Council pull plug on Wick heating scheme

Back to square one for Wick heating scheme residents

THE 242 households in Wick which receive their heat and hot water from Caithness Heat and Power (CHaP) have been told that attempts by Highland Council to find a private operator to take over the district heating system have been unsuccessful and that the council will now work with residents to reinstate domestic heating systems in their homes.
In a letter hand delivered to their homes earlier today (Friday), CHaP Company Secretary, Michelle Morris, Assistant Chief Executive of Highland Council, advised households that the council and the directors of CHAP have been striving over a long period to find an operator from the private sector to take over the district heating system .
The council was initially involved in discussions with a company called Clearpower. When the council was not able to conclude an agreement with them, it entered into discussions with the reserve preferred bidder, Ignis.
Ms Morris wrote: “Regrettably, Ignis have failed to achieve the conditions required for concluding an agreement and the council, supported by the directors of CHAP, have agreed to terminate the procurement process and not to award a contract.
“Continuing to operate the existing district heating system is not commercially viable and therefore the council has decided that the way forward must be for houses to revert to the reinstatement of domestic heating and hot water systems.
“For council houses, tenants can be assured that these systems will comply with the Scottish Housing Quality Standard and that the work will form part of our Housing Capital Programme.
“For tenants of other organisations (Cairn, Albyn, Pentland) the council will now initiate discussions with your landlord about how the reinstatement work will go forward.
“For private owners the council will contact you individually to understand your circumstances.
“Please be assured the council and the directors of CHAP have worked tirelessly and done everything possible to attempt to make a success of the CHAP initiative and both are deeply disappointed at the outcome.
“Also be assured we will maintain the current service using the oil boiler until the reinstatements are addressed.
“We will keep you advised of developments and consult with you on how the reinstatement work will affect you.”
Councillor Ian Ross, a director of Caithness Heat and Power, described the outcome as a great disappointment.
He said: “Since taking over the company, the council has done everything possible to find a way forward for this project, which, at the outset, promised so much for Wick households. Our focus now must be on reinstating domestic heating systems in the homes and giving every help possible to households in terms of coping with the change.”


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Below is the Accounts Commission assessment of the scheme which gives an insight into the problems it generated and criticises Highland Council about the way it ran the operation.


HIGHLAND COUNCIL failed to establish effective governance arrangements for innovative heat and power project
The Accounts Commission has considered a report on Highland Council’s Caithness Heat and Power (CHaP) project, which was run by an arms-length community enterprise. In its findings, the Commission says the lack of appropriate risk management and effective governance arrangements for the project was a corporate failure by the council. It also highlights aspects of the performance of two senior officers in relation to governance.
The Highland Council established a not-for-profit company in 2004 to provide a heating system to 500 houses in Wick. The company failed to deliver its objectives and the project experienced technological and financial problems. The council’s total commitment to the project including provisions stands at around £13.8 million. It has spent around £10.5 million so far but because the project is still ongoing the full cost and any losses cannot be determined yet.
The Commission says that there were weaknesses in the council’s arrangements for oversight of the project. From the start, there was a lack of appropriate risk management. The council did not monitor progress effectively and failed to ensure that appropriate control mechanisms were in place.
The Commission notes that the council has taken action to avoid a similar situation happening again. The structure of the council has also changed in recent years and there is now less emphasis on area-based decision making.
Chair of the Accounts Commission for Scotland John Baillie 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, The Highland Council has been addressing the difficulties in governance and financial stewardship and has taken action to avoid a similar position developing again.
“Many councils deliver projects and services through arms length bodies. The history of this project has important lessons for elected members and senior officers. Effective governance and risk management are always needed from the start to ensure best use of public money.”

Council takes steps

In their response to the criticism, Highland Council said it has put in place new governance arrangements to prevent a recurrence of the deficiencies experienced in the early operating years of Caithness Heat and Power, the community-owned enterprise formed to deliver a biomass district heating system in Wick.
The Accounts Commission has ruled that the lack of appropriate risk management and effective governance arrangements for the project was a corporate failure by the council.
The Council took control of the company in 2008 and, having identified failings of the company between 2004-2008, carried out its own 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. We have selected a preferred bidder, whom we hope will deliver a district heating scheme using renewable energy and at an affordable price for local residents.”
Ignis Energy Ltd has been invited by The Highland Council to be its Preferred Bidder to take over the district heating scheme – Caithness Heat and Power Ltd.
The Board of Caithness Heat and Power Ltd (CHAP) recently wrote to 260 householders in Wick who receive their heat and hot water through CHAP informing them of plans to work with the Council and Ignis with the aim of agreeing a contract soon.
The Council will consider the findings of the Commission in the near future. It has a duty to publish in a newspaper circulating in the Highlands the time and venue of the meeting seven clear days in advance of the meeting at which the findings will be discussed. It has also to publish the recommendations of the Commission.
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