The Commission for Energy Regulation (CER) has published the proposed levels of a levy to be collected from electricity customers during the 2010/11 tariff year. This Public Service Obligation (PSO) levy, is not a new item on bills although it has been zero for the past number of years.
The concept of PSO is not unique to energy markets and is utilised in other sectors such as public transport. The aim of the electricity market PSO in Ireland is to support the provision of secure electricity supply and the use of indigenous and/or renewable sources of electricity.
A number of natural gas generators were included under the PSO when it was forecast that demand for electricity would not be meet in 2005. These are referred to as the Capacity 05 (Cap05) generators and met the remit of securing electricity supply albeit with a heavy reliance on imported fossil fuels.
The PSO insulates electricity suppliers who purchase their electricity from these sources. If, following an annual review, it turns out that they could have purchased their electricity cheaper from the wholesale market they are compensated for the additional costs incurred. If it turns out, as it has done frequently in the past, that the PSO supported generators produce electricity which is less expensive than the wholesale or benchmark price then no compensation is required.
All the PSO supported generators are merged into one 'pot' for each annual review which means they can cancel each other out or accumulate. For example wind generators contributed negative values during times of high natural gas prices which alleviated or cancelled out the contributions of other generators such as peat or the Cap05. Renewable generators provide a financial hedge which can protect the consumer during fossil fuel price spikes. The average wholesale price of electricity has been low during 2009/10 primarily due the price of natural gas but also due to the impact of renewable generators -mainly wind. Should natural gas prices recover to forecasted levels the contribution of renewable energy to the PSO pot will reduce or once again become negative.
This year's pot contributions by each PSO supported generator grouping is summarised by the CER as follows:
- Peat - €89.6m
- Renewable - €60.5m
- Cap05 Gas- €20.7m
- Administration and correction of previous forecasts- €23.7
- Resultant PSO Pot - €194.6m
This pot is then allocated across the entire customer base with each of the three categories of customers sharing the cost in proportion to their percentage of total demand. This allocation per customer category is then split evenly between all the customers in that category. The resulting charges proposed for this year are as follows:
| Charges proposed |
2010/11 |
per month |
| Domestic users (€/cust) |
€ 40.85 |
€ 3.40 |
| Non-domestic users (€/cust) |
€ 142.19 |
€ 11.85 |
| Large users (€/kVA) |
€ 16.55 |
€ 1.38 |
In recent years the summing of the PSO pot has lead to a final figure which has been too low to warrant the expense of collection. This is the reason why the figure has appeared as zero on bills. This year however the figure is substantial and includes any roll overs which have not been collected in the past few years. Therefore the CER has proposed that the levy be collected.
For more information on the proposed decision and some background to PSO policy please follow this link to the CER paper:
CER Proposed Decision on the PSO Levy for 2010/11.