Dáil Éireann Debate, Tuesday - 5 November 2013
607. Deputy Pearse Doherty asked the Minister for Communications, Energy and Natural Resources the reason for the increase in the public service obligation levy for electricity customers; if he will confirm that VAT is payable on the levy; if he has considered the impact this increase will have on consumers; and if he will make a statement on the matter. [45622/13]
View answerThe Public Service Obligation (PSO) levy has been in place since 2001 and is the overall support mechanism for peat generation, for certain conventional generation constructed for security of supply purposes, and for the development of renewable electricity. The levy is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by these producers.The Commission for Energy Regulation (CER) 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 (S.I. 217 of 2002). The scheme sets out that the levy applies to all electricity customers and the levy amount is reviewed annually. VAT at a rate of 13.5% is payable on the PSO levy amount. The annual PSO levy amount for 2013/2014 (exclusive of VAT) is €42.87 for residential customers and €129.83 for small to medium sized business customers. This equates to €3.57 per month for residential customers and €10.82 per month for small to medium sized business customers. Medium and large customers pay €18.47/kVA annually or €1.54/kvA monthly. I understand from the CER that the key drivers for the rise in the annual PSO levy include: (i) a lower market price for electricity than expected; (ii) less running of certain PSO plant than anticipated (resulting in reduced market income and hence an increased requirement for PSO support), (iii) an increase in wind connections supported by the PSO, as well as (iv) a “correction factor” for under-recoveries of the PSO in previous years. The CER Decision on the PSO levy (CER/13/168) is available at www.cer.ie
While I fully understand and appreciate concerns about the cost of the PSO levy to customers, the development of renewable energy capacity will allow Ireland to reduce its fossil fuel dependence and vulnerability to rises in international fossil fuel prices. The PSO levy supports that development and provides increased security of supply in electricity generation.
