Industry: Hike in electricity levy hurts economy

Some of the country’s biggest industries and largest employers have claimed a large rise in a government levy on electricity bills will damage the Irish economy.

A large number of leading firms have complained to the Commission for Energy Regulation (CER) about a 23% rise in the Public Service Obligation (PSO) levy that is imposed on all electricity customers.

Although their comments were made when the CER originally proposed a 36% increase in the PSO levy, they remain concerned that rising electricity costs will have an adverse effect on the economy in terms of enterprise development, job creation, job security and cost competitiveness.

Intel, the computer chip multinational which employs around 5,500 staff in the Republic, said Ireland must remain economically competitive with its alternative manufacturing locations globally.

“Ireland has lots of volatility over the last decade moving between competitive, to our highest cost location globally,” said Intel’s director of global utilities and infrastructure, Marty Sedler.

He claimed increases of almost 400% over the past four years in the PSO levy “would clearly demonstrate runaway costs and an increase far beyond that which is reasonable.” Mr Sedler also observed: “Intel continues to constantly evaluate Ireland’s costs and competitiveness to other options.”

In a joint submission, the Department of Jobs, Enterprise and Innovation together with IDA Ireland and Enterprise Ireland said the large increase in the levy was “of great concern from an enterprise development perspective”.

They pointed out that almost one third of Ireland’s generation capacity — sourced from renewables and peat — was subsidised. “This is not sustainable,” they stated.

Major employers, including Intel, Kerry Group, Glanbia and Roadstone highlighted how Irish electricity prices were already amongst the highest in Europe, while Ibec, the employers’ group, said the levy could rise significantly further over coming years.

Dairygold said the PSO levy as it currently operates was a barrier to energy efficiency projects such as the development of combined heat and power plants and other on-site generation.

Aughinish Alumina described the PSO levy as “a penal tax on manufacturing industry”, while Electric Ireland said the wind generating industry was now sufficiently mature that it didn’t warrant any further subsidies.

Other organisations such as St Vincent de Paul criticised the PSO levy as a regressive tax because it was imposed on all domestic customers at a flat rate, placing a disproportionate burden on customers on low incomes and in arrears.

Households and businesses will face higher electricity bills as a result of the CER sanctioning such a large rise on the levy imposed by the Government to promote renewable energy and guarantee the security of supply.

The CER announced at the weekend that it had set the annual PSO levy at €400.9m for 2016/17 — up from €325.3m in the current year. It had originally proposed a levy of €440.9m but the figure was revised downward due to a forecast increase of around 9% in the market price of electricity over the coming year.

As a rule the PSO levy increases if the market price of electricity falls in order to compensate power generation plants. The decision will add €1.01 to the monthly bill of domestic customers and €3.30 for small commercial users.

The regulator said a factor in the overall 23% rise in next year’s PSO levy was a large rise in the number of renewable energy plants qualifying for PSO payments.

The CER said it was not in a position to abolish or phase-out the PSO levy.


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