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Energy Prices

Dáil Éireann Debate, Wednesday - 19 October 2011

Wednesday, 19 October 2011

Questions (98, 99)

Bernard J. Durkan

Question:

98 Deputy Bernard J. Durkan asked the Minister for Communications, Energy and Natural Resources the degree to which he can interact with his EU colleagues with a view to achieving lower energy prices; and if he will make a statement on the matter. [30433/11]

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Written answers

I do not have a statutory function in the setting of energy prices, whether in the regulated or unregulated market. Responsibility for the regulation of the electricity and gas markets is a matter for the Commission for Energy Regulation, CER, which is an independent statutory body. Prices in the retail electricity market are now fully deregulated and from 1 October 2011 gas residential consumers are the only segment of the electricity and gas markets where prices are regulated. Prices in the electricity market and unregulated part of the gas market are wholly a commercial and operational matter for the suppliers. Ireland's electricity and gas markets, both wholesale and retail, are characterised by vigorous competition regulated by the CER.

The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing energy consumers during this difficult period for the economy. The provision of secure, sustainable and competitive energy supplies is critical for the economy and is a challenge we are determined to meet.

Global gas and oil prices have risen sharply since the start of 2011 driven by events in North Africa and Japan and high demand from the emerging economies of China and India. There are clear indications that international oil and gas prices will rise further over the coming months. These trends are leading to higher domestic electricity and gas prices, as reflected by recent increases in domestic electricity prices announced by the suppliers competing in that market and by CER's decision to allow an increase in BGE's regulated gas tariff for the residential sector.

Given Ireland's heavy reliance on imported gas and oil and relatively small market size, it is a price taker in the global fossil fuel market. The economy is therefore vulnerable to fossil fuel price fluctuations and price rises. Competitor countries are in many instances facing the same prospect and the objective in the context of higher global prices must be that we retain or improve our competitive position.

Ireland's concerns about high oil and gas prices are shared at EU level and fellow Member Countries of the International Energy Agency (IEA). The EU and IEA agree that high fossil fuel prices which pose a threat to economic recovery underline the need to reduce dependence on fossil fuels by radically enhanced energy efficiency measures and the development of renewable energy.

EU energy Ministers have focused in recent years on bringing about change in Europe's electricity and gas markets, for example, as regards industry structure, the extent of competition, security of gas supply and greater EU energy market integration. EU targets have been set for 2020 in relation to both energy efficiency and renewable energy. These EU developments have at the same time allowed for Member State subsidiarity in these matters, especially in relation to their fuel mixes. The successful implementation of these policies should contribute to a lesser dependence on fossil fuels, and therefore a lower vulnerability to global price increases in such fuels.

At a national level, our competitive energy market helps put downward pressure on prices. In addition, we must focus on all possible additional actions to mitigate costs where possible for business and domestic customers. This is essential for competitiveness, employment and for economic recovery. I am committed to working with enterprise and with the energy sector to ensure that the costs of energy are as competitive as possible through those measures at our disposal including sustained focus on energy efficiency and renewables.

Charlie McConalogue

Question:

99 Deputy Charlie McConalogue asked the Minister for Communications, Energy and Natural Resources his plans to exclude charities, voluntary and community organisations and sporting clubs from the public service obligation levy; and if he will make a statement on the matter. [30437/11]

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The Public Obligation Service (PSO) levy has been in place since 2001 and is the support mechanism for peat generation, the development of renewable electricity, and certain plant necessary for security of supply. The levy is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by plant qualifying under these three headings. The levy has supported the connection of more than 1,400 MW of renewable energy, mostly wind, to the electricity grid over the last decade. The PSO also supports the output of two gas fuelled power plants built in 2005 to secure much needed generation capacity at the time.

The Commission for Energy Regulation determines the PSO levy which is a charge on all electricity customers without exception. The legal basis for the PSO levy and its method of calculation are set out in regulations made under the Electricity Regulation Act 1999. The scheme sets outs that the levy applies to all electricity customers and the levy amount is reviewed annually. The PSO levy for 2011/2012 (exclusive of VAT of 13.5%) is €19.33 for residential customers and €57.22 for small to medium sized business customers. On a VAT exclusive basis, this roughly equates to €1.61 per month, or €3.22 every two months, for residential customers and €4.77 per month, or €9.54, every two months for small to medium sized business customers.

In general terms, the cost of the PSO levy to the consumer tends to be low or zero when gas and oil prices are high, as in these cases the market adequately rewards renewable and conventional generation including the peat stations. However, when fossil fuel prices are low, peat and renewable generators become less competitive and suppliers need to be compensated for purchasing their output. The fall in gas prices in the two years up to September 2010 accounts for the re-emergence of the PSO levy as a positive amount on all customers' bills from October 2010 onwards.

While I fully understand and appreciate concerns about the cost of the PSO levy to customers, it is the Government's position that increasing the share of renewable energy in electricity generation in Ireland, will enable Ireland reduce its fossil fuel dependence and vulnerability to rises in international fossil fuel prices. The PSO levy supports that development and increased security of supply in electricity generation.

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