The government’s green levy will see Irish households pay an additional €3.23 each month, starting from 1 October.
The Commission for Regulation of Utilities (CRU), Ireland’s independent energy and water regulator, has confirmed that the household Public Service Obligation (PSO) will increase for the upcoming year, with commentators suggesting it will provide a “blow for hard-pressed energy consumers.”
The new levy will be €3.23 ex VAT a month or €3.52 a month including VAT at 9% – just over €40 a year for each Irish household. Meanwhile, the charge for businesses will be €12.91 per month.
The PSO Levy is mandated by the Government and approved by the European Commission. It is charged to all electricity customers in the State, and is designed to support the generation of electricity from sustainable, renewable and indigenous sources.
The levy is calculated and certified annually by the CRU in line with relevant legislation – with all energy suppliers required to collect this levy from customers through bills. Under the PSO scheme, renewable energy operators are guaranteed a price for the electricity they produce.
If they receive less money on the open market (the wholesale price) than the guaranteed price, then the money raised from the PSO levy is used to top up the payment.
While the PSO levy is not applied to gas bills, there is the carbon tax, introduced back in 2010. It is applied to carbon-emitting fuels including coal, peat, oil and natural gas, and is intended to reduce carbon dioxide emissions as part of the national strategy for a greener environment.
The carbon tax rate was recently increased in the 2024 Budget – from €48.50 per tonne to €56 per tonne of CO2 – with the government setting a target of €100 per tonne by 2030.
Meanwhile, large energy users, including manufacturers and data centres look set to pay increases which are tied to the amount of energy they use.
For the past two years, both households and businesses did not have to pay such a levy because of extremely high wholesale prices. Because wholesale prices have eased, this is no longer the case. The PSO was first introduced in 2010 – and since then, it has been as low as €81.10 (meaning customers were credited) and has peaked at almost €105 a year.
The CRU said that that PSO Levy is a “key factor in enabling Ireland to meet its national targets in terms of the generation of electricity from renewables.”
It said that following a review of the PSO cost submissions from eligible suppliers, the final PSO Levy of €251.79 million will be required for the 2024/25 PSO year – representing an increase of €251.79 million on the 2023/24 PSO Levy which was set to zero.
The CRU further said it had made the decision given the reduced payment due to customers last year, to set the levy at zero to reduce the impact of the expected higher charges on customer bills in 2024/25.
“The increased funding requirement for 2024/25 was a result of the inverse relationship between the PSO and the wholesale electricity price. When wholesale electricity prices are lower, mostly because of reduced gas prices, renewable generators, which do not require gas, receive lower revenues for the electricity they sell in the wholesale market,” it said, adding:
“As a result, for the forthcoming PSO Year 2024/25, it is estimated that increased support will be required from the PSO for renewable generation under the older REFIT renewables support scheme and the newer RESS support scheme.”
In the PSO Levy period 2022/23, the negative funding requirement meant that domestic customers receiving a PSO payment for the first time on their bills of €89.10.
Meanwhile, Daragh Cassidy of price comparison site Bonkers.ie said the levy represented “a blow to energy customers still grappling with high energy prices.”
“At the moment electricity bills are still around 70% to 80% above pre energy crisis levels and are among the highest in the EU. So although the levy will only be just over €40 a year including VAT, it’s adding to bills at a difficult time,” Mr Cassidy said.
Commenting on the decision, John Melvin, CRU Director of Wholesale Markets said: “While the previous two PSO years saw a PSO credit and zero payment being applied to customer bills, the PSO Levy’s inverse relationship with wholesale fuel costs means that this year renewable generators require much greater support under the Government schemes.
“The increase this year has been offset by the decision of the CRU last year to set the PSO Levy at zero given the comparatively smaller payment that year to reduce the impact of these higher charges on customer’s bills for this forthcoming year.”