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Summary

  1. Renewable Heat Incentive Inquiry examining botched energy scheme
  2. Senior Ofgem administrator Gareth John answers questions from the inquiry
  3. Inquiry set up after public concern over scheme's huge projected overspend
  4. Retired Court of Appeal judge Sir Patrick Coghlin chairing inquiry at Stormont
  5. Public evidence sessions expected to last until well into 2018

Live Reporting

By Iain McDowell and Robin Sheeran

All times stated are UK

That's all for now...

Stormont's Parliament Buildings
BBC

Mr Aiken tucks in his metaphorical t-shirt and today's participants stream out of the Senate chamber into the early evening sunshine.

We'll be back tomorrow with more live coverage of the RHI Inquiry, when Ofgem technical expert Dr Edmund Ward will be joining us again.

Kick-off is at 09:45 so do join us then.

What happened today at the RHI Inquiry?

BBC News NI

Civil servants at DETI tried to suspend the RHI scheme as the "penny dropped" that the budget was under huge pressure, the public inquiry was been told.

They asked the administrator Ofgem to "queue" new applications while they worked out the budget position.

The RHI Inquiry in Stormont's Senate chamber
Pacemaker

Ofgem was worried that the bill for its work might not get paid and also had concerns that it had commitments to scheme applicants and might end up getting sued.

DETI's request to pause the applications came when it's monthly payments to scheme claimants had gone from £264,000 in March 2014 to £1.5m in June 2015.

'Keep calm and hide the evidence'

In August 2016, a member of the Ofgem's counter fraud team sent an email to the RHI scheme operations manager Teri Clifton seeking approval for a letter to claimants who would be under fraud investigation, requesting information from them.

It was greeted with great amusement by the scheme management team, who felt it acted almost as a tip-off to claimants.

The t-shirt on Mr Aiken's computer scren
RHI Inquiry

When it was passed to Mr John, he emailed his colleagues saying that along with the letter Ofgem also had to send claimants a t-shirt bearing the message "keep calm and hide the evidence".

Asked to explain that, he says it was meant as a humorous and sarcastic response because he viewed the counter fraud team's proposed approach to claimants as inappropriate.

Instead, he wanted a more subtle approach to be taken when contacting scheme claimants who were due to be inspected because sending out letters addressed from the counter-fraud team could spook some claimants or offer a tip-off to those who may be gaming the scheme.

'More inspections needed after evidence of scheme gaming'

In October 2014 DETI's Stuart Wightman - who had oversight for the RHI scheme in Northern Ireland - wrote to Ofgem to say he was "wrongly under the impression that" about one in 10 boiler installations were being inspected.

He said he'd heard "anecdotal evidence of gaming of the system" and he wanted to "ensure that appropriate controls are in place to circumvent this".

The number of installations being inspected was much smaller - it was between 1% and 2% of installations.

Boxes being ticked by a green pen
Getty Images

Ricardo-AEA - the audit subcontractor - told Ofgem in its report about the Northern Ireland audits it had carried out that the number was "very small and it's difficult to comment" on whether the finding were representative with the scheme as a whole.

Mr John says he's not aware of whether that was shared with DETI and in retrospect there's no reason why it wasn't done.

'Loopholes identified to maximise benefits from scheme'

In November 2013, subcontractors Ricardo-AEA reported to Ofgem on an audit of a Great Britain RHI scheme installation in Hertfordshire.

This site was running multiple boilers heating a single space, there were external heat losses and the operator's records showed a higher heat output than stated on the boiler nameplate.

Ricardo said that was an example of a scheme participant reading the guidance documentation and "identifying loopholes" - the system was specifically designed to maximise the benefits from the scheme.

Elsewhere, auditors identified poultry sheds as being prone to multiple-boilers installations.

Burning wood pellets
Getty Images

Mr Aiken asks why that kind of material would not have been passed on to DETI and to the Whitehall department responsible for the GB RHI scheme.

"I don't know, I've not seen this document before," says Mr John, explaining that it was before his time in the job at Ofgem.

Dame Una O'Brien interjects that the Ricardo-AEA document "is almost a word-for-word description of what materialised in Northern Ireland - it's even got photographs of a building with the doors and windows open".

'Not aware if DETI received fraud prevention plan'

Long shot of senate chamber
RHI Inquiry

Asked if DETI ever received Ofgem's 2013 fraud prevention strategy for the RHI scheme, Mr John says he's not aware if it was or not.

In fact, DETI didn't receive the strategy until 2015 when it appeared in an annex to another document.

And the witness concedes that he can't see any reason why DETI didn't get it long before then.

'We're seeing words but no action'

Dr Keith MacLean
RHI Inquiry

Inquiry panellist Dr Keith MacLean says that Ofgem doesn't seem to have been monitoring whether its list of fraud mitigation measures for the RHI scheme were actually working.

"If you're not monitoring that how on earth can that be a fraud prevention measure?" he asks.

"We're seeing all the words here but there doesn't seem to be any follow-up... to see if your mitigation is working."

'Mitigation plan didn't apply to NI scheme'

Ofgem's fraud prevention strategy listed the tiering of subsidies on offer through the RHI scheme as a way that the wasteful use of heat by claimants was being prevented.

Tiering, as we mentioned earlier, works by reducing the subsidy on offer once a claimant has used a certain amount of heat, therefore of preventing them from overusing their heating system to collect more cash.

Wood pellets
PA

But, of course, there was no tiering in the Northern Ireland RHI scheme.

Mr John is asked if Ofgem managers ever caught on to the fact that a mechanism they believed was making it impossible for claimants to game the scheme didn't actually exist.

"Yes, that appears to be the case," he says.

'Was fraud prevention plan shared with boiler inspectors?'

Ofgem used subcontractors to carry out site audits on RHI scheme boiler installations in Northern Ireland

Sir Patrick wants to know whether those auditors were supplied with the fraud prevention and risk register documents but Mr John says he doesn't know what information was shared with them, telling the inquiry that would've been dealt with by someone at a lower level than him.

A biomass boiler
BBC

The inquiry chair is concerned that if the fraud prevention strategy was shared with the subcontractors it means they were being given information that did not bear any relation to the Northern Ireland scheme's regulations.

On the other hand, he says, if the documentation was not supplied, he queries if that means it was up to the subcontractor to work out for themselves if there was a problem when they saw a multiple-boiler installation.

"If that's the case it lays an enormous risk on the basis of the discretion of subcontractors," he says.

'Effective mitigation plan replaced by one that didn't work'

A mitigation measure that was in place to deal with circumstances in which claimants installed multiple boilers in order to maximise the amount of money they could claim through the RHI scheme "dropped off" Ofgem's risk register for the initiative, says Mr Aiken.

So-called gaming of the scheme was one of the major issues the led to the catastrophic overspend of a projected hundreds of millions of pounds.

Some claimants installed several small boilers to meet their heating requirement rather than a single larger unit in order to obtain a higher subsidy that was on offer for smaller installations.

Burning wood pellets
BBC

Mr John says he's not aware of any communication with DETI to say the change had happened.

Inquiry chair Sir Patrick Coghlin says that whoever made the change to the risk register "removed what on the face of it was a perfectly effective way of dealing with multiple boilers and put in one that wasn't".

"No doubt we'll come across that genius at some stage," he adds.

On the afternoon agenda...

Mr Aiken asks a question
RHI Inquiry

Suitably refreshed, the inquiry panel, the legal teams and Mr John are all back in the Senate chamber for the afternoon session.

Inquiry barrister Mr Aiken (above) outlines the three broad areas he wants to cover with Mr John. They are:

  • Fraud prevention strategies
  • Audits of the RHI scheme
  • The issue of claimants installing multiple biomass boilers, and the potential for 'gaming' the scheme

Time for lunch...

Sir Patrick calls time on the day's opening session, which turned into a bit of a grind in its latter part.

We'll be back at 14:00 when Mr Aiken will be delving deeper into Ofgem's role in the RHI scheme - join us then.

'Can't remember if I raised cost controls issue'

Questions continue on the point of whether or not the issue of cost controls - specifically degression - was mentioned in the meetings between DETI and Ofgem in 2014 and Mr John continues to insist it was.

He's asked by the inquiry panellist Dame Una O'Brien if he raised it personally at the meetings.

Gareth John
RHI Inquiry

His memory is that there was a "general discussion", adding: "I can't remember if I personally raised it but I can recollect it being discussed."

Dame Una presses a little harder: "So, is it likely you would've raised it or do you think it was someone else?"

"I can't recollect," replies the witness.

'No record of discussion about cost controls'

Mr John was part of an Ofgem delegation that met DETI officials in Belfast in April and October 2014.

He claims they discussed cost controls for the RHI scheme, specifically degression, at both of the meetings but Mr Aiken tells him that the DETI staff have a completely different recollection of the October meeting.

A boardroom
Getty Images

A detailed DETI minute of the April meeting makes no mention of any discussion of cost controls or any reference to degression.

And an email sent by Mr John to colleagues after the meeting lists numerous subjects that were discussed, but again there's no reference to cost controls.

'Was risk of scheme escalated to top of organisation?'

Dr Keith MacLean
RHI Inquiry

Asked if he informed that Ofgem's governing board that it was continuing to administer the RHI scheme even though the financial approval for it had elapsed, Mr John says he can't remember.

Inquiry panellist Dr Keith MacLean suggests that the concerns about the scheme should've been "escalated pretty quickly", given that the budget both for admin costs and for paying claimants - which was done through Ofgem - had suddenly become uncertain.

"I'm surprised that there's a fairly substantial risk that's developing here that affects the payments for all of the accredited parties and future obligations but you're not sure if that was even... escalated it further within the organisation," he adds.

'No reason to doubt budget assurances from DETI'

In light of the legal advice, it was decided by DETI that it would be "continuation of business as usual" for the RHI scheme, as one Ofgem official noted in an email from May 2015.

But there was a proposal for cost controls to be fasttracked and to come into effect in October that year.

It envisaged a tiered tariff for all biomass boilers up to 200kW and sequenced reductions in the tariffs were also proposed for October, April 2016 and April 2017, with DETI intending to put the proposals to public consultation over the summer of 2015.

£20 notes
Getty Images

There was a belief within DETI that the necessary funding for the scheme would be provided but now there was another problem to add to the mix - it was discovered that the scheme's approval by Stormont's finance department had elapsed.

Mr John says it was relayed to him that sign-off for the funding for DETI was a "formality" and it would "arrive in three to four week", adding: "I had no reason to doubt that at the time."

'No obligation on Ofgem to suspend scheme'

Wide shot of the senate chamber
RHI Inquiry

Mr John asked Ofgem's lawyers to consider whether it had an obligation to stop accrediting RHI scheme applicants after an instruction from DETI.

He was told there was nothing in the administrative agreement with DETI requiring Ofgem to comply with such a request.

Legal advisor Catherine Scott said that on examination of the scheme's regulations she "can't see anything that allows DETI to suspend operations with no notice".

'Uncertainty over budgets was new experience for me'

An email inbox
Getty Images

Emails show that Mr John had concerns that Ofgem wouldn't be paid for its work on the RHI scheme as a result of DETI's budget problems.

"The biggest wider implication," he wrote, "is who is going to pay for the £55k for the first quarter. Are they saying this is unfunded? We can't just down tools."

He tells the inquiry that he needed "certainty" because Ofgem had incurred costs it was a "new experience for me in terms of trying to understand the impact of what DETI were saying".

'Interesting and unprecedented situation'

So what was Mr John's reaction when he heard of the concerns over DETI's budget for RHI?

He says he had three concerns. They were:

  • Commitments to the scheme participants
  • Concern over funding for Ofgem's administration of the scheme
  • The possibility that Ofgem might be asked to operate "outside the legislation"

Teri Clfton
RHI Inquiry

When Ofgem's head of operations Teri Clifton (above) forwarded Mr Wightman's email to Mr John she described it as "interesting and unprecedented for us".

Mr Aiken suggests that may have been "a bit of an understatement".

'Need to queue applications as scheme is over budget'

In May 2015, the penny dropped with the DETI team running the RHI scheme that it was running over its budget and Stormont finance officials ordered it to "please stop entering into commitments immediately" in order to stop the spend from increasing even more.

But it wasn't possible to halt the scheme there and then, so DETI official Stuart Wightman asked Ofgem if it could "queue applications for a few weeks" until he had "clarity" over the available budget.

A biomass boiler
BBC

He said that due to the increase in applications its monthly RHI scheme payments had gone from £264,000 in March 2014 to £1.5m in June 2015.

He also said that DETI may need to add a cost control mechanism - tiering - to the scheme sooner than planned.

Tiering is an important way of controlling the cost of the scheme and works by dropping the tariff on offer once a certain limit of usage of a claimant's heating system has been reached, with the intention of preventing them from overusing it to collect more cash.

'Ofgem discussed scheme cost controls with DETI'

Mr John first became aware in mid-2014 of a "looseness" in the regulations of the RHI scheme that allowed claimants to earn more money from the initiative than had been intended.

Inquiry chair Sir Patrick Coghlin to know when Mr John became aware that, unlike the GB initiative, there were no cost controls in place in the Northern Ireland RHI scheme.

Sterling cash
Getty Images

There were two main forms of cost control designed to prevent subsidy payments running out of control - tiering and degression.

Mr John says Ofgem had a discussion with DETI officials in April 2014 around degression, and in May of that year Ofgem's Dr Edmund Ward discussed tiering with DETI official Peter Hutchinson.

'Delays in sharing data about RHI scheme'

Communications and data-sharing between DETI and Ofgem were far from ideal, as several witness have told the inquiry.

Mr Aiken puts it to Mr John that it took too long to sort out the transfer of information for the RHI scheme.

Gareth John
RHI Inquiry

The witness agrees that "things could have been quicker - so there were delays".

Ofgem was sharing information with DETI on a monthly basis and there was ongoing dialogue regarding the sharing of personal data, he says.

'Five key problems with admin of RHI scheme'

A biomass boiler
BBC

Asked by the inquiry to identify the key problems or difficulties with the RHI scheme, Mr John has made five observations in his witness statement. They are:

  • Budget management and a lack of cost controls
  • Increased applications in the lead-up to suspension of the scheme
  • Agreement of the data sharing protocol between DETI and Ofgem
  • DETI's obligation to publish data about the scheme
  • Regulation amendment in December 2014

Regular followers will notice that those points have been identified by other witnesses in the inquiry and they'll be closely examined during the course of Mr John's evidence today.

New witness Gareth John gives evidence

Gareth John was the associate director for the RHI scheme at the initiative's administrator Ofgem’s from January 2014.

That meant he was - and still is - responsible for the operation and delivery of both the Great Britain and Northern Ireland schemes.

Gareth John takes the affirmation
RHI Inquiry

You can read his witness statement to the inquiry here.

Inquiry junior counsel Joseph Aiken is asking the questions today.

What happened yesterday at the RHI Inquiry?

BBC News NI

The top auditor at the department in charge of the RHI scheme was thanked for saying she accepts responsibility for a failure to spot flaws in the scheme.

Elaine Dolan told the inquiry that as the head of internal audit at Stormont's Department of Enterprise, Trade and Investment (DETI) the buck stopped with her after an audit in 2014 failed to pick up governance issues in the department.

Elaine Dolan
RHI Inquiry

As Ms Dolan concluded her evidence, inquiry panel member Dame Una O'Brien thanked her for accepting responsibility for failures of the audit process.

She said her "frank" acknowledgement was an example of words heard "too infrequently so far in this inquiry".

What is the RHI Inquiry?

BBC News NI

An independent inquiry into the RHI scandal was established in January last year by the then finance minister Máirtín Ó Muilleoir.

He ordered it in the wake of the huge public concern and what was then a developing political crisis surrounding the scheme.

The RHI Inquiry began in November and Sir Patrick Coghlin (below), a retired Court of Appeal judge, is its chair and has been given full control over how it will operate.

Sir Patrick Coghlin
Pacemaker

It will look at:

  • the design and introduction of the RHI scheme
  • the scheme's initial operation, administration, promotion and supervision
  • the introduction of revised subsidies and a usage cap for new scheme claimants in 2015
  • the scheme's closure

For more information on the RHI Inquiry, you can read our handy Q&A.

RHI scheme - the fallout

When the scale of the overspend emerged, public and political concern rocketed.

As the minister in charge of the Stormont department that set up the RHI scheme, the Democratic Unionist Party (DUP) leader Arlene Foster faced calls to resign from her role as Northern Ireland's first minister in December 2016.

Martin McGuinness and Arlene Foster
PA

She resisted, and Sinn Féin's Martin McGuinness then quit as deputy first minister in protest at the DUP's handling of what had by then become a full-blown political crisis.

That move brought about the collapse of the Northern Ireland Executive. Now, more than a year on from that, Northern Ireland remains without a devolved administration.

You can find much more detail on the RHI scheme in our need-to-know guide.

RHI scheme - the flaws

The budget of the RHI scheme ran out of control because of critical flaws in the way it was set up.

Claimants could effectively earn more money the more fuel they burned because the subsidies on offer for renewable fuels were far greater than the cost of the fuels themselves.

Burning £20 notes
BBC

The most recent estimate for the overspend was set at £700m, if permanent cost controls aren't introduced.

The massive overspend bill will have to be picked up by the Northern Ireland taxpayer.

RHI scheme - what was it?

The Renewable Heat Incentive scheme - or RHI for short - came to the fore of the Northern Ireland public's knowledge in late-2016... and the fallout from the scandal attached to it is still being felt in the region's politics today.

A biomass boiler
Getty Images

The scheme was set up by the Northern Ireland Executive in 2012, as a way of encouraging businesses to switch from using fossil fuels to renewable sources for generating their heat.

Those who signed up were offered financial incentives to buy new heating systems and the fuel to run them.

Good morning

Stormont's Parliament Buildings
AFP

Welcome to Thursday's live coverage of the Renewable Heat Incentive Inquiry.

It may be sunny outside but we're deep inside Stormont's Parliament Building for the important business in the old Senate chamber.

We haven't heard from the scheme's administrator Ofgem for a while and today top official Gareth John will be answering questions, with proceedings starting shortly.