Frank Feighan (Roscommon-South Leitrim, Fine Gael)
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Question 229: To ask the Minister for Communications, Energy and Natural Resources if a full reply will issue to correspondence sent to him six weeks ago (details supplied). [41030/10]

Eamon Ryan (Dublin South, Green Party)
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I can confirm to the Deputy that a full reply was issued to him on 3rd November. I outline in brief below the points made in my response. The Government recognises that the cost of energy in Ireland is a serious competitiveness issue facing the enterprise sector during this difficult period for the economy. The provision of secure, sustainable and competitive energy supplies is critical for the economy and is a challenge we are determined to meet.

Significant steps have already been taken to improve Ireland's competitiveness and these policies are working. Regulated electricity prices for small businesses fell by 15% from May 2009 to September 2010 and the electricity market for all businesses will be completely deregulated from 1st October 2010. By shopping around for an electricity supplier businesses can avail of further significant savings. Large businesses have similarly seen declines of between 34% - 44% on average over the past 18 months.

The PSO levy is not a new levy on business. It has existed since 2003 but has been set at zero for the last three years. Its legal basis and method of calculation are set out in the regulations made under the Electricity Regulation Act 1999. In general terms the cost of the PSO levy tends to be low during periods when fossil fuel prices are high, as in these cases the market adequately rewards renewable and indigenous peat producers. Hence, for the last three years we have had a nil PSO.

However, as fossil fuel prices fall, peat and renewable generators are no longer as competitive with fossil fuels and suppliers need to be compensated for purchasing their output. As gas prices have fallen significantly since their peak this is what gives rise to the proposed increased PSO levy from this October.

The PSO levy supports the security of our energy supplies and the development of renewable electricity in Ireland. Already at a low cost, the levy has enabled the connection of more than 1,400 MW of renewable energy mostly wind to the electricity grid. This renewable energy is helping to reduce wholesale electricity prices at times of high wind by displacing higher cost fossil fuel generators. Renewable energy and other sources and technologies supported by the PSO levy helps to reduce our dependence upon imported fossil fuels. It is our lack of indigenous fossil fuels and high level of dependence upon price-volatile imports which led to high electricity costs in 2008. By continuing to support renewable electricity we reduce this dependence and the risk of future price volatility.

The Government will however ensure that the development of renewable energy is achieved in a cost effective way. We have the second lowest rates of renewable energy supports across Europe, which reflects our abundance of renewable resources. I intend to review the operation of the peat PSO to ensure that it is also being operated in as cost efficient a fashion as possible. It remains the Government's position that the development of renewable energy in Ireland is lowering electricity prices to consumers in the long run and that the PSO levy is required to support this development.