Renewable Heat Incentive decision quashed on fairness and eligibility

Richard Harwood OBE KC from 39 Essex Chambers acted for the notice parties in a significant judgment at the Northern Ireland High Court which quashed a decision by the Department for the Economy to uphold the revocation of renewable heat incentive (RHI) accreditation for boilers operated by Dennison Commercials, a major truck firm.

The RHI scheme subsidised the burning of woodchip to heat working spaces and for industrial processes. As the costs of the RHI scheme increased in Northern Ireland, the subsidies were significantly cut back in April 2017. The Department and the Office of Gas and Electricity Markets (OFGEM) who administered the scheme then investigated heat usage at accredited installations.

One of the obligations on participants was that 'they must not generate heat for the predominant purpose of increasing their periodic support payments' (Renewable Heat Incentive Scheme Regulations (Northern Ireland) 2012, reg 33(p)). In 2021, Ofgem revoked the accreditation of two of Dennison Commercials' boilers, relying on a large fall in usage after subsidies were cut which were said to be unexplained. They also required the repayment of alleged excessive payments. 

Dennison Commercials asked for a review by the Department's panel under the regulations, which was turned down. They brought judicial review proceedings (Application by Dennison Commercials Limited [2024] NIKB 52). A variety of other companies which also had accreditation revoked also brought proceedings. Dennison Commercials was heard as a test case, with two other operators with a judicial review claim, Milltown Gravel and Supermix, joining as notice parties.

On 26th June 2024 Mr Justice Humphreys quashed the review panel’s decision on four grounds:

(i) The Department’s failure to allow Dennison to know the case against it;

The judge held ‘there was a ready and regular exchange of information between the Panel, the DfE and Ofgem, none of which was made known or available to the applicant or its advisors. This represents an egregious breach of the basic principles of procedural fairness at common law.’ (para 77, 78)

(ii) The Department’s unfair refusal to allow Dennison to submit further evidence;

The Panel had declined to allow further evidence as decision letters were being prepared.  However the final decision had not been taken and they failed ‘to consider the basic question of fairness’ (para 82).

(iii) The Department’s failure to provide any (or any adequate) reasons;

The panel was obliged by the regulations to give reasons for its review decision. The Court said ‘it is well established that the reasons must be adequate and intelligible, and they must enable the reader to understand why the decision was taken as it was – see South Buckinghamshire District Council v Porter (No 2) [2004] UKHL 33’. The decision letter was ‘not a set of reasons at all, but merely a statement of outcomes’ (para 100), which ‘manifestly fails to meet even the relatively low reasons threshold set out in South Bucks’ (para 102).

Humphreys J said (para 105):

“this is a case where adequate reasons are a condition of the validity of the decision. This serves to promote the transparency, effectiveness and impartiality of the Panel’s decision making, and public confidence more generally.”

(iv) The Department’s failure to make a finding that heat has been produced for the predominant purpose of increasing payments;

The Court also found that the wrong test had been applied, concentrating on alleged unnecessary heat production (para 110):

“The Regulations do not prohibit “overproduction of heat.” Sanctions may only be invoked when the predominant purpose test is satisfied. Nowhere in any of the documents generated by Ofgem or the DfE, nor in the evidence relied upon in these proceedings, is this question properly grappled with.”

Mr Justice Humphreys said (para 114):

“The failure to consider how the statutory test is applied is a serious and obvious omission. If for, instance, a participant decides to generate heat for the purpose of making its premises warm and comfortable but, following the tariff change in April 2017, decides to let the premises become cold, this is not a breach of regulation 33(p) since it does not meet the predominant purpose test. Alternatively, the participant may be generating heat both for the purpose of keeping his premises warm and also to increase periodic support payments. In such a case, a decision has to be made as to which is the predominant purpose. Without undertaking the required analysis, the decision maker simply conflates a significant drop in heat production with a breach of obligation.”

Given the systemic nature of the defects identified, the case has wide implications for other accreditation decisions and processes in Northern Ireland.  As the predominant purpose and review provisions are similar in the rest of the United Kingdom, it is important in England, Wales and Scotland.

Richard Harwood OBE KC from 39 Essex Chambers appeared for Milltown Gravel and Supermix, instructed by Andrew Ryan of TLT NI LLP.

Richard will be discussing the case at 39 Essex Chambers’ seminar ‘The Lifecycle of an Energy Project’ on 16 July 2024.