Dáil debates

Wednesday, 26 October 2016

Other Questions

Public Service Obligation Levy Increase

5:10 pm

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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21. To ask the Minister for Communications, Energy and Natural Resources his views on increasing the public service obligation levy on electricity bills; the rate at which it is levied; and if he will make a statement on the matter. [32065/16]

Photo of Denis NaughtenDenis Naughten (Roscommon-Galway, Independent)
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The public service obligation, PSO, levy has been in place since 2001. The PSO levy consists of a set of support schemes designed to facilitate the national electricity policy objectives for renewables, indigenous fuels and security of supply. The PSO has supported the connection of over 2,000 MW of renewable energy to the electricity grid. It will continue to support the development of renewable energy to ensure we can meet our target of increasing renewable electricity penetration to 40% by 2020.

Recent international studies have shown that Ireland has had one of the lowest per unit supports for renewable energy in the European Union.

The calculation of the level of the PSO is a matter for the Commission for Energy Regulation, CER. The total PSO levy for 2016-17 is €392.4 million. This equates to less than €6 per month for domestic consumers and represents an increase of less than €1 per month. The biggest drivers for the proposed levy increase are the lower predicted wholesale market electricity price and increased deployment of renewables.

I am conscious of the impacts of energy costs on industry and households alike. As the wholesale electricity price is falling, this should be passed onto domestic electricity customers and more than outweigh the levy increase. In this regard, I am pleased to see that most electricity suppliers have recently reduced their standard prices.

Customers can also avail of discounts available, either by contacting their supplier directly, or by using the price comparison websites accredited by CER, such as bonkers.ieor switcher.ie, to switch to discounted tariffs. A customer consuming the average amount of electricity could save over €200 per annum by switching suppliers.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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My party is deeply concerned at the current high level of retail energy prices. These are footed by the consumer at the end of the day. This is at a time when there has been a significant collapse in wholesale gas prices. The Minister is aware consumers are not seeing the equivalent cuts in their electricity and gas bills from the main retail operators. While he is correct that wholesale gas prices decreased by 29% in 2015, the retail equivalent decrease was just 5%, a mere €50 reduction per annum. Any retail energy bill decreases will be negated by the planned PSO levy increase of over 30% this October.

I agree with the PSO approach and support for the renewable energy sector. I also acknowledge the necessity of getting tariffs in place to encourage the solar sector to become part of that mix of renewables. Does the Minister believe the CER is sufficiently empowered with enforcement and sanctioning powers regarding the wholesale electricity and gas market to ensure consumers are getting a fair price?

Photo of Denis NaughtenDenis Naughten (Roscommon-Galway, Independent)
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The overall impact of the levy on consumer bills depends on what happens with the other components in electricity prices. The wholesale price of electricity makes up 50% of a bill, while the network charges make up 30%. That would be a higher factor than would be the case in most other EU countries, purely because we have a dispersed rural population. Up to 30% of our population is on 97% of the country’s landmass. Due to that, the distribution charges are significantly higher than in other parts of the European Union. The retail margin the companies have is between 10% and 12%.

The advantage with the fall in the wholesale price is retailers will pass on those reductions to consumers. However, because of that, we have to compensate the wind operators for that fall in the wholesale price, which, in turn, leads to an increase in the PSO. This has increased by €10.80 to €70.80 per annum. I encourage people to shop around. If they go to bonkers.ieor switcher.ie, they can save up to €200, which would more than negate the cost of the PSO.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Does the Minister believe the CER is fit for purpose? I am not calling into question its directors or anyone else involved in the agency. Is it adequately resourced and appropriately configured from a legislative point of view in challenging the network operator? If the Minister is suggesting that is where a large percentage of the cost is, then consequent reductions in the wholesale price will not be passed on if a large portion of the cost is a function of the network provision.

Photo of Denis NaughtenDenis Naughten (Roscommon-Galway, Independent)
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I have to smile. Deputy Timmy Dooley is legitimately questioning network charges, while Deputy Eamon Ryan is arguing we should increase the charges with smart metering.

Photo of Eamon RyanEamon Ryan (Dublin Bay South, Green Party)
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The customers would save money.

Photo of Denis NaughtenDenis Naughten (Roscommon-Galway, Independent)
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I have to be conscious of all the costs. When I make decisions, I need to make them in the interests of consumers. Deputy Eamon Ryan is correct that the intention would be to ensure people reduce their bills rather than increase them. It would also help in reducing consumption through energy efficiency.

Regarding the regulatory capacity of CER, we are looking at an independent review of its operations. There have been changes in its operation. It is working on the iSEM, all-island single electricity market, which will bring about additional challenges. I do not know if legislative changes are required but we are prepared to look at them.