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Gas & Electricity

Lower electricity bills for customers as PSO levy to decrease by 18%

Lower electricity bills for customers as PSO levy to decrease by 18%
Daragh Cassidy

Daragh Cassidy

Head Writer

The Commission for Regulation of Utilities has announced that the PSO levy will decrease by 18% for the 2019/2020 period, providing a small amount of relief for energy customers in Ireland.

Slightly cheaper energy bills are on the way for households in Ireland as the Commission for Regulation of Utilities (CRU) has confirmed that the PSO levy will decrease by 18% for the 2019/2020 period.

The change means electricity customer will pay €3.22 a month (inc. VAT) towards the levy from 1st October, down from €3.95 a month at present. 

What is the PSO levy and why is it decreasing?

The PSO levy is a Government subsidy which supports renewable energy generation in Ireland and helps secure the nation’s energy supply.

Since last October, it has been charged at a rate of €3.95 a month (inc. VAT) or €47.40 a year for the 2018/19 period.

Back in June following a consultation with all stakeholders, the CRU forecast a rate of €2.18 a month or €26.15 a year (inc. VAT) for the upcoming levy period, which runs from 1st October to 30th September each year. This would have represented a decrease of almost 45%! However it was highlighted by the CRU at the time that this could be subject to change. 

And unfortunately, having completed its review, the CRU has decided that a decrease of just 18% is possible. 

However this is now the second year in a row that the levy has decreased and brings it to its lowest level since the 2012/2013 period and it means customers will see the charge decrease from €47.40 to €38.69 a year, a saving of €8.71.  

OK, so it's hardly big, but it's better than a kick in the teeth, right? And at least it didn't increase!  

So, why the decrease? You see, 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 considerably! 

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

Supporting renewable energy in Ireland

The PSO levy has increased most years since it was first introduced in 2010, and the overall increases correlate closely with the increase in renewable energy generation in Ireland.

In 2010, Ireland produced just 12% of its electricity from renewable sources. Today, Ireland produces around 30% of its electricity from renewables, with the bulk of this coming from wind generation, and the Government has set a target of 70% by 2030 under the Climate Action Plan.

This has also had a knock-on effect on Ireland’s need to import fossil fuels, particularly gas. Natural gas was used to produce 64% of Irish electricity back in 2010. Today, gas accounts for around 40% of the total generation which is an extraordinary shift in such a short space of time, and would not have been possible without the PSO levy.

This year's decrease means that the PSO levy is at its lowest level in six years.

Recent PSO levy history

Period

Monthly Cost (ex. VAT)

Monthly Cost (inc. VAT)

Annual Cost (ex. VAT)

Annual Cost (inc. VAT)

2015 - 2016

€5.01

€5.67

€60.09

€68.24

2016 - 2017

€5.90

€6.70

€70.75

€80.36

2017 - 2018

€7.69

€8.73

€92.28

€104.74

2018 - 2019

€3.48

€3.95

€41.76

€47.40

2019 - 2020

€2.84

€3.22

€34.08

€38.68

The pros and cons of a PSO levy decrease

While price hikes are never greeted as good news by the public, at least we can look forward to a lower PSO levy charge this coming year - something which benefits all electricity customers, regardless of supplier.  

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.

However, when wholesale prices are low, more money is needed to subsidise renewable generators and schemes that are supported by the PSO levy, meaning that it increases.

The bad side of a lower PSO levy means that electricity prices are likely to be higher or increase.

There’s nothing electricity customers can do about changes to the PSO levy, but any increases to your supplier’s electricity prices can be easily offset by switching to a cheaper price plan today, or why not check out these tips on how to use less electricity and save money?

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