Cabinet agrees to set the PSO levy to a negative rate
Energy customers are in line for a €127 saving in their electricity bills later this year, under new legislation agreed by the Government.
The Cabinet has signed off on plans to allow the Commission for Regulation of Utilities (CRU) to set the Public Service Obligation (PSO) levy on bills to a negative rate.
It was originally believed the rate would be set to zero saving customers around €52 a year. However, the new legislation will allow the CRU to set the levy at a minus rate leading to expected reimbursements of €75 for electricity customers.
The PSO levy is charged to all bills and supports the generation of electricity from sustainable and renewable local sources of energy such as wind and solar power.
The rate is calculated annually by the CRU and energy suppliers are required to collect this levy from customers through bills.
Levy payments are calculated on the basis of estimated generation and wholesale electricity prices for the year ahead.
The payments are then corrected for actual generation and prices.
The CRU estimated the funding to be raised from the levy will decrease from €263m for 2021/2022 winter to a figure of minus €408m for the forthcoming year.
This equates to an ‘indicative’ annual saving of €75, excluding Vat for householders and consumers.
Including the saving of €52 from the PSO going to zero, customers are potentially inline to save €127 on their bills for the coming winter.
The CRU will issue a final decision at the end of July on the exact PSO levy that will apply from October 2022 to September 2023.
Separately, the Cabinet signed off €350m for the purchase of 450 megawatts extra emergency capacity for the electricity grid.
This additional generation capacity will be contracted for a limited period over the winter of next year.
It is due to increased demand on the electricity grid and the dismantling of aging power station.
“It will be available when needed and will be in addition to existing generation capacity in the electricity market. As part of today’s broad-ranging announcement, the Government approved the necessary capital funding – in the order of €350m for EirGrid.
“This will support and enable implementation of the initiative for winter of next year (2023/2024),” a statement said.
The CRU welcomed the move but issued a warning about the potential impact of data centres on the electricity grid.
The Commission said EirGrid’s projections pointed to the gap between demand and generation of electricity increasing over the coming years.
“There remains a risk that increased data centre demand, above that estimated by EirGrid, could further increase the 2023/24 gap currently advised by EirGrid,” it said.
“The CRU considers that all potential demand side mitigation measures should be pursued, alongside those on the supply side,” it said.
It said the mitigation measures should include deferring approval for any an additional data centre connections to the grid for the next two winters.
The Government also approved an €3bn borrowing for EirGrid to strengthen our national grid as part of ‘Shaping Our Electricity Future’ plan and to deliver the Celtic (Ireland-France) Interconnector.
EirGrid is seeking to rely on 80pc renewable electricity target by 2030.
At present, around 40pc of electricity comes from renewable generation.