State-imposed energy levy opposed by Aughinish Alumina

Aughinish Alumina has begun lobbying against a State-imposed energy levy from which the company was paid millions of euro up until 2016.

State energy watchdog, the Commission for the Regulation of Utilities (CRU) plans to cut the public service obligation (PSO) levied on all electricity bills by 56 per cent from October to €209.19 million from €471.9 million under the current scheme.

The move will reduce the charge imposed on electricity bills paid by each home in the Republic by €4.21 a month to €3.48 a month.

The charge is levied on all homes and businesses in the State and used to support renewable energy producers, such as wind farms, and two ESB-owned, peat-burning electricity plants.

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Documents lodged with the commission show that Limerick-based aluminium maker Aughinish Alumina was one of the organisations that lobbied against the PSO, labelling it unfair and a threat to investment.

Russian-owned Aughinish Alumina received millions of euro from the same levy between 2006 and 2016. CRU figures show it was paid €13.7 million from the cash collected under the charge between October 2014 and January 2016 to support an electricity-generating plant that the manufacturer built between 2003 and 2006.

The State agreed to Aughinish’s power plant for 10 years in 2006 to help guarantee security of energy supplies. The Government feared at the time that there may not be enough electricity-generating capacity to produce the power needed to supply the Republic’s needs.

Similar deal

The State struck a similar deal with Galway-based privately backed generator Tynagh Energy. Both deals ended in January 2016. Aughinish did not lobby publicly against the charge before that date.

The CRU’s figures do not show how much Aughinish received from the levy in the years preceding 2014. However, in the 12 months from October 2013, both the aluminium maker and Tynagh shared €48 million.

Aughinish would have received far less than Tynagh from this total as the manufacturer’s electricity plant was the smaller of the two.

A submission from Aughinish Alumina energy manager John Ryan, made ahead of the CRU's recent decision, points out that the company spent $130 million (€112 million) on its power plant.

As most of the electricity used by the company comes from its own generating plant, it should not be subject to the PSO, he argued. Mr Ryan notes that Aughinish paid “a staggering” €9.2 million in PSO levies over the last seven years.

“This is an additional cost of doing business in Ireland, this cost cannot be passed on to our customers and this cost is not levied on our competitors,” he says.

Mr Ryan goes on to point out that the EU regards aluminium as a strategic commodity. His submission argues that if governments hit producers of this material with extra costs or hidden taxes to support renewable energy, producers will invest elsewhere.

Aughinish submitted a similar protest against the PSO last year. The company did not respond to efforts to contact it for a comment.