Eamon Ryan (Dublin South, Green Party)

I will give further detail on Deputy Coveney's amendment, although we have discussed this issue on Committee Stage also.

Tynagh and Aughinish Alumina are the only plants that would have such CADA agreements. Deputy Coveney was an Opposition spokesperson when Tynagh and Aughinish Alumina got those agreements. There was a shortage of electricity at the time. We were very close to being unable to meet some of our power demand and in those circumstances the regulator issued them with those contract arrangements to ensure they would have guaranteed sales. Even with those contract arrangements, there is a percentage of their output which in certain instances they may be selling into the electricity market outside that contract arrangement or PSO system, and that is the element on which we would look to make sure that the carbon windfall which accrues to them is recovered. As I said, that is likely to be a small percentage of their output but one we did not want to omit.

I will give details on the peat one because while in our initial discussions on this Bill I was of a like mind that we should apply it to all generators, even in the peat plants where there is a PSO in place, I asked my officials to examine that in some detail and having given it due consideration they came back with the view that removing the exemption for PSO plant from those peat generators would not be irrational because they do not earn the carbon windfall gains in the PSO application they get. That is because PSO plant do not bid into the market in the same way as other generators. Rather they receive a guaranteed fixed return, and that fixed return is generally above the prevailing system marginal price. Hence, when fossil fuel prices are high and the market price is high, there is little or no premium paid to those PSO plant. However, when market prices are low that premium can be large. The effect of the incorporation of carbon into electricity prices was to raise the wholesale cost of electricity similarly to if there had been an increase in fossil fuel prices.

That directly reduced the cost of the PSO levy to consumers. While overall compensation to PSO plant was unchanged, therefore, the cost of the PSO to consumers declined by that portion of the rise in electricity prices attributable to carbon, that is, we, the electricity consumers, benefited from the incorporation of carbon, not the PSO plant. The PSO difference from the market price reduced when we passed through carbon and it was from that point that the consumers did not have to pay for it. The PSO would otherwise have been higher.

Imposing the carbon levy on the PSO plant would be essentially a zero sum game. The amounts we would collect from the PSO plant by applying the carbon levy to them would be passed directly on to consumers through an increase in the PSO levy. I understand it may seem incongruous to some that we are excluding the most carbon intensive plants from the levy but even if we were to include the peat plants in the carbon levy that would have no effect on the emissions of those peat plants.

The peat plants have priority dispatch. That means they always produce electricity when they are available, regardless of the cost. The consumer then picks up the bill for that through the PSO levy. Imposing the levy upon them, therefore, would not reduce their emissions one iota.

I have sympathy with the Deputy's argument that the PSO levy should reflect the true economic cost of running such plant and that the cost should be transparent to consumers. However, as I am sure the Deputy is aware, the CER has recently published its draft decision on the PSO levy that will apply from this October onwards. That decision proposes a PSO levy of almost €200 million, with over €90 million of that total attributable to the peat plant. The decision makes the cost of operating the peat plant clear and real to consumers. The PSO levy applies to all consumers. I have already stated that I will be using the funds raised by this levy to offset electricity prices for large energy users. Therefore, imposing this levy on a PSO plant would raise prices for domestic users while reducing electricity prices for large energy users. This would be an additional burden on consumers. Given that removal of the exemption would have no impact upon the operation of a peat plant and the steps I have taken to address the small amount in windfall gains to be earned by other PSO generators where it is possible, I cannot on that basis accept amendment No. 8.

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