Friday's prosecution in Parramatta Local Court has been welcomed by Fair Trading Minister Virginia Judge as "a clear message to NSW traders . . . that Fair Trading will not hesitate to go after companies that don't comply with the law".

Mr Heslop and his business partner Kerry Hawkins yesterday apologised for the fire but said the blame lay with the Federal Government.

"Yes, the scheme did stimulate the economy but at the cost of many unfortunate individuals," Mr Heslop said in a statement tendered to magistrate Jennifer Betts.

Yesterday, an angry Mr Heslop and a tearful Ms Hawkins said the insulation saga threatened to ruin their business.

"This fire happened in October but I had warned the Government about the problems with this long before then," Ms Hawkins said.

"The only reason our company was the first one to be prosecuted is because all the others have disappeared or changed their names or gone under. We didn't. We've faced up to it and gone to court and pleaded guilty.

"We've had subcontractors do shoddy work. We've been ripped off paying for insulation batts that never appeared. People think you're doing insulation on this scheme and you're making a fortune. We've lost so much money on this it has almost broken us."

Ms Hawkins said the insulation scheme warranted a royal commission.

At Friday's hearing, Mr Heslop was fined $2000 and his company Dowco Pty Ltd (trading as ABC Insulation) was fined $10,000 over a fire that extensively damaged a two-storey house at Dean Park, near Blacktown in Sydney's west, on October 15 last year.

Ms Judge said the charges were laid under Section 44(b) of the Fair Trading Act for "falsely representing a service".

Ms Judge said investigators found the fire was caused by overheating wiring and downlights covered by insulation batts.

Mr Heslop said insulation had been "an intrinsic" part of his business but the $2.5-billion insulation subsidy had been "chaotic" from the start.