normal processes. It is very clear to everybody that, given the nature of the RHI scheme, its closure will have a disproportionate impact on rural communities. Going even wider than RHI, Sinéad: in our planning for the future use of AME, which Phillip mentioned, the needs of rural communities will have to be at the forefront. It will be done through normal monitoring and ongoing engagement with participant representatives.

Ms McLaughlin: OK. Will there be equality impact assessments and all that?

Ms Harkin: Yes.

Ms McLaughlin: OK. That is grand.

Ms D Armstrong: It is good to see you again. My question is a bit like that asked by Sinéad. Will you talk us through how the future review mechanism will be rolled out?

Ms Harkin: Are you talking about the —? Sorry, Diana.

Ms D Armstrong: Will you review the ongoing implementation and roll-out? What plans do you have to review that, should you need to halt it and make a change?

Ms Harkin: This may be very simplistic, Diana, but I envision that, in two or three years' time, the RHI scheme will have settled down into a very steady cycle of payments. Since day 1 of the RHI scheme, the Department has continually kept an eye on the fuel price differentials, and it will continue to do so. The tariffs as they sit are correct — they are the right tariffs. They bring parity to our participants, as opposed to those in Britain. Again, if something unexpected happened, we may wish to consider that, and I am sure that we would hear about it from participants. There will be normal, ongoing monitoring of the scheme. I hope that the proposals that we have brought forward will see out the RHI scheme softly, because it has been quite difficult for a lot of people.

Ms D Armstrong: OK. Thank you.

The Chairperson (Mr Brett): There are no other questions. Are members therefore content for the Committee to move to informal clause-by-clause consideration of the Bill?

The Chairperson (Mr Brett): Members will be asked to set out for the record their informal views on the clauses of the Bill and any amendments. No votes will be taken. Formal clause-by-clause consideration will follow next week, when votes may or may not be required. If that is clear, we will proceed.

Members may wish to follow the issues in the Bill in the evidence table on page 6 of their pack. Let us now deal with subsections (1) and (2) of clause 1, which are described as "scene setting". No commentary was received on them. Does the Department have anything to add?

Ms Harkin: No.

The Chairperson (Mr Brett): No problem. No evidence was received on those subsections of clause 1, and no amendments were proposed. Can members confirm that they understand those subsections of clause 1?

The Chairperson (Mr Brett): Will members indicate formally whether they wish to oppose or support the proposition that those subsections of clause 1 stand part of the Bill?

The Chairperson (Mr Brett): Let us deal now with subsections (3), (4), (5) and (12) of clause 1, which allow the Department to bring forward regulations to partially or completely close the non-domestic RHI scheme. The Department previously clarified that the provision in clause 1(5), which allows for the conferring of functions on the Department or other persons, will likely be used in respect of the inspection and compliance regime. Does the Department have anything to add?

Ms Harkin: No.

The Chairperson (Mr Brett): No problem. Can members confirm that they understand those subsections of clause 1?

The Chairperson (Mr Brett): Are members happy to indicate informally that they support the proposition that those subsections of clause 1 stand part of the Bill?

The Chairperson (Mr Brett): We will now deal with clause 1(6), which allows the Department to bring forward regulations to revoke the 2012 regulations in support of scheme closure and to allow for the use of historical data to calculate tariffs. The Ulster Farmers' Union (UFU) and the Renewable Heat Association Northern Ireland (RHANI) expressed concern at the wide-ranging nature of those powers. The Department has clarified that the powers were developed in response to the RHI inquiry findings and, in any event, would be subject to both Committee and Assembly approval. Does the Department have anything to add?

Ms Harkin: No.

The Chairperson (Mr Brett): Are members content that they understand that subsection of clause 1?

The Chairperson (Mr Brett): Are members content to indicate informally that we will oppose the proposition —? Are members content to indicate that we will support the proposition that that subsection of clause 1 stands part of the Bill?

The Chairperson (Mr Brett): We will now deal with clause 1(7),which allows the Department to bring regulations to allow for one-off, periodical or instalment payments and for payments to be calculated on the basis of deemed or notional generation of heat. UFU and RHANI wanted payments to be grandfathered. They also sought backdated payments for the period from 2019 to the present; controls to prevent changes to banding; an upfront indication of payment; an appeals process; and continued use of metering, where available, to support claims and to enable participants on the zero band to remain within the scheme.

The Department advised that the tariffs would not be altered except with the agreement of the Assembly; that an appeal process that allowed for the use of 2018 data would be in place; and that zero-band participants could remain within the scheme. The Department has also now responded on the issue of metering. Do colleagues have anything that they want to add?

Ms Harkin: No.

The Chairperson (Mr Brett): OK. Can members confirm that they understand that subsection of clause 1?

The Chairperson (Mr Brett): Are members content to indicate informally that we oppose the proposition —?

Some Members: Support.

The Chairperson (Mr Brett): I am testing whether people are listening. [Laughter.]

Are members content that we support the proposition that that subsection of clause 1 stands part of the Bill? Are members agreed?

The Chairperson (Mr Brett): We will now deal with subsections (8) and (13) of clause 1. Those are described as being technical in nature and drew no comments from stakeholders. The Department has nothing to add. Do members understand those parts of the Bill, and do we support the proposition informally?

The Chairperson (Mr Brett): Thank you. We will now deal with subsections (10) and (11) of clause 1. Those subsections allow the Department to bring regulations to allow for events that occurred prior to the Bill's coming into operation. The Department advised that that is to cover payments made between the end of the current scheme and the start of the closure scheme. The Department has nothing to add. Can Members confirm that they understand those subsections and are happy to indicate that we support them standing part of the Bill? Are members content?

The Chairperson (Mr Brett): Clause 2 provides for the Act to come into operation on the day after it receives Royal Assent. The Department will have nothing to add, and I assume that members understand what that clause means. Are we happy to indicate that we support clause 2 standing part of the Bill?

The Chairperson (Mr Brett): I move on to other matters. UFU wanted to allow for change of RHI ownership reflecting the sale or inheritance of farms. UFU also wanted further flexibility to allow for RHI equipment pre-notification to transfer to other locations, even when a farm has not been sold. The Department indicated that the regulations will allow for change of location of an RHI boiler. The Department has not commented on change of RHI ownership owing to sale or inheritance.

Ms Harkin: Change of ownership is allowed under the regulations.

The Chairperson (Mr Brett): OK. No problem. Do members understand that, and are members content that we informally support it?

The Chairperson (Mr Brett): Can Members indicate informally if they wish to seek to add amendments to the Bill or seek assurances from the Minister on any item? No? OK.

Thank you for that, members. I thank officials for all their work on this. The Committee will seemingly support the Bill. I encourage the Department's energy division to get on with looking at how we will utilise the remainder of that AME. We have legal targets that we need to meet by 2030, and underspending that amount of money at a time of restrained public finances should not continue indefinitely.

Ms Harkin: Thank you.