Denis Naughten (Roscommon-Galway, Independent)
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The conflict with state aid rules that would be presented by a Public Service Obligation (PSO) levy system based on a per kwh charge is set out most recently by the European Commission in correspondence with the Department on the State Aid re-notification for the PSO related to peat stations, C (2013) 5832 section 3.4 (49) “Compatibility with other Treaty provisions.”

In this notification letter, the European Commission states “In accordance with the case law of the Court and the Commission’s case practice, parafiscal charges and levies which are imposed on the consumption of a product (e.g. electricity) regardless of whether it is domestic or imported, but the proceeds of which only benefit domestic production, are not compatible with Articles 30 or 110 TFEU.”

In practical terms, the above provision means that a simple consumption based-levy is not allowed under state aid rules. This is because it could theoretically benefit supported generators/suppliers in Ireland by imposing a levy on all electricity supplied including that imported from another Member State, thereby discriminating in favour of generators/suppliers in one Member State, potentially distorting competition and affecting trade between Member States.

Therefore a kWh charge is not possible under EU law in these circumstances whereas a flat charge based on the connection level is permitted.

The European Commission has made similar ruling for the PSO levy in notification approvals in respect of the original PSO scheme (C (2001) 3265) and also in respect of renewable support schemes (C (2002) 2 and C (2002) 5).