The energy regulator is proposing to increase the levy by 35%
Consumers are facing an increase of almost €20 per year in their electricity bills due to a hike in the green energy levy while electricity bills for businesses will also increase by around €65 per year.
All customers have to pay the public service obligation (PSO) levy to cover the cost of subsidising energy from wind farms, as well as from older peat-burning power stations needed to provide a regular supply.
The energy regulator is now proposing that this PSO levy be increased by 35 per cent for the 2016-2017 period. The PSO levy was previously increased by 85 per cent for the last 2015-2016 period.
The Commission for Energy Regulation (CER) confirmed that the latest planned increase would lead see households paying a PSO levy of €79.48 per year. This is up by €19.39 on the current PSO levy of €60.09 per year.
Small and medium-sized businesses will pay a PSO levy of €279.48 per year, which is up by €64.98 on the current levy of €214.50.
One of the main reasons for the latest proposed increase is that wholesale electricity prices have fallen by 28 per cent due to the drop in oil and gas prices. This means that energy from wind farms is getting a lower price, so the PSO levy has to be increased to make up the difference.
The CER said there were also more wind farms coming onto the system which meant there was more renewable electricity to subsidise with the PSO payments.
“An estimated 2,943 megawatts of renewable generation, mostly wind, will be supported by the PSO next year.This is 863 megawatts, or 41 per cent, more than the 2,080 MW supported in the current PSO period,” it said.
The PSO levy is due to raise around €440 million, with €334 million going to subsidise renewable energy and another €137 million going to the peat-burning power plants in Lough Ree in Lanesborough in Longford and in Edenderry in Offaly. The Edenderry plant is now burning a mixture of peat and biomass to produce energy.
The PSO levy is designed to support an increase in electricity generated from wind farms, which the state needs to have any chance of meeting its carbon emissions reduction targets by 2020. It will face heavy EU fines if the targets are missed.
A public consultation process is being carried out by CER before the final decision on the 36 per cent PSO levy increase is made on August 1.
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