Electricity prices may rise over green levy

A PROPOSAL to pay for green energy incentives and supports for peat-fired power plants could add €40 a year to consumers’ electricity bills and increase industries’ costs by five-figure sums.

Every year the Commission for Energy Regulation imposes a public service obligation charge on all electricity users to pay for incentives for renewable energy and to support peat-fired power plants.

The charge was dropped last October for 12 months, but the regulator estimates that the incentives now cost €195 million a year, and proposes adding a new charge to cover this. This would increase household bills by €3.40 a month or €40 a year.

Energy consultants, McKinnon Clarke warned that those hardest hit will be large industrial users, including many of the State’s biggest employers, who could face five-figure increases in their annual electricity bills. One of the company’s consultants, Sandra Quinn, explained that such customers face a double whammy as they are also set to lose credits paid to large energy users.

McKinnon Clarke’s figures show the loss of credits combined with the extra charge would mean a typical industrial user paying about €3,000 extra a month, or well over €30,000 extra a year.

Ms Quinn warned that Irish-based subsidiaries of multi-nationals could have difficulty justifying such increases to their parent companies. “I would be very concerned about jobs,” she said. The regulator’s spokesman said the increase was just a proposal, and no decision would be made until submissions were heard from all interested parties. He explained the proposed charge is just “one component” of electricity costs, and said other elements – generation and networks – could come down.

He pointed out that the charge was dropped last year partly because the availability of green energy helped offset fossil fuel price increases. Those costs have since come down.

The spokesman said the proceeds of a proposed carbon windfall tax, which will be levied on power plants, will be used to substitute for the credits paid to large energy users.

Separately, yesterday, the first Bord Gáis monthly energy index indicated that wholesale prices could be on the rise again, despite a fall in May.

The index tracks the world market prices of oil, gas, coal and the wholesale price of electricity, and weights each fuel according to the rate at which it is consumed. It is benchmarked at 100, which is based on prices on December 31st.

The index rose to 110 from January to April but dropped 1 per cent in May to 109, mainly because of an 8 per cent fall in oil prices, its largest component. The cost of the other three commodities increased.

However, it states that the outlook is for price increases to resume in the the short to medium term, driven mainly by confidence that the world economy is emerging from recession.