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Summary

  1. Design of botched scheme outlined to Renewable Heat Incentive Inquiry
  2. DETI official Peter Hutchinson returns for his third evidence session
  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 Robin Sheeran and Iain McDowell

All times stated are UK

  1. That's all for today...

    After a full two-and-a-half days in the witness chair, Mr Hutchinson's evidence comes to an end... for now, at least.

    He'll have to come back when the inquiry moves into its second phase, looking at the initial operation of the RHI scheme... it's still only on part one of four, remember.

    The Christmas tree in the Great Hall in Stormont's Parliament Buildings

    With the later-than-planned finish, Dame Una O'Brien jokes with Mr Lunny, saying: "You're not planning on night-shifts, are you?"

    Mercifully not! But we'll be back tomorrow for the 09:45 start - do join us then.

  2. What happened today at the RHI Inquiry?

    BBC News Northern Ireland

    A civil servant who set up the RHI scheme said it would have been "prudent" to advise Arlene Foster that the projected cost had risen significantly after she made her decision to proceed with it.

    Arlene Foster

    Mrs Foster, the then DETI minister, gave the go-ahead in June 2011 based on the draft findings of an economic appraisal.

    But when DETI received the final report a month later, the projected cost had risen by over £100m and civil servants did not inform her of the change.

  3. 'Did emergency powers advice go to Foster?'

    Sir Patrick is concerned about the omission of a power of emergency suspension in the scheme's regulations, in spite of a number of recommendations that DETI should include such a safety mechanism.

    The emergency power was being adopted in the GB RHI scheme, and after Ofgem advised DETI that it should wait and include it the department's solicitors Arthur Cox urged the same.

    Sir Patrick Coghlin

    Sir Patrick says DETI was obviously concerned about time and the possibility of missing out on the 2011-12 Treasury budget, and it was a difficult decision to make, but he asks: "Did it go to the minister?"

    There was no formal submission, according to Mr Hutchinson, so Sir Patrick puts it to him that given all the perfectly rational advice DETI had received the then minister Arlene Foster should've been involved.

    Mr Lunny says that DETI official Fiona Hepper states in her evidence that she had a conversation with the minister after the Ofgem advice.

  4. 'Stopping to add cost controls wasn't feasible'

    DETI's small team working on the set-up of the RHI scheme decided to pursue with the scheme against Ofgem's advice.

    Mr Hutchinson says they had a large workload in trying to get it up and running and making changes would've led to further delay in opening it.

    Peter Hutchinson

    "There was only so much we could do - to stop everything to consult on a cost control mechanism... did not appear to be a feasible option for us," he adds.

    DETI chose continue without the cost controls because it had a "level of confidence" that the Great Britain scheme had opened without them and added them later, so the officials decided to look at the issue "at the next stage".

  5. 'Significant concerns over DETI's scheme intention'

    Administrators had "significant concerns" that DETI wanted to press ahead with starting the RHI scheme without including cost controls that were being added to the similar scheme in Great Britain.

    Ofgem was brought on board to run the scheme and it recommended replicating the changes before it was opened.

    People taking part in a teleconference

    DETI and Ofgem discussed the matter in a teleconference in June 2012, when the regulations for the Northern Ireland scheme were being drawn up.

    A lawyer for Ofgem later said it was important that the minutes of that discussion recorded that it had "hammered home" to DETI "that we had significant concerns regarding the course that they are preparing to adopt".

    Another lawyer said it was important to note that Ofgem's "clear recommendation to DETI was to wait until the regulations are amended due the risk the current ones pose".

  6. 'More could've been done to meet conditions'

    Approval for the business case for the RHI scheme came from the Department of Finance.

    Mr Lunny says it was granted on two main conditions:

    • That further approval would be required if the scheme continued past March 2015
    • That scheduled reviews of the scheme should be carried out
    Ticked boxes

    He asks whether anything was done at the launch of the scheme to ensure the re-approval condition was met.

    Mr Hutchinson says the letter would have gone into the civil service's electronic filing system and senior management would have been informed but he accepts that "more could have been done".

  7. After hours at the inquiry...

    The inquiry was due to be finished for the day by now, but there's still more questions for Mr Hutchinson to answer - Mr Lunny has another "hour or more" of material to go through.

    The RHI Inquiry

    The inquiry panellists have a quick conflab and offer the witness the chance to finish up this evening to save him the bother of coming back again tomorrow morning.

    Mr Hutchinson is game for another while in the chair this evening, so we're sticking around and hope you will, too...

  8. 'Oversight led to cost underestimation by hundreds of millions'

    Outdated figures on the cost of the RHI scheme were included in the business case that was put forward for the initiative's approval.

    As we heard earlier, the projected cost of the subsidies that would be offered was revised upwards by £111m in February 2012 from the previous estimate of £334m in June 2011.

    A man looking at figures with a magnifying glass

    Asked why that error was made in the business case, Mr Hutchinson says: "I assume it was just an oversight."

    Mr Lunny responds: "It's a significant oversight if it underestimates the cost benefit/net present value by tens or hundreds of millions of pounds."

  9. 'Tail an awful lot bigger than the dog'

    The business case supplied to Stormont's Department of Finance for approval for the RHI scheme refers to a "capital cost of £25m, resource cost of £386,000 plus ongoing admin".

    A footnote speaks of "grandfathered payments for 20 years" that would be covered by the Treasury.

    A dog with a long tail

    Mr Lunny says the £25m is the budget of the scheme for years 1 to 4, but even if the scheme was closed to new entrants at the end of year four, the grandfathering, or "the tail" of payments as it's sometimes referred to, would continue for 20 years.

    "It's obviously going to be very, very considerably greater than £25m - it might be more in the region of 200-and-something million pounds," he says, and the footnote does not make it clear that "the tail is an awful lot bigger than the dog".

    Myr Hutchison says it shows that perhaps the officials "had not detailed it as clearly as we should have done".

  10. 'Query over content of minutes a worrying feature'

    The minutes of the casework committee note that DETI economist Sam Connolly had "reviewed the approach taken by the consultants and is content that the proposed scheme represents the best value for money".

    Mr Lunny says Mr Connolly was at the committee meeting but it is not clear who made the statement regarding his view that appears in the minutes because the economist states in his witness statement that he did not speak at it.

    Sir Patrick Coghlin

    Mr Hutchinson says he does not recall who said it, or how it was presented.

    Inquiry chair Sir Patrick Coghlin says it is "quite an important point" that Mr Connolly says he did not speak but "somebody has recorded that he has made a choice on the merits in terms of value for money, which lends to the minutes a degree of authority from Mr Connolly".

    He says that unless there is an explanation for that it seems to him to be "quite a worrying feature".

  11. 'Almost 20 versions of meeting minutes'

    Files in a filing cabinet

    There are "18 or 19" draft versions of the minutes of the DETI casework committee's meeting about the RHI scheme.

    "There are a large number of versions - we don't have dates for them," adds Mr Lunny.

  12. 'Committee asked to approve well-developed scheme'

    DETI's casework committee was effectively being asked to approve a project that had already been well developed, rather than choose the best option for the RHI scheme, says Mr Hutchinson.

    Peter Hutchinson

    "Everything was prepared" for the casework meeting "with the [subsidy scheme] in mind" as opposed to the up-front grants option, he adds.

    Inquiry panel member Dame Una O'Brien asks if anything was presented to the committee in terms of how a grant fund option could work, but Mr Hutchinson says everyone had already been "content" to go ahead with a subsidy offer.

  13. 'Risk of going over budget not discussed'

    One theme running through the ongoing comparison of a grants fund and an ongoing subsidy scheme is the risk of going overbudget.

    That scenario is unlikely with a grants fund with a fixed budget, but not with a demand-led, uncapped subsidy scheme - as Mr Lunny puts it: "If there's a spike in demand you can run way over your budget."

    The senate  chamber

    He says that is a risk that does not appear in the minutes of the casework committee and he asks whether it was discussed.

    "I don't recall it, not in those terms," Mr Hutchinson says. Does he know why it wasn't? "No, I don't," he replies.

  14. 'Risk that big investments could've been lost'

    Another reason raised at the casework committee for preferring a subsidy scheme over a grants initiative was the "risk" that the latter would not allow Northern Ireland to meet its 10% target of renewable heat production by 2020.

    Basically, a subsidy scheme was seen as offering a continued incentive for 20 years for claimants to keep using their renewable heat systems.

    A biomass boiler

    But DETI believed that some claimants who installed boilers using up-front grants would stop using them after they got the money. Mr Lunny questions whether that was a realistic view to take.

    Mr Hutchinson defends that view, saying that people could've switched back to fossil fuel systems if oil dropped in price and biomass rose, and he also points out that if a claimant had gone out of business DETI's large investment towards its renewable system would've been lost.

    Mr Lunny suggests that there could've been conditions imposed on grants to ensure continued system use, as well as adding clauses that allowed the clawback of public money.

  15. 'We chose short-term £2m saving over long-term £300m cost'

    One of the reasons put forward at DETI's casework committee for why an ongoing subsidy offer was the preferred option for the RHI scheme was the higher administration costs of the alternative, the up-front grants initiative.

    But in terms of overall cost, the subsidy scheme could've been as much as £300m more expensive than the up-front grants option, and yet somehow it was still chosen.

    People looking at charts

    Mr Lunny asks whether the focus on the admin costs rather than the lifetime costs of the two options is an example of the "false economy" that CEPA had warned DETI against.

    He also wants to know if the economists present at the meeting made the point that saving "£2m or £3m" on admin over four years but spending "£200m or £300m more" over 20 years represented bad value for money.

    Mr Hutchinson accepts that DETI was looking at a "short-term saving against a long-term cost", and says he has no recollection of the economists putting that argument forward.

  16. 'Tiering not needed in RHI scheme'

    Mr Lunny turns to the next stage of the development of the RHI scheme, when it came before DETI's casework committee in March 2012.

    He exhibits a synopsis that was "probably" provided by Mr Hutchinson to the committee.

    Once again, within a couple of pages that glaring error - the fuel cost higher than the proposed tariff - is shown, which Mr Lunny says "a reader could, if they noticed, see" it.

    Mr Lunny reads the sentence

    The document also includes a footnote explaining tiering.

    It is followed by the sentence: "Tiering is not included in the NI scheme because in each instance the subsidy rate is lower than the incremental fuel cost."

    Mr Lunny says this sentence appears to be one that Mr Hutchinson has added.

  17. 'Feeling the cold at the RHI Inquiry'

    The afternoon session opens with a couple of housekeeping announcements from inquiry chair Sir Patrick Coghlin.

    Good news for the legal teams sitting in the middle row of benches - over Christmas, workers will attempt to provide more legroom for them.

    Video content

    Video caption: RHI Inquiry panel feeling the cold, says chair

    And as for the panel members, they've been complaining of feeling the cold!

    Sir Patrick says "heating arrangements" have been made but he jokes: "It's not pellet power, I can assure you."

  18. Time for lunch...

    Quick break now for a bite to eat - the inquiry will be back for more from 14:00.

  19. 'Subsidy model the most effective way'

    Matters turn to the role of DETI economist Sam Connolly in approving the RHI scheme in value-for-money terms.

    In his evidence to the inquiry, he says that in early-2012 the up-front grants model was "no longer on the table" in terms of being a option for the RHI scheme - Mr Hutchinson says that's not the case and the ongoing subsidy initiative could've still been rejected at that stage.

    A man making calculations

    As we heard earlier, that grants model was cheaper and offered a much better cost benefit that the ongoing subsidy initiative that was eventually adopted.

    At the start of March 2012, Mr Connolly gave the subsidy model his sign-off, saying it was the "most effective way of allocating" the money provided for the RHI scheme.

  20. 'Our responsibility to ask, check and verify'

    Inquiry panel member Dame Una O'Brien asks where Mr Hutchinson thought responsibility lay regarding the setting of the tariff.

    He confirms that he would have thought CEPA would have recommended tiering if it had been required.

    Dame Una asks questions

    She asks whether, after the CEPA addendum in February 2012, there was any point at which Mr Hutchinson felt the whole responsibility for tariff setting lay within his DETI team.

    He says he believes "it was CEPA's responsibility" to set the tariff and DETI's responsibility "to ask questions, to check and verify".