The PSO Levy will increase by over 50% from 1 October
The PSO Levy is to increase by over 50% from October 1st 2014, meaning Irish electricity customers will pay more for their electricity.
The Commission for Energy Regulation (CER) announced the PSO Levy increase, rising from its current annual charge of €42.84 per customer to €64.37.
It represents an increase of €21.53 per customer when VAT is added the total payable amount increases from €48.62 to €73.06, irrespective of how much electricity a customer uses.
PSO Levy increase history:
The table below highlights PSO Levy increases since 2011.
When the new rise in cost comes into effect on 1 October, it will result in a 233% rise in the cost of the PSO Levy since 2011.
From 1 October the average household electricity bill is set to increase from €1,211 to €1,236.
This calculation is based on Electric Ireland’s Standard Domestic Electricity urban 24 hour tariff using the national average consumption. According to the Energy Regulator (CER), the average Irish household uses 5,300 kW/h of electricity per year. Prices include PSO Levy & 13.5% VAT.
PSO Levy explained
The Public Service Obligation (PSO) Levy is paid by all electricity customers and helps subsidise government schemes that relate to national policies on renewable energy targets, indigenous fuels such as peat and to the security of the energy supply.
The cost of the levy is applied to all electricity tariffs in the market and affects all domestic electricity customers, regardless of the level of electricity that they use.
Proceeds from the PSO scheme help to cover some of the costs related to PSO-supported electricity generation which is not covered by revenue channels.
The CER is responsible for setting the PSO Levy and has to ensure that any costs associated with the PSO scheme are calculated correctly.
Any terms of PSO schemes are beyond its control – the CER merely calculates the levy and administers it accordingly.
Some €335.4m is expected to be generated by the PSO Levy for the 2014/2015 financial year, up from €210.9m in 2013/2014.
Reasons for the increase
According to the CER, this cost increase is the subsequent result of three factors – lower wholesale electricity prices, more renewable generation and lower running costs of a 400MW gas plant at Tynagh.
The latter is due to an increase in wind generation while an increase in the number of wind farms has seen generation boosted further, although this has also led to increasing running costs.
The higher PSO levy is being imposed despite a fall in the wholesale cost of generating electricity.
Overall wholesale prices have reduced by approximately 11% in the all-island Single Electricity Market (SEM) according to the CER.
With lower wholesale prices, PSO plants require a higher portion of PSO finance in order to cover their allowed costs – making this the biggest reason for the increase.
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