Sparks fly over failed heating scheme that cost ratepayers £13m

A LOCAL authority has been strongly criticised over the handling of a renewable energy project to provide heating to hundreds of homes, which has so far cost £13.8 million but has never worked.

Highland Council established the not-for-profit company Caithness Heat and Power (CHaP) in 2004 to generate heat and hot water to 500 homes in an area of fuel poverty in Wick, using a waste wood-fired system.

But the award-winning concept failed to deliver and an oil-fired generator had to be used to heat the homes.

A damning report published today by the Accounts Commission has criticised the "corporate failure" of the council, and is critical of the authority's current finance director and depute chief executive, Alan Geddes, and its previous chief executive, Arthur McCourt, for their roles.

The report says that from the start the council did not monitor progress of the project effectively and failed to ensure that appropriate control mechanisms were in place.

John Baillie, chairman of the Accounts Commission for Scotland, said: "The CHaP project was established as an innovative scheme to benefit the local community.

"Unfortunately, the council's arrangements for managing its interest in the project were not as good, or as effective, as they should have been.

"However, Highland Council has been addressing the difficulties in governance and financial stewardship and has taken action to avoid a similar position developing again."

The scheme envisaged using wood-fuelled plant and waste heat from the local distillery to supply heat and power to homes.

The reports says that between the project winning approval in October 2004 and May 2008, when significant problems were identified, only three reports were made to the council.

It says Mr McCourt was aware of governance concerns and started to take action, but did not follow through to ensure these measures were effective. Mr Geddes should have been more forthright in pursuing his concerns about project governance, the report says.

The council took control of the company in 2008 and carried out an internal audit, which identified an action plan to tackle the failings of the company and ensure these would not be repeated.

A spokesman said: "As the result of a detailed internal audit review, a number of improvement actions have been taken to ensure that these failings are not repeated in any future venture of this nature.

"A huge amount of effort has gone into finding a way forward for the district heating scheme in Wick."

The authority has since chosen Ignis Energy as its preferred bidder for the scheme.

The CHaP board recently wrote to 260 householders in Wick who receive their heat and hot water through the project saying it hopes to agree a contract soon.