Official Report: Minutes of Evidence

The Chairperson (Mr Brett): I welcome Catriona Harkin, who is well known to the Committee. She is acting director of energy operations in the Department.

Ms Catriona Harkin (Department for the Economy): I have some very brief opening remarks, and then I will be happy to take questions. Chair and members, thank you for the opportunity to appear today. I am incredibly grateful to the Committee for accommodating the session at very short notice.

The regulations represent the final stage of bringing the non-domestic renewable heat incentive (RHI) scheme to a close, following the Assembly's agreement to the primary legislation earlier this month. The purpose of the regulations is to provide a clear and enforceable framework to wind down the scheme in a controlled way, while ensuring that existing participants receive support only for the remainder of their original tariff lifetime through annual closure payments. It is not a continuation or a redesign of the scheme; it is closure.

In doing so, the framework balances three key objectives: first, to bring certainty to participants by converting existing accreditations into closure accreditations within a defined and time-limited framework; secondly, to ensure robust cost control and value for money as the scheme comes to an end; and, thirdly, to put in place clear governance and enforcement so that support continues only where installations remain compliant and eligible for closure payments.

Members will be aware that we have continued to engage with stakeholders, including industry representatives, as the regulations have been progressed. That engagement has been very constructive and has helped us to test the workability of the proposals in practice.

As members will appreciate, we are now at a relatively advanced stage in the development of the regulations, reflecting the legislative timeline and the need to provide certainty to participants. That said, I am keen to ensure that any further views from the Committee and stakeholders are carefully considered, and, where there is a clear case for refinement, we will look to reflect that promptly in the regulations or in supporting guidance. However, I believe that the core design of the closure framework is settled. In particular, the regulations retain the key mechanism that ensures affordability and fairness as the scheme comes to an end, including the approach to load factor calculation and the application of the annual cap.

Overall, the regulations provide the legal framework to close the scheme responsibly, protect the public purse and ensure that payments continue only within clearly defined parameters.

I am happy to take members through the detail and to respond to any questions.

The Chairperson (Mr Brett): Thank you very much, Catriona. I think that that would be useful. You kindly provided the draft regulations previously, so it might be useful if you run through any changes that have been incorporated into the updated regulations that have been tabled.

Ms Harkin: We provided a version in January. I do not think that we had got to the refinement of the various policy positions at that point; it was really to give an overview of the regulations. In the letter that was issued to members last Friday, we tried to articulate any changes or refinements that had come about from that draft to this draft. There are some changes that I want to draw members' attention to, as some of the positions have been revised in light of stakeholder engagement and consultation.

The primary one is the replacement of an installation post consultation. We have been minded not to allow complete like-for-like replacement of an installation, on the understanding that we were balancing it as closure. Therefore where an installation exists, it will come to the end of its natural life, and that would be the end of that installation's entitlement. Through conversations with stakeholders and legal advisers, I had to balance that against a reasonable article 1, protocol 1 (A1P1) right that participants have to the 20-year tariff. Depending on your thinking, we had a ship of Theseus, or, as I would call it, Trigger's broom, discussion, so if we are allowing the replacement of various parts of the installation, at what point does the installation become a new installation? In real terms, there is the matter of cost. The machines can cost £10,000, £15,000 or £20,000. We are coming to the end. We are moving into the last decade of any payments under the RHI regulations. Therefore, if a participant is minded to replace an installation at that cost, it is because there is a legitimate need for the heat, and I do not think that they should be penalised. That was one of the key changes that we made.

The other one that we may want to discuss is the inspection process. At one stage, we were minded to give notification of inspections, and then we removed the notification of inspections. I have had some good engagement with the stakeholders, remembering my own background.

Farmers can be difficult people to get hold of on a given day without notice. If we send an inspector out and the owner is not there, that is a wasted journey. Therefore, I have landed on giving a day's notice because I am reliably informed that one day does not give anybody who is minded to do anything nefarious time to install a boiler. I am more than happy to take a view from the Committee on that because I know that there had been conversations about that before.

We have added a right to voluntary withdrawal. I do not think that there is anything controversial in that. It is something that did not exist before. In the existing scheme, voluntary withdrawal was quite a challenge; it was not as simple as a participant saying that they did not want to receive payments anymore. It became a bit of an issue.

The Chairperson (Mr Brett): Those are probably the two big changes. I think that 24-hour notice makes sense. As you said, no one is going to be able to do anything nefarious. I think that it is important to give at least some notice that someone is coming to your land to inspect something.

The replacement proposal makes sense. Those were the two main points that I picked up from it, but I was not sure whether I had missed any others. The only other issue is probably that the projected closure costs have slightly increased from £196 million to £213 million over the period.

Ms Harkin: It is £196 million from annually managed expenditure (AME) in payments, and the other £17 million is from the departmental expenditure limit. It has always been £213 million.

The Chairperson (Mr Brett): Is that for the administration of the scheme?

Ms Harkin: Yes.

The Chairperson (Mr Brett): OK, so there are no changes.

Ms Harkin: There is no change in the projected cost.

Mr Buckley: Thanks very much for your work on this, Catriona. I understand the need for urgency so that there is no vacuum between Ofgem and closure. I did raise a specific concern about pre-notified inspections in the sense that I was conscious that we had to safeguard the ratepayer and taxpayer against abuse of the system. With a 24-hour notice period, does the inspection automatically go ahead or is there room for —?

Ms Harkin: It is 24-hour notice, and we are coming the next day.

Mr Buckley: I think that that is sensible, and I take your assurances — this was also raised by stakeholders — that it would be impossible for anybody to perform malpractice and it not be noticeable in such a short period.

On my second point, you referred to Trigger's broom from 'Only Fools and Horses' when you were talking about replacing the installation like for like. When you were talking to the industry about that decision and the balance that you have come down on, what was its view?

Ms Harkin: I think that the industry was content with that. Even during the consultation responses, that arose again and again. I last spoke to the stakeholders on Friday past, and they were positive about it.

Mr Buckley: To be clear, on stakeholders, we have always been trying to get the balance between genuine participants and the ratepayer. Are there any major issues that we should be aware of from any stakeholders as we go towards the final stage?

Ms Harkin: Again, I do not want to speak on their behalf, but —.

Mr Buckley: From what has been notified to you.

Ms Harkin: I do not think that there is anything major. I think that we are in the margins of the conversation now. I have had very positive engagement with the Ulster Farmers’ Union (UFU) and the Renewable Heat Association of Northern Ireland (RHANI). I think that the relationship has been transformed over the past number of months, and I think that we are in the margins.

Under the existing regulations, heat is capped. We pay up to, I think, 400,000 kWh. A conversation is happening with stakeholders. Some 220 installations will be impacted on by the cap in calculation of the closure payments. The question is: what was the cap for? Was it to protect the public purse so that people could not run up high payments or was it there because, reasonably, the boilers were expected to run for so much of the year? In the margins of those conversations, there is nothing — excuse the parlance — that is a deal-breaker. I do not think that there are any significant issues that I am aware of that mean that the stakeholders and affected participants will not be content with where we are at.

Mr Honeyford: Thank you, Catriona. I want to say genuinely that what you, in particular, and the Department have done on those links with RHANI and UFU is vital. It is really appreciated. Credit where credit is definitely due.

I have a couple of questions. We were told that the portal would be ready by May. It is now running — we are right at the limit here, are we?

Ms Harkin: When the legislative timeline became clear, David, we used those additional weeks to — we are calling it "minimum viable product-plus", so there is some additional functionality going in to what was the minimum viable product. All the assurances that I am getting from our IT side and the IT side of my project are that the portal will be ready on 1 July.

Mr Honeyford: We are running close to the time limit.

Can you clarify whether usage is 25% less than in 2017-19, and that the overall budget is based on the 2017-19 figures?

Ms Harkin: Yes.

Mr Honeyford: Therefore, that overall AME budget should, in practice, be 25% less as we move forward.

Ms Harkin: Because of —.

Mr Honeyford: If the budget is reflective of the 2017-19 figures, and there is 25% less usage today than there was in that period, does that mean that the budget —? I know that we are setting a level. I understand that. That is fine. However, does it mean that, in reality, that number will be based on less usage?

Ms Harkin: The £196 million is at the very top end of the projections, David. We have a number of participants who are live and approved but who are inactive; they are submitting either zero meter readings or no meter readings. Those people would have been active in 2017-19 and then became inactive. I suppose that it depends on whether those people reactivate into closure. I think that, for a significant cohort, that is unlikely, which is why, if you look through regulations 5, 6, 7 and 8, I think, you will see that there is a process for how to convert, but, if you do not convert, you are revoked. We are expecting there to be a significant cohort that do not come over into closure, which would bring the budget down.

Mr Honeyford: If it is 25%, there will be around £50 million —

Ms Harkin: Yes.

Mr Honeyford: — that could be used elsewhere. That is all. Thank you. I appreciate that.

The Chairperson (Mr Brett): What are the next steps for the underutilised AME?

Ms Harkin: I will probably have to come back to you in writing because a different team is dealing with the future use of AME.

The Chairperson (Mr Brett): That is fine.

Ms Harkin: To my understanding, there is a letter with HMT at the minute —

The Chairperson (Mr Brett): OK.

Ms Harkin: — on that, but I probably will have to come back in writing. I do not have the information with me today.

The Chairperson (Mr Brett): No problem. Catriona, can I just pay tribute to you for your work on this? Often, I am critical of officials. However, on this issue, you, in particular, have been across every detail. You have delivered in a timely manner, and that deserves to be recognised. I am always quick to criticise, so I should point out the great work that you have done. Long may it continue. I pay tribute to you and all the great work that you have done on this.

Ms Harkin: Thank you very much.

The Chairperson (Mr Brett): No problem.