Huge payment cuts to Northern Ireland’s botched Renewable Heat Incentive scheme were lawfully made to prevent a crisis in public finances, the Court of Appeal ruled on Tuesday.
Senior judges accepted boiler owners who signed up to the green energy initiative had a legitimate expectation that tariff rates were guaranteed for 20 years.
But they held that this belief could be legitimately frustrated due to the wider public interest in protecting the Northern Ireland budget.
Lady Chief Justice Dame Siobhan Keegan said the Department for the Economy was faced with significant overspend in a flawed scheme which threatened the public purse.
“It is hard to conceive of more critical or striking circumstances which required action,” she stated.
“Something had to be done to avoid a crisis. These were truly exceptional circumstances and as such we think that a lawful course was followed.”
Members of the Renewable Heat Association NI Ltd and poultry farmer Thomas Forgrave took separate cases against the Department over legislative changes introduced in 2017 and 2019.
The revised RHI regulations saw average annual payments to non-domestic operators slashed from £13,000 to £2,000.
Boiler owners claim it was an unlawful step taken against operators given a cast-iron 20-year rate of return when they invested in the incentive back in 2012.
Their rights were “obliterated” by the tariff cuts, it was contended.
Set up to encourage businesses and other non-domestic users to switch to environmentally friendly wood pellet burning systems, the RHI scheme was plunged into controversy after the potential cost to taxpayers emerged.
Because subsidies were higher than fuel costs it became known as "cash for ash", closed to new entrants in 2016 and eventually led to the collapse of the Stormont's power-sharing administration a year later.
A public inquiry chaired by Sir Patrick Coghlin identified a series of failings but found no evidence of illegal activity.
Two judicial review challenges have already held that the reduced tariffs were lawful.
Appealing those rulings, lawyers for the “2012 cohort” of boiler owners claim insufficient weight was given to the potential catastrophic impact on their livelihoods.
Mr Forgrave’s award-winning business had been left potentially unviable after he borrowed hundreds of thousands of pounds to install ten biomass boilers at his poultry farm in Co Antrim, the three-judge panel was told.
His barrister argued that the High Court was wrongly swayed on being told he has received more than £1m in payments over a seven-year period.
The court also heard that despite lurid headlines at one stage about the scheme potentially costing up to £700m, a £390m underspend is now estimated.
Counsel for the department insisted the level of payments made to Mr Forgrave were “not an excessive burden”.
He also forecast that the poultry farmer could have received nearly £8m over the lifetime of the scheme if the 2012 rates remained in place.
Based on the RHI methodology, another man who installed four 99kw boilers at a total cost of £111,000 was said to have secured returns of 204%.
He would have been paid more than £2.5m if subsidies had continued at the original rate, the court heard.
The department argued that a government authority can break a legitimate expectation, provided it does not amount to an abuse of power.
Two options for compensating boiler owners have been explored: closing the flawed scheme and buying out participants; or potentially revising tariff rates.
But with no functioning power-sharing administration at Stormont, the operators' sceptical legal representatives claimed all promises have failed to materialise.
It was repeatedly stressed that no official has ever faced sanctions for the debacle.
Instead, the court heard, the only ones to suffer financial and personal damage are the boiler owners who mistakenly believed government promises when they signed up to use the scheme.
Delivering judgment, Dame Siobhan said: “The frustration of a substantive legitimate expectation, which we do think exists, in fairness to all the boiler owners who are caught by the change provided by the 2017 Regulations, is to be balanced with the public interest in providing proper financial relief rather than overcompensation for a scheme that was fundamentally flawed.
“Fairly early on, after there was a rush into this scheme, the sheer scale of the threat to public finances clearly justified the introduction of a remedial measure.”
Claims that the changes to the scheme amounted to a breach of Article 1 Protocol 1 property rights under European Convention on Human Rights were also rejected.
Dismissing both appeals, the Lady Chief Justice recognised the position small and medium mass boiler owners have been left in because of the “botched” scheme.
She concluded: “We have sympathy for those who have been adversely affected by the mistakes that have been made and who have probably lost faith in government.
“However, we must answer the legal questions which require us to consider not just individual interests but wider considerations of public interest.”
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