I knew subsidy was higher than cost of fuel, top RHI official admits The senior official responsible for setting up the RHI scheme has admitted that she knew at the outset that the […]

The senior official responsible for setting up the RHI scheme has admitted that she knew at the outset that the subsidy was higher than the cost of biomass fuel – one of the critical flaws which led to a perverse ‘burn to earn’ situation developing.

Fiona Hepper – who personally briefed the then minister, Arlene Foster, about the scheme as it was being set up and who was subsequently promoted by the civil service – is the first person involved in the creation of the scheme to state that they knew from before the scheme launched that the tariff was higher than the cost of fuel.

However, she told the public inquiry into the scandal that she did not realise that it was a problem because she had a “narrative” in her head which justified the apparent problem with she and her colleagues believing that they had expert advice from consultants who had explained that the tariff should cover other costs on top of fuel, such as paying for the boiler and ‘hassle costs’.

Energy division had no energy experts

It also became clear during today’s evidence session that at the point when the scheme was being finalised and launched none of the key individuals working on it in the Department of Enterprise, Trade and Investment’s (DETI) energy division had any specialist energy expertise.

Ms Hepper said that she was appointed head of the energy division by David Sterling – who is now head of the Northern Ireland Civil Service – but that at that point she had “no experience” of energy policy.

The inquiry has already heard that the main official working on the scheme under her also had no energy expertise or even scientific expertise but was a “generalist” civil servant with an arts degree.

Ms Hepper said that because of her lack of expertise in energy she had procured expert consultants to advise on the creation of the RHI.

However, the consultants – CEPA – have already told the inquiry that they were not experts in renewable heat and believed that the Stormont officials with whom they were working had more knowledge of renewable heat than it did, so it sub-contracted part of the work to another consultancy.

She said that Joanne McCutcheon, who was put in charge of the new renewable heat branch, “wouldn’t have had energy experience” but that she had no reservations about her taking up the role and “like all of us who are generalists in the civil service, you learn on the job”. Later in her evidence, Ms Hepper said it should be remembered that “we were not energy experts”.

Questions about what Foster was told

The panel also questioned Ms Hepper closely on whether she had provided full and accurate information to Mrs Foster.

Ms Hepper was asked whether she had a discussion with Mrs Foster which showed the minister to have had any preference between an RHI scheme and the cheaper option of a ‘challenge fund’ grant scheme, which was about £200 million cheaper than the RHI and, according to DETI’s consultants, would have delivered more renewable heat. She said: “It wouldn’t have had a conversation I would recall as specifically as that…of course she was fully aware of what [Whitehall] had done…but I don’t believe at that stage she would have had a preference one way or the other…throughout the process”.

She added: “She [the minister] would have been content for us to…she would have left it to officials for us to pull together the detail”.

Ms Hepper also disputed evidence from the consultants that DETI had put pressure on them not to recommend the challenge fund – even though it was cheaper.

Referring to a comment from CEPA at the time that it was operating on the basis that DETI wanted to do an RHI, Ms Hepper said that “It was not for them to make an assumption…that was a surprising statement for them to come back with”. When asked about Mrs Foster’s preferences for receiving submissions, Ms Hepper said: “I always found she went through her paperwork and would have read around detail”.

‘I had a narrative in my head’

During exchanges at the close of a six-hour evidence session today, Ms Hepper made clear that she was aware of the subsidy being higher than the cost of fuel.

She said: “I had a narrative in my head which was accepted around the team as to how you got from the cost of the fuel to the price of the tariff.”

When asked if she or her team ought to have spotted the critical flaws in the CEPA report, she said: “I don’t know. It looks very clear now when you see the figures written down, but at the time we had a rationale for how this was put together.

“We had the expert advice from consultants that tiering was not required and there was an element of challenge to that – we went back, we asked questions – and the expert advice was consistent.

“So I do believe that we scrutinised as best we could and when the experts stood by their advice I think that was when we said ‘Right, that’s right’.”

‘Any common sense person would have seen that’

Inquiry chairman Sir Patrick Coghlin interjected to say: “But you didn’t need to be an expert to see this differential. All you had to be able to do was to see that the tariff was a higher figure than the price of biomass fuel and that appears three times separately in the CEPA report; it appears in the business case within three pages.

“You wouldn’t need to be an expert in economics – or indeed in energy – to see that if you have a tariff that is paying more than the fuel you are using to burn to achieve that tariff there’s a problem.”

Ms Hepper replied: “The point I was making was that our rationale for how that tariff was put together….in working that through what we did was we said ‘the price of the fuel is X, you take the efficiency of the boiler into account because you pay out on heat combustion; that takes you up to 5.2p and then you add in the other elements of the tariff’. That was our logic and our thinking at the time.”

Sir Patrick replied: “I don’t understand that. Are you saying that the tariff wasn’t higher than the fuel?”

Ms Hepper said: “No, no, no. I’m saying it was higher. But what I’m saying is that in our thinking about how that came to be we took the price of the fuel, we…”

Sir Patrick interjected again to say that “any common sense person would have seen that difference and if they didn’t appreciate the significance of it they would have asked because it’s so clear in a number of documents”.

Ms Hepper said: “It is clear now, I agree.”

Sir Patrick said: “It was clear then, too.”

Ms Hepper said: “But when we were thinking of it from a different angle we worked through a logic as to how that tariff came to be.”

So you did notice at the time…

Panel member Dame Una O’Brien then asked: “So you did notice at the time…it’s implied in what you’re saying that you did notice there was a difference between the cost of the fuel and the tariff.”

Ms Hepper said: “We would have seen what the cost of the fuel was and we would have seen the tariff…”

Dame Una said: “So you did notice?” Ms Hepper said: “We did notice. But then we had a logic as to how you got from the price of the fuel and the other elements that had to be worked through to cover the other elements of it.

“Now I appreciate that with the benefit of hindsight and everything that had happened it is maybe very obvious now but it wasn’t at the time. It wasn’t to the team. It wasn’t to the scrutiny process and that is where we are.”

Sir Patrick jumped in again to say: “It doesn’t really matter if you saw how you got to the tariff or not – you may be right; there may be different ways of looking at it – but once you got the tariff which was there in the table at 5.9 and you knew that the price of the biomass was less than that, I don’t follow any explanation or justification as to why it wasn’t seen as a significant matter. It’s maybe my fault…”

Ms Hepper was one of several civil servants involved in key parts of the RHI scheme who were subsequently promoted by the civil service. She is now a deputy secretary in the Department of Education, a role she moved to in November 2013.