Kevin Humphreys (Dublin South East, Labour)
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Question 160: To ask the Minister for Communications, Energy and Natural Resources the action that has been taken on the recommendation of the National Competitiveness Council in the Ireland's Competitiveness Challenge 2011 report to phase out subsidies for peat generated electricity as funded through the public service obligation levy; if any consideration has been given to transferring these funds to projects such as the better energy homes scheme or warmer homes scheme; and if he will make a statement on the matter. [25811/12]

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 levy is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by the three peat stations, from renewable energy sources and from the gas fuelled plant commissioned in 2005 to ensure adequate electricity supply. Peat-fired electricity plants are supported as they contribute to security of supply through the use of indigenous fuels. The levy has supported the connection of approximately 2,000 MW of renewable energy, mostly wind, to the electricity grid over the last decade. 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 Commission for Energy Regulation determines annually the amount of the PSO levy, which is a charge on all electricity customers. 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 to the consumer tends to be low or zero when international gas and oil prices are high, as in these cases the market price adequately rewards renewable and conventional generation including the peat stations.

In line with the Programme for Government commitment to review and reform the PSO levy, I have requested my Department to review the operation of the peat PSO from a cost efficiency perspective. This review is currently underway. I would clarify for the Deputy that funding for Exchequer programmes, such as Better Energy or Warmer Homes schemes, would not arise as a result of savings accrued from changes in the PSO. The PSO levy is a charge to all electricity customers. The levy covers inter alia the additional costs incurred by electricity suppliers, such as Electricity Ireland, Airtricity and Bord Gáis Energy, in sourcing, and ESB Power Generation in producing, a proportion of their electricity from peat or renewable generators. Any reduction in the PSO year on year results in a reduction in the charge levied on all electricity customers.