Consumers should be informed a levy on electricity bills can reduce energy costs

Consumers should be informed a levy on electricity bills can reduce energy costs

Consumers should be made more aware that a levy on electricity bills can actually lead to lower energy prices, according to the owners of wind farms.

The Irish Wind Energy Association has criticised the lack of context presented by the Commission for the Regulation of Utilities in explaining the PSO (Public Service Obligation) levy that is charged on electricity bills to all households and businesses.

The PSO levy covers various subsidy schemes designed by the Government to support national policy on renewable energy and security of energy supply.

The CRU announced last week that the reduction in the PSO levy for the 12-months beginning on October 1 next will be less than originally proposed.

It has now set the annual levy at €176.46 million compared to its provisional figure of €120.63 million. The PSO levy for 2019/20 is still 16% lower than the previous 12-month period.

For consumers it will result in a monthly charge of €2.84 on their energy bill – a reduction of €0.64 per month on the 2018/19 levy.

The IWEA described the PSO levy as an essential policy tool that enabled wind energy to provide 29% of Ireland’s electricity last year.

In a submission to the energy regulator, IWEA chief executive, David Connolly, said the association was concerned that a focus on informing consumers about the PSO levy on their energy bill was not balanced by a comparable focus on ensuring that they understood that renewable energy supported by the levy was driving down wholesale electricity prices and the overall bill for consumers.

The IWEA highlighted a recent consultant’s report which found that the savings in wholesale electricity prices delivered by wind energy displacing more expensive fossil fuels were greater than the cost of the PSO levy.

“This effect increases as more wind generation is installed,” said Dr Connolly.

The IWEA claimed electricity prices last year would have been 20% higher for consumers but for the impact of wind generation.

Dr Connolly said other research including a study by the Economic and Social Research Institute confirmed the strong inverse correlation between the amount of renewable energy used on the national grid and wholesale electricity prices.

The IWEA acknowledged that highlighting the PSO levy on bills was a transparent way of showing electricity consumers how their bill was arrived at.

However, it said the benefit of lower wholesale electricity prices was being ignored as a result of focusing solely on the cost to the consumer of the PSO levy.

“Incomplete information is being provided to the consumer which provides a skewed and partial understanding of renewable generation on the consumer’s electricity bill,” said Dr Connolly.

However, a CRU spokesperson, said the regulator had acknowledged in its public communications that “wind generation typically has a dampening effect on the wholesale electricity price”.

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