The Commission for Regulation of Utilities has published a decision paper regarding the calculations for the Public Service Obligation (PSO) levy for the period 1 October 2021 to 30 September 2022.
The PSO levy is a key factor in enabling Ireland to meet its national targets in terms of the generation of electricity from renewables.
Following a review of the PSO cost submissions, the CRU’s final calculation is that a PSO levy of €263.70 million will be required for the 2021/22 PSO year. This represents a decrease of €129.43 million (32.92%) on the 2020/21 levy of €393.13 million.
From a customer impact perspective, the difference in the monthly PSO levy amount between the 2020/21 and the 2021/22 PSO levy period that customers will have to pay will be:
- Domestic Customers (34% reduction): €4.30 per month (previously €6.52 per month)
- Small Commercial Customers (36% reduction): €13.63 per month (previously €21.41 per month)
- Medium/Large Customers (41% reduction): €1.63 kVa (previously €2.78 kVa)
The PSO levy is a subsidy charged to all electricity customers in Ireland and was originally designed by the Irish Government to support its national policy objectives related to renewable energy, indigenous fuels (e.g. peat) and security of supply. The proceeds are used to pay for the relevant costs incurred by supported electricity generators which are not covered by the market.
The CRU’s role is to calculate the PSO levy in accordance with Government policy and the governing legislation and to ensure that the scheme is administered appropriately and efficiently.
PSO levy payments are calculated on the basis of the estimated generation required and the estimated wholesale electricity market prices for the year ahead. These payments are then adjusted, through the R-factor mechanism, to take account of the actual generation and wholesale electricity prices.
The key driver of the decrease of the 2021/22 PSO levy (relative to the 2020/21 PSO year) is the increase in the PSO Benchmark Prices. The PSO levy calculation estimates the expected market price for electricity for the forthcoming year. The higher the expected market prices, the smaller the subsidy that will be needed.
The three Benchmark Prices modelled for the forthcoming (2021/22) PSO year are significantly higher than the estimated Benchmark Price of €53.66/MWh for the current (2020/21) PSO year. This has resulted in downward pressure on the 2021/22 PSO levy of €305.08 million.
For the 2021/2022 PSO Levy, the CRU has introduced amendments to PSO forecasting methodologies in order to reduce the risk of volatility occurring in the PSO levy. As part of this, specific Benchmark Prices will now be applied for wind and solar projects in receipt of PSO support to offset these large changes each year.
The decision that has been published can be found here.
Commenting on the decision, Aoife MacEvilly, CRU Chairperson said: “While the next year will see a decrease in the PSO Levy for customers, its inverse relationship with wholesale fuel costs means that many customers will have felt price increases by suppliers over the last number of months. These increases to a bill can be beaten by customers who renegotiate with their supplier or switch to a new provider where they could save over €300.”