Cost of subsidy jumps by 140% but less renewable electricity generated
Denis Naughten has described the fact that electricity bills will jump by €54 a year from Thursday to subsidise renewable electricity as “completely unjustifiable”. He has highlighted that despite the jump in cost there will be 44,000 less homes supplied with green energy.
Under a decision taken during the summer by the Commission for the Regulation of Utilities (CRU) electricity bills will go up by €54 from 1st October under the Public Service Obligation (PSO) to subsidise the cost of generating renewable electricity, mainly from wind.
“However, hidden in the detail is the fact that in the next 12 months the CRU expects that 83MW less renewable electricity will be generated which would be enough to power 44,000 homes with green electricity,” stated Denis Naughten.
“Also hidden in the decision by the regulator is the reduction in the PSO for peat fired electricity which should have seen electricity bills fall by €4/year instead of jump by €54/year.
“So even though electricity customers are no longer paying for the burning of peat in power stations, the levy is set to increase by 140% yet this will subsidise the generation of electricity for 44,000 less homes over the next 12 months.
“This perverse twist to the hike in electricity bills needs to be outlined in detail by the regulator, CRU, and I have now written to Deputy Brian Leddin, Chair of the Dáil Committee on Climate Action, requesting that the regulator be hauled before the committee immediately to explain why families are facing such hikes,” concluded Denis Naughten.
Public Service Obligation Levy:
The PSO Levy (Public Service Obligation) is a charge that all electricity customers in Ireland must pay on their electricity bill. It is used to subsidise the cost associated with producing renewable electricity and was until this year also used to subsidise the cost of burning peat, due to a security of energy supply policy.
The PSO levy is currently €2.84/month (before VAT) and this will rise to €6.52 a month (before VAT) from October 1st, 2020.
However, as peat is no longer subsidised the PSO in 2020/21 this should have come down by €0.30.
So, in real terms the cost has gone up by €3.98 before VAT of 13.5% which brings it to €4.52/month or €54/year. This is an increase of 140%.
The total annual PSO Levy per domestic customer from 1st October 2020 will be €88.80 inclusive of VAT.
Extract from CRU decision:
Downward Drivers of the 2020/21PSO Levy
i. Decreased Renewable Capacity:
An estimated 3,891.2MW of renewables will be supported by the 2020/21 PSO levy. This is a slight decrease of 83MW, or 2% less than the 3,974.2MW of renewable capacity supported in the 2019/20PSO year. Following the expiry of the Peat PSO Scheme, both Lough Ree and West Offaly plants were eligible to claim REFIT 3 support for co-firing biomass with peat, up to 30% of the plant capacity in any single year. This REFIT 3 support was subject to the granting of planning permission by An Bord Pleanála for the co-firing of biomass at 30% of plant capacity at both plants. ESB have not obtained planning permission at either plant. As a result, ESB have not made an ex-ante submission to the 2020/21 PSO levy for either of these projects. In addition to these two ESB plants, several other small REFIT 2 and REFIT 3 projects that made submissions to the 2019/20 PSO levy, have not made submissions for the 2020/21 PSO year.
ii. Expiry of Peat Scheme:
The Peat PSO Scheme expired at the end of 2019. Notwithstanding this, in a PSO submission made to the CRU in April 2020, ESB sought to claim ex-ante costs of €25.8 million for the 2020/21 PSO year (included Dismantling Costs, Environmental Provision Costs, Just Transition Costs & Rates). In a subsequent submission received by the CRU in May 2020, ESB proposed treating these costs as actual PSO costs. These costs were excluded from the CRU’s calculation of the 2020/21 proposed PSO levy.
Letter to the Chair of the Climate Action Committee:
Deputy Brian Leddin,
Joint Oireachtas Committee on Climate Action.
Dear Deputy Leddin,
I am writing to you to request that the Commission for the Regulation of Utilities would come before your Committee at an early date to discuss the impact of the renewable energy Public Service Obligation on electricity customers, particularly families who are at present struggling to pay their electricity bill.
I believe that electricity customers will find it hard to understand how the Commission for the Regulation of Utilities (CRU) can increase electricity bills by €54 from 1st October yet there will be 44,000 less homes supplied with the green energy over the coming 12 months.
Also hidden in the decision by the regulator is the reduction in the PSO for peat fired electricity which should have seen electricity bills fall by €4/year instead of jump by €54/year.
So even though electricity customers are no longer paying for the burning of peat in power stations, the levy is set to increase by 140% yet this will subsidise the generation of electricity for 44,000 less homes over the next 12 months.
Specifically, the CRU should:
(i) Clearly explain why the PSO levy is set to jump by €54 in real terms in 2020/21 yet it will subsidise less electricity than it did in 2020.
(ii) Outline why electricity customers should continue to pay €7.66m in levy’s over the next 12 months for peat generated electricity when the PSO ceased for West Offaly & Lough Ree power stations at the end of 2019.
(iii) Clarify if the PSO will be used to fund the decommissioning costs of West Offaly & Lough Ree power stations and if this is being considered that CRU will allow for alternative proposals to be presented which could facilitate the retention of the buildings for other uses, including renewable energy uses.
(iv) Provide an estimate on the impact that data centres will have on the PSO over the next decade.
I’m attaching a background note which may be of assistance to your members and I hope that the Commission can be brought before a public hearing of your Committee at an early date.
Denis Naughten TD