Thursday 22 February 2018

Explained: Six things you need to know about your increasing energy bills

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Rebecca Lumley

Irish households and businesses are set to see a jump in their electricity costs, due to significant hikes on a levy on bills.

The increase was proposed by the Commission for Energy Regulation, which is recommending that  the public service obligation (PSO) levy goes up by as much as 40pc for consumers.

Here’s everything you need to know about the hikes.

1. What is the PSO levy?

The PSO levy allows for the production of renewable energy in Ireland. It is a charge included in each household and small commercial consumer bill, which is put towards the additional costs of producing sustainable energy.

It is necessary because the production of such energy, particularly using thermal power stations or wind farms, is pricier than traditional means. As renewable energy is much better for the environment, these kinds of energy sources are more desirable and are subsidised by this tariff.

The PSO levy is collected when you pay your electricity and is displayed as a separate charge on the bill.

2. How much is the PSO levy increasing?

The regulator has proposed that the charge go from €80 a year for household customers to €112, when value added tax is included. This is a rise of 40pc.

A 12pc rise is proposed for businesses.

3. When is it coming in?

According to the regulator, it has sought the views of the public on the proposed increase. A decision is likely by the end of July, with the new levy then taking effect in October if it is given the green light.

4. Why is it going up?

Ireland is producing more renewable energy, according to the Commission, and so needs more subsidy funding.

Wind farms have really taken off, with the country this year producing far more energy in this way. The industry now needs funding to the tune of €296m.

Peat burning power plants are also set to receive funding of up to €110m in the 12 months from October.

Ireland now produces 40pc of its energy through sustainable means.

5. What does it mean for Irish customers?

This is the second largest increase in the history of the PSO levy and, according to Simon Moynihan from price comparison site, it is in line with the rising rate of renewable energy generation.

The price comparison expert said that the PSO levy now makes up some 10pc of the average domestic electricity bill.

Eoin Clarke, of price comparison site, said that the proposed increase would mean that households would be paying €112.64 a year on this levy from October, compared with €80.30 per year at the moment.

"The standard electricity bill for an average customer in Ireland is already a whopping €1,136 per year," he said.

"So any increase in the PSO levy - which all electricity customers have to pay - will be unwelcome news for anyone already struggling to make ends meet."

6. What can you do?

Mr Clarke advised customers that switching energy providers could save money in the long run.

He said: "Energy bills are one of the biggest costs to Irish households.

"But still only 15pc of us switch energy every year, which means most of us are missing out on a better deal."

He encouraged people to regularly compare energy deals in order to get the best value for money.

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