Michael Creed (Cork North West, Fine Gael)
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611. To ask the Minister for Communications, Energy and Natural Resources the purpose of the public service obligation levy on electricity bills; the rate at which it is levied; the reason for the recent increase in same; and if he will make a statement on the matter. [5694/15]

Alex White (Dublin South, 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. It is designed to compensate electricity suppliers for the additional costs they incur by purchasing electricity generated by these producers. The PSO levy is also vital to enable Ireland to meet its 2020 40% target for electricity generated from renewable sources by 2020, which in turn is important for the achievement of Ireland's 16% EU 2020 target for renewable energy.

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 annual PSO levy amount for 2014/2015 is €335.4 million. This equates to €64.37 per annum for residential customers, €221.66 per annum for small to medium sized business customers and €34.20/kVA for medium and large customers.

The biggest driver for the levy rise for this year is the lower predicted wholesale market electricity price, which is 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 their allowed costs. The lower wholesale electricity price is currently being driven by lower international gas prices in evidence since mid-2013. This drives up the proposed PSO levy. However, if these lower gas and wholesale prices are sustained, the lower wholesale prices would reduce the wholesale cost of electricity that suppliers pay. In turn, suppliers would be in a position to reduce their retail prices and potentially offset the PSO levy increase. Increased competition in the retail electricity has led to some suppliers reducing their retail prices. The CER is tasked with retail market monitoring and executes this role vigorously to ensure competition leads to the fairest prices for customers.