A STORMONT department had no legal power to cut Renewable Heat Incentive (RHI) payments guaranteed for up to 20 years, the High Court heard yesterday.
Counsel representing a group of boiler owners claimed officials must have known tariff rates for those signed up to the original 2012 scheme could not be altered retrospectively.
Gerald Simpson QC insisted the decision to introduce new regulations this year to cover those operators went beyond the Department for the Economy's legal authority.
More than 500 members of the Renewable Heat Association NI Ltd are challenging the move to reduce payments under the botched green energy initiative.
The scheme was set up to encourage businesses and other non-domestic users to move from using fossil fuels to renewable heating systems.
But with operators legitimately able to earn more cash the more fuel they burned, the cost to the public purse has been projected at £500m.
The scandal led to the collapse of Stormont's power-sharing administration, while a public inquiry chaired by retired judge Sir Patrick Coghlin is to examine the development and roll-out of the scheme.
Earlier this year former Economy Minister Simon Hamilton set out revised 2017 RHI Regulations as part of cost-cutting proposals.
Lawyers for the Association claim this was an illegal step against boiler owners with 20-year contracts.
As part of a wider judicial review challenge they are mounting a bid to have the move declared ultra vires, or beyond the Department's legal powers.
Mr Simpson argued that departmental business case papers, and documents sent to Brussells for state aid approval, made clear that boiler owners on the 2012 regulations would be exempt from any changes under a "grandfather" clause.
He told Mr Justice Deeny the tariff for accredited RHI installations was to remain fixed.
The only variation on their rate of return would be due to inflation, the court heard.
"First and foremost there's no suggestion in the internal documents that there's any power to change retrospectively the tariff - in fact the exact opposite is stated," the barrister said.
"It's quite clear that the Department knew that it did not have the power to alter the tariff in the way the 2017 regulations do."
Before rising Mr Justice Deeny raised the possibility of reserving his decision in the wider legal challenge until after the public inquiry examines all the facts.
It was also revealed during the hearing that inspections have uncovered no financial abuse of the scheme among poultry and mushroom businesses.
Consultants were instructed by the Department to carry out an audit amid claims of overpayments.
Mr Simpson told the court: "There's been a report from PricewaterhouseCoopers which has expressed the view that there's no cause for concern in respect of the poultry sector, there's nothing to suggest it's misusing the technology in any way.
"The mushroom sector has also got a clean bill of health."
Proceedings have been adjourned until next month.
