Electricity customers to get small rebate as PSO levy cut

Slightly cheaper electricity bills are on the way for households in Ireland, for now at least, as the Commission for Regulation of Utilities (CRU) has confirmed that the PSO levy will cut entirely for the 2022/2023 period.

And on top of that, a rebate will also be paid to electricity customers under the PSO scheme for the first time.

What is the PSO levy and why is it decreasing?

The PSO levy is a Government levy which supports renewable energy generation in Ireland, mainly wind.

The levy is currently €51.60 a year (ex VAT) or €58.57 (inc. VAT) for the 2021/22 period, which works out at just under €10 on every household's bi-monthly bill. However it's been as high as €104 in recent years.

Earlier in the year, the Government announced that it was planning to temporarily remove the levy entirely as a way to support households on the back on soaring energy prices. 

However, following a review by the CRU, the levy for the next year will actually turn negative, resulting in a small rebate to electricity customers.   

How much will I be credited?

Residential customers will be credited a payment of €89.10.

The CRU says it's working with suppliers on a way to pay customers this money. It's likely the money will be credited to customer accounts over the course of a year on a bi-monthly basis as you're billed.

The CRU says it hopes to be able to start refunding customers as soon as possible from the start of the new PSO levy year, which is 1 October. 

Why the decrease?

Some renewable electricity suppliers are part of a scheme called REFIT and are guaranteed a certain minimum price for each unit of electricity they generate. This guarantee is there to support and promote renewable energy and make it worthwhile for suppliers to generate it. But when wholesale prices are too low to meet this guaranteed price (as they were in previous years), the PSO levy fund is needed to make up the difference. This is why the levy was as high as over €100 a year at one stage. 

However, over the past 18 months, as many electricity customers will already be aware, wholesale energy prices have risen hugely and are now at record levels. 

So, although wholesale prices are higher, the upshot is that PSO levy funding requirements go down.  

Recent PSO levy history

Since the PSO levy was first introduced in 2010, it has been as low as just under €22 a year to as high as almost €105 a year.

This will be the first time residential customers will receive money, as opposed to paying money, under the scheme.

The pros and cons of a PSO levy decrease

When wholesale electricity prices are low, money is usually needed to subsidise wind farms and schemes that are supported by the PSO levy, meaning that the levy increases.

However when wholesale prices are high, less money is required to subsidise renewable generation because suppliers receive more money for the electricity that they produce meaning that the PSO levy decreases.

And in Ireland electricity prices have hit record levels in recent months.

So, the bad side of a lower PSO levy is that electricity prices are likely to be higher or increase.

The fact that the levy has not only been cut, but has been turned into a rebate, shows just how high prices have gone. 

The decrease in the PSO Levy is a positive, however, its inverse relationship with wholesale fuel costs means that customers will have already seen price increases by suppliers over the last number of months. We would encourage customers to renegotiate with their supplier or switch to a new provider where they could save over €300.

Aoife MacEvilly, CRU Chairperson

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