Electricity bills to rise as regulator increases PSO charge

Household and business electricity bills will rise from October when the Commission for Energy Regulation (CER) increases its public service charge by €76 million to cover the growing cost of supports for the wind industry.

The move means the charge imposed on each home will rise to €6.02 a month from €5.01. The cost over 12 months will be €72.28, 20 per cent more than its current level of €60.09.

The regulator plans to raise the public service obligation (PSO) levied on all electricity users in the Republic to support wind power, other renewable energy producers and peat-fired plants by almost €76 million to €400.9 million, from €325 million over 12 months from October 1st to September 30th, 2017.

An increase in the charge is likely to reignite the row over the Republic’s high energy costs and the logic behind imposing an extra levy on consumers and businesses in the first place.

Figures published by the commission show that businesses will pay more than €253 million of the €400 million total. Medium and large-scale electricity users will pay a total of €210.95 million between them over the 12-month period.

This group includes major employers, including those in key areas for the Republic such as food processing, pharmaceuticals and technology, as well as large public service organisations such as hospitals.

The figures give no monthly breakdown of how each business in this group will be affected, but their overall share of the burden will rise by 23.5 per cent.

Small businesses will have €21.18 a month added to their bills from October, 18.5 per cent more than what they pay at the moment. They will each pay a total of €254.16 towards the public service obligation over the 12-month period. Their overall share of the €400 million will come to €42.6 million.

Households will pay a total of €147.4 million.

The cash collected from consumers and businesses bridges the gap between the wholesale cost of electricity and prices guaranteed to a number of generators, to which it is distributed.

Companies generating electricity from “green” sources, the bulk of which are wind farm operators, will be the biggest beneficiaries, as a number of Government schemes underwrite the prices that they are paid for the energy that they produce.

Overall, they will share €277 million of the total collected, compared with €181 million currently. Of this, the wind industry will receive €269.7 million. According to the commission, the main driver of this increase is the sector’s greater size.

“An estimated 2,814 mega watts (MW) of renewable generation, mostly wind, will be supported by the PSO next year. This is 694MW, or 33 per cent, more than the 2,120 MW supported in the current PSO period, hence driving up the levy,” the regulator states in a document detailing the increase.

Another factor is a fall in the wholesale cost of electricity that has resulted from the sharp drop in oil and natural gas prices. As this fell, it left the regulator with a larger gap to bridge between the market and guaranteed prices.

The commission acknowledges that many of the parties that made submissions to it before it set the 2016/17 PSO pointed out that electricity prices in the Republic are already high and imposing an extra charge on businesses could hit their ability to create jobs.

They also argued that imposing the charge as a flat rate on households was a regressive tax as it increased the burden for those on low incomes and in arrears.

The commission’s response says that the PSO is Government policy, designed to promote renewable generation and indigenous fuels, and to support energy security. The regulator adds that it cannot abolish the charge.

“Furthermore, the CER does not have discretion regarding the magnitude of the PSO levy, as the CER calculates the PSO levy in accordance with the governing legislation,” it says.

“Consequently, any issues pertaining to PSO legislation, PSO policy and associated terms and conditions are a matter for Government policy and outside the remit of the CER.”