Robert Dowds (Dublin Mid West, Labour)
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Question 226: To ask the Minister for Communications, Energy and Natural Resources if he will cap the public service obligation levy on energy bills for voluntary organisations in order that the levy, inclusive of VAT, cannot exceed the cost of the energy used for the billing period. [16250/11]

Pat Rabbitte (Dublin South West, Labour)
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The Public Obligation Service (PSO) levy has been in place since 2001 and is the support mechanism for peat generation and the development of renewable electricity. The PSO also supports the output of two gas fuelled power plants built in 2005 to secure much needed generation capacity at the time. The levy is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by the three peat stations and renewable energy sources. The levy has supported the connection of more than 1,400 MW of renewable energy, mostly wind, to the electricity grid over the last decade. The Commission for Energy Regulation (CER) determines the PSO levy which is a charge on all electricity customers without exception. Its legal basis and method of calculation are set out in the regulations made under the Electricity Regulation Act 1999. The scheme sets outs that it applies to all electricity customers. Each year the PSO Levy is calculated by CER according to the method set out in the regulations and this process is currently underway for the next PSO year starting on 1st October 2011.

The PSO levy for the current year (exclusive of VAT of 13.5%), is €32.76 for residential customers and €99.03 for small to medium sized business customers. On a VAT exclusive basis, this roughly equates to €2.73 per month or €5.46 every two months for residential customers and €8.25 per month or €16.50 every two months for small to medium sized business customers.

In general terms, the cost of the PSO levy to the consumer tends to be low or zero when gas and oil prices are high, as in these cases the market adequately rewards renewable and conventional generation including the peat stations. However, when fossil fuel prices are low, peat and renewable generators become less competitive and suppliers need to be compensated for purchasing their output. The fall in gas prices in recent years gave rise to the re-emergence of the PSO levy on all customers' bills from October 2010.

Global gas and oil prices have risen sharply since the start of the year driven by events in North Africa and Japan and high demand from the emerging economies of China and India. Markets and analysts are forecasting that international oil and gas prices will rise further over the coming months. The Energy Regulator, Bord Gáis Éireann, ESB and other energy suppliers consider that such increases will have an impact on domestic gas and electricity prices. Ireland is a price taker in the global fossil fuel market and electricity consumers are therefore vulnerable to such energy price fluctuations and price rises.