Ofgem’s decision to cancel payments
13. Before we decide if we should investigate a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and, we have not found any indications that something has gone wrong.
14. Mr O complains that in making its decision to cancel his payment under the renewable heat incentive (RHI) scheme, Ofgem have misinterpreted its own regulations and should only have withheld his RHI payments whilst his heating system was not working rather than cancelling them completely.
15. Ofgem wrote to Mr O on 27 October 2020, giving a ‘Payment Adjustment Notice’. In this letter it explained that in accordance with Regulation 45 it had adjusted the payments due to Mr O and outlined the reasons as:
‘You first notified us (in accordance with regulation 40) on 16 April 2020 via email that your accredited renewable heating technology was not in good working order and would be replaced.
Under Regulation 45(4), we carried out a review in order to determine if we were satisfied that the plant may continue to be an accredited plant.
In your emails (dated 26/08/2020 and 01/09/2020) it was confirmed that the original product stopped providing heat to the property on 01/04/2020 and the new product was commissioned on 24/08/2020.
Therefore, the accredited plant was not eligible for RHI payments the period between 01/04/20/20 and 24/08/2020 while it was not capable of providing heat to the RHI property. During the above period, it did not meet the eligibility criteria of an accredited plant, as specified in the Domestic Renewable Heat Incentive (RHI) Scheme Regulations 2014, as amended.
This has been calculated to a total of £229.70 of overpayments that will be offset in future payments with a further £394.25 which have been permanently withheld’
16. Mr O wrote to Ofgem and requested it review its decision. In its review decision letter dated 1 December 2020, it upheld its decision and reiterated its reasons from its first letter (outlined above). It also said:
‘I have considered the arguments presented in your review request. I understand and appreciate the circumstances you mention, however, having reviewed the details of the case, including all of the correspondence received to date, I am satisfied that we took the appropriate course of action in this instance.
In line with Regulation 26, we have a duty to make RHI payments in respect of the heat generated by the accredited plant. Your system was not capable of providing heat to the domestic property between 1 April 2020 and 24 August 2020 and therefore it is correct that you are not entitled to receive RHI payments for this period. I acknowledge that you explained how Covid affected the time taken to replace your renewable system, however, these factors cannot be considered as there is no discretion concerning this regulation.’
17. Mr O told us that the regulations he believes Ofgem have misinterpreted are 40, 45 & 58. Which say:
‘Ongoing obligations: changes affecting accredited domestic plants
40.—(1) A participant (“P”) must notify the Authority if, at any time in the tariff lifetime—
(a)P becomes aware that any of the information provided in support of the accreditation application for P’s accredited domestic plant is incorrect;
(b)the accredited domestic plant no longer generates heat for the RHI property;
(c)a replacement plant is installed which generates heat for the RHI property;
(d)any other plant is installed which generates heat for the RHI property;
(e)the RHI property is occupied for less than 183 days in any 12 month period after the RHI date for the plant, unless the Authority has provided a metering statement for the plant;
(f)the accredited domestic plant no longer provides heat for an eligible purpose;
(g)P becomes aware that P will not be able to comply with an ongoing obligation;
(h)P ceases to comply with an ongoing obligation;
(i)P, or another owner of the accredited domestic plant, intends to transfer ownership of all or part of the accredited domestic plant within 28 days;
(j)any change in ownership of all or part of the accredited domestic plant has taken effect;
(k)there is any other change in circumstances which may affect P’s eligibility to receive RHI payments; or
(l)any meter which is required under a metering statement for the accredited domestic plant is moved, is replaced, is reset or ceases to operate, be in good working order or be an eligible meter, or any eligible meters are added or removed.
(2) A notification under this regulation must be made within 28 days of P becoming aware of the circumstances to which the notification relates.’
‘Review of accreditation following notification of a change in circumstances
45.—(1) This regulation applies where the Authority receives a notification under regulation 40 and regulations 47 and 48 do not apply. (2) Where this regulation applies, subject to regulation 46(2)(b), no RHI payment may be made for the accredited domestic plant until the requirements set out in paragraph (4) are met.
(3) On receipt of the notification, the Authority may—
(a)require the participant to provide such of the information specified in Schedule 4 and any declarations the Authority considers necessary for the proper administration of the domestic RHI scheme; and
(b)review the accreditation of the accredited domestic plant to ensure that it continues to meet the eligibility criteria.
(4) The requirements referred to in paragraph (2) are that the Authority has notified the participant that—
(a)it is satisfied that the matters to which the notification relates are such that it is unnecessary to review the accreditation of the plant; or
(b)it has carried out a review and is satisfied that the plant may continue to be an accredited domestic plant.
(5) Following a notification under paragraph (4) the Authority must resume payment of RHI payments in accordance with these Regulations.’
‘Power to withhold RHI payments in the case of non-compliance
58.—(1) Where the Authority is satisfied—
(a)that a participant is failing to comply with an ongoing obligation; or
(b)that an accredited domestic plant has been given accreditation wholly or partly as a result of the provision of information which is incorrect in a material particular, it may withhold all or part of that participant’s RHI payments.’
18. Mr O says these regulations state that the during replacement work payments can be stopped, he says the rules do not say that they can be cancelled. He also says Ofgem did not take the government enforced lockdown into consideration when making its decision.
19. We can understand Mr O’s view as the regulations he has referred to do not specifically say payments can or should be stopped completely. However, Regulation 47 says:
‘Replacement plants
47. Where a replacement plant is installed—
(a)an accreditation application for that plant may be made by the owner of the replacement plant if that person is a participant in relation to the original plant; and
(b)no RHI payments are payable for the period commencing on the date on which the original plant ceased to provide heat to the property and ending on the day before the date on which the Authority received the accreditation application for the replacement plant.’
20. On 30 August 2019, Ofgem issued an open letter to all Domestic RHI applicants and participants, renewable heat installers and renewable heat trade bodies. This letter says ‘It is our view that a product is replaced when all or any of the renewable heat generating components of the system are replaced’.
21. It is clear from this that Ofgem do not distinguish between a product being repaired or replaced. As such, its decision to permanently withhold Mr O’s payments whilst his system could not generate heat is in line with Regulation 47.
22. We recognise that the delays Mr O experienced in getting his heating system working again were in no way his fault. It is very unfortunate that coronavirus restrictions had an impact on the time it took for him to get his heating system repaired. The regulations do not provide any discretion for Ofgem to take situations such as the coronavirus pandemic into consideration in its decision making. As such we do not consider that there are any indications that Ofgem’s decision to cancel Mr O’s payments during the period his heating system could not generate heat, was incorrect.