Pat Rabbitte (Dublin South West, Labour)
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The Public Service Obligation (PSO) levy has been in place since 2001 and is the overall support mechanism for generation constructed for security of supply purposes (including peat generation), and for the development of renewable electricity. The levy is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by these producers.

The Commission for Energy Regulation (CER) determines the PSO levy which is a charge on all electricity customers without exception. The legal basis for the PSO levy and its method of calculation are set out in Regulations made under the Electricity Regulation Act 1999 (S.I. 217 of 2002). The proposed annual PSO levy amount for 2014/2015 is €327.7 million. This equates to €63.01 per annum for residential customers, €215.94 per annum for small to medium sized business customers and €33.38/kVA for medium and large customers.

The biggest driver for the proposed levy rise for 2014-15 is the lower predicted wholesale market electricity price, which is currently estimated to be around 10% lower than last year. This results in lower predicted market income for the PSO plants and, therefore, a higher levy is required to cover the allowed costs. The lower wholesale electricity price is currently being driven by the lower international gas prices in evidence since spring 2014. This drives up the proposed PSO levy. However, if these lower gas and wholesale prices are sustained for the coming months, it should help to reduce the wholesale cost of electricity that suppliers pay and, in turn, should enable those suppliers to reduce their retail prices and potentially offset the PSO levy increase.

The increased costs to industry and households arising from the PSO levy are of concern to me and I have contacted the CER in this regard. As the main reason for the increase in the levy is a decrease in wholesale electricity prices, I have asked the CER to be vigilant in its market monitoring and to focus particularly on the impact that the reduction in the wholesale price of electricity has on retail prices.