Office of Gas and Electricity Markets

3. Mrs O complains on behalf of a company (the company). Mrs O explained the company applied for the Tariff Guarantee (TG) under the Non-Domestic Renewable Heat Initiative (NDRHI) scheme. Ofgem approved the application at stage one and two, but it was rejected at stage three because the company did not meet specific technical requirements.

4. The company has been unable to claim the quarterly NDRHI payments that amount to £660,000 over 20 years. The company transferred ownership of the heat pumps to property owners but has kept responsibility for maintaining boreholes, which caused an extra cost.

5. The company wants £660,000 in lost payments or an agreement that Ofgem will allow it to reapply for the NDRHI scheme.

Background to the NDRHI scheme

6. The NDRHI is a government environmental programme designed to increase the use of renewable heat to help reduce carbon emissions and meet the UK’s renewable energy targets.

7. The Department for Energy Security and Net Zero (formerly the Department for Business, Energy and Industrial Strategy) closed the NDRHI scheme in Great Britain to new applicants on 31 March 2021, with some applicants able to apply up to 31 March 2023 under specific circumstances.

8. Accredited installations get quarterly payments over 20 years based on the amount of eligible heat generated. The scheme operates within England, Scotland and Wales.

9. Mrs O told us the company’s stage one application went to review. During the COVID-19 pandemic the TG application was extended and the company withdrew its application after advice from Ofgem.

10. After this, the company submitted a revised TG application. This happened five times meaning more properties could be added to the district heating scheme. Mrs O explains had the TG application been granted, this would have resulted in more NDRHI payments.

11. Mrs O says during stages one and two of the application process, the company submitted plans to show the site layout and boreholes. Importantly the plans showed they were not hydraulically connected. For the company to meet the requirements for the NDRHI scheme it had to show that the properties connected to the district heating were on a shared loop, meaning hydraulic connection for the boreholes was needed. Also, the total stated capacity for the heat pumps had to be 100kw or greater.

12. Mrs O said each property had its own heat pump and two shared a borehole, but the boreholes were not connected hydraulically. This meant the TG application was rejected. Mrs O says Ofgem did not tell the company about the requirements of the heating system at stages one and two of the TG application process and it was only told at stage three.

13. Mrs O says that if the company had known the TG would not be granted, it would have explored other options. Mrs O tells us the company feels Ofgem is negligent in the TG review process. It feels the guidance documents are not good enough as they did not explain what a shared ground loop is and there is no description of what counts as a ‘hydraulically linked’ heating system.

14. Ofgem sent its first response to Mrs O on 8 September 2022. It said the NDRHI TG application was rejected on 14 July, and it was also outside of the 28-day period for a request for a Right of Review (RoR). Ofgem explained it is not in the complaints team’s remit to overturn a decision, but it could give information on why the application was rejected.

15. The response explained the stage one consideration and how this is focused on a review of the budget and to confirm this was available for the application. It said while there was a requirement to indicate the capacity of the proposed installation, no review would be done to assess if this was eligible at stage one.

16. Ofgem said the TG application could be withdrawn if it considered a ‘material change’ during stages one and three. It explained it was the responsibility of the applicant to provide the correct details.

17. Ofgem said no evidence was given at stage one to show there were smaller installations. Ofgem also explained it was only aware of the specifics of the installation when Mrs O sent an email on 1 May. It also reminded Mrs O that technical matters would not be assessed until stage three of the application process.

18. Ofgem disagreed its approach at stage one and stage two had been ‘lax’, and said it reviewed the application in line with the guidance and regulatory requirements. It went on to say stage two only considers financial close, and this does not relate to the technical parts of the heating system installation.

19. Ofgem agreed with Mrs O’s understanding about the guidance, in particular that there were multiple shared ground loop installations. Ofgem stressed it is the applicant’s responsibility to understand the structure of the overall heat pump system including that it is made of separate installations and not a single large installation.

22. Before we decide if we should do a detailed investigation of 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 have not seen any signs that something has gone wrong.

23. Mrs O says Ofgem should have reviewed the technical details of the heating installation at stages one and two of the TG application. Having carefully considered this we have found that Ofgem had clearly explained why stages one and two did not consider the technical parts of the TG application. This is also outlined in its guidance on TGs:

‘A tariff guarantee does not guarantee accreditation, each application will still need to comply with all of the regulations in place at the time of accreditation.’

24. We have seen that Ofgem told Mrs O how it had reached its decision at stage three of the TG application and specifically that the TG application did not meet the regulations. We have seen that Ofgem gave this explanation in line with our Principles, which say:

‘Public bodies should be open and truthful when accounting for their decisions and actions. They should state their criteria for decision making and give reasons for their decisions.’

25. While we can fully appreciate Mrs O’s view about the checks at stages one and two, it is the applicant’s responsibility to make sure they are familiar with the eligibility criteria of the TG application process. Ofgem has made this guidance publicly available.

26. We have noted Mrs O’s comments that the TG guidance did not include relevant information because there is no description of what makes a ‘hydraulically linked’ heating system. Our Principles say we expect organisations to aim to make sure that customers are clear about what they can expect from the organisation and about their own responsibilities. We expect organisations to make information and guidance about schemes they invite customers to use available. We recognise this is an aim and we cannot expect guidance to cover every possible outcome. In these circumstances, we would expect the organisation to respond to enquiries asking for clarification of that guidance. When no request has been made, we cannot say the organisation has acted unreasonably simply because its original guidance did not cover a specific circumstance or event.

27. Overall, we are very sorry that Mrs O thought the TG application was going to be approved, especially as it had passed stages one and two. We recognise she disagrees with Ofgem’s decision and felt the guidance was not good enough. Having reviewed the information available there is no sign that anything went wrong in the way Ofgem reached its decision.

28. We recognise this has been a difficult time for Mrs O and we realise our decision is not the one she was hoping for. We thank Mrs O for bringing her concerns to us.

1. We have carefully considered Mrs O’s complaint about the Office of Gas and Electricity Markets (Ofgem). We have seen no sign that anything went seriously wrong.

2. We are sorry to learn that Mrs O felt Ofgem had not properly considered her application for the Tariff Guarantee under the Non-Domestic Renewable Heat Initiative scheme.