The Cabinet has approved a package of measures to help mitigate the rising cost of rising electricity bills and to ensure secure supplies to electricity for households and businesses across Ireland over the coming years.
The package of measures includes changes to the Public Service Obligation (PSO) levy (beyond those announced earlier in the year). The changes will result in rebates, and thus savings, for domestic electricity bills over the course of the next PSO year beginning in October. This further reduction in the PSO levy occurs because of a fall in the relative cost of renewable energy, compared to fossil fuel generation.
The Government has also approved the final results of the second onshore Renewable Electricity Support Scheme (RESS 2) auction. This will bring significantly more indigenous wind, solar and hydro-electric energy onto the National Grid. This, in turn, will reduce our reliance on increasingly expensive imported fossil fuels.
The package also includes Government approval for the provision of funding for backup generation capacity, to address risks to the security of electricity supply over the coming winters.
The Commission for the Regulation of Utilities (CRU), which has statutory responsibility for security of supply, has directed EirGrid to procure additional temporary emergency generation capacity (for the winters of 2023/2024 to 2025/2026). This will ultimately provide flexible and temporary backup capacity, to safeguard secure supplies of electricity for households and businesses as we deploy longer-term generation capacity.
The Public Service Obligation (PSO) levy is charged to all electricity customers in Ireland and supports the generation of electricity from sustainable, renewable and indigenous sources.
The levy is calculated and certified annually by the Commission for Regulation of Utilities (CRU) in line with relevant legislation. All energy suppliers are required to collect this levy from customers through bills. Levy payments are calculated on the basis of estimated generation and estimated wholesale electricity market prices for the year ahead. These payments are then corrected, for actual generation and prices.
The Government previously announced that the PSO levy would go to zero from 1 October of this year (2022), which will lead to an annual saving of €52 (excluding VAT) on household bills. In a further move (and in a new announcement), the proposed PSO levy will decrease from €263 million for 2021/2022 to an estimated figure of minus €408 million for the forthcoming year.
This will result in a rebate for domestic household bills – equating to an ‘indicative’ annual saving of €75 (excluding VAT) for householders and consumers. Combined with the €52 saving, this will result in a combined ‘indicative’ saving of €127 (excluding VAT) – for 2022/2023. At the end of July, the CRU will issue a final decision on the exact PSO levy that will apply for the period from October 2022 to September 2023.
The legislative amendments, to enable PSO levy payments to be credited to electricity customers, were approved by Government today. This was done, in recognition of the rising cost of living and of the impact on households and businesses of increasing energy bills.