Billy Timmins (Wicklow, Fine Gael)
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Question 133: To ask the Minister for Communications, Marine and Natural Resources the reason for the projected decrease for the public service obligation charge on ESB bills for 2006; and if he will make a statement on the matter. [27760/05]

Noel Dempsey (Meath, Fianna Fail)
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A public service obligation has been imposed by the Minister of Communications, Marine and Natural Resources on the ESB since 1 January 2003 and has been amended since then. The primary objectives of the obligation are to ensure reasonable self-sufficiency in electricity generation capacity by utilising peat as a primary fuel source, promote renewable energy sources to help protect the environment and cover costs of generation capacity needed to ensure that customer demand can be met in times of peak demand.

The Commission for Energy Regulation is required under section 9(2) and (3) of the Electricity Regulation Act 1999 (Public Service Obligations) Order 2002, as amended by SI 217 of 2002, to approve the ESB's estimated additional costs incurred by complying with the public service obligation. These include the administration costs incurred by the transmission system operator, suppliers and the distribution system operator in collecting payment of the obligation levy. The costs are calculated annually, with the sanction of the European Commission, in accordance with parameters specified in the public service obligation notification to the European Commission. The public service obligation levy for a given year is calculated, by the Commission for Energy Regulation, on an ex ante basis.

The current wholesale electricity market in Ireland is a bilateral contracts market with a balancing mechanism. The majority of energy traded is contracted under bilateral arrangements between participants. With this market structure, no set market price is available. In the absence of a market price the additional costs incurred by the ESB in complying with the public service obligation are those above and beyond a regulated ex ante best new entrant market price, as published annually by the Commission for Energy Regulation. The increase in the best new entrant has impacted significantly on the public service obligation levy for 2006 as this is the benchmark price against which the additional costs of meeting the public service obligation is measured. Effectively, the public service obligation will decrease by a projected €59 million in 2006 because the best new entrant price has increased.