Energy prices - Levy rooted in wishful thinking

MINISTER Eamon Ryan’s proposed electricity levy will increase electricity prices by 5% in October but it will be very difficult to stomach.

The most obvious reason is the additional burden it will place on homeowners bearing the brunt of our economic collapse – those who have lost jobs, those with unaffordable mortgages or rents, those with considerable personal debt and, possibly, those facing huge back-to-school costs to educate their children.

In such difficult circumstances an increase in the cost of an essential like electricity might make something already very difficult almost impossible.

Businesses just about managing, despite pay cuts, to meet the wage bill; small businesses struggling with aggressive bankers and curtailed overdrafts, may find this is the straw that breaks the camel’s back.

Already business leaders have warned that Minister Ryan’s measure will cost jobs and if this is the case then Mr Ryan must think again or be made to think again. There can be no ambiguity about this, any state-controlled cost increase that jeopardises jobs, foreign investment or provokes inflation cannot be contemplated.

The €157 million will be used to offset the costs faced by electricity producers who are obliged to buy a proportion of renewable or peat-generated electricity. Though all electricity producers will benefit the great majority of the levy will go to the ESB.

Last year the ESB made profits of €500 million. This is reflected in the enviable conditions enjoyed by ESB workers who, according to January 2009 figures, earned on average €76,000 before they were given a 3.5% pay rise. That pay rise was granted just five months after the company imposed a 17.5% increase in electricity prices.

ESB workers will argue that because they have discharged their commercial mandate so effectively that they are entitled to such rewards. But, in these straitened times, it is easy to argue too that these figures reflect the dominant position, a legacy of their monopoly, as much as it reflects anything else. ESB workers have, in the event of privatisation, expectations that might not be as easily defended today as they would have been in recent years.

Defending the levy energy regulator Michael Tutty said that the levy “is there to protect the consumer ... through promoting renewables, which will give us security of supply. We are very dependent on imported fossil fuels”.

This is not a new situation and one that should have been tackled years ago. That we are so utterly dependent on imported energy – about 90% – is another failure of political oversight. However, Mr Ryan’s belief that renewable energy options might become a mainstay of our electricity generation is a personal belief that science has yet to endorse. There is a case to be made that this levy is being imposed to sustain just one set of arguments. As is usual in discussions on Ireland’s energy needs the elephant in the room is ignored.

Of course it is just possible that the 30 countries where 436 commercial nuclear power reactors already operate, as well as the very many countries – including Romania – that are building nuclear power plants today are wrong and that Mr Ryan and the Green party are right to oppose nuclear plants, but is that a bet we can afford to take? This levy should be scrapped and a real debate about our energy options should begin, a debate informed by experience and pragmatism not emotion-led wishful thinking.