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Concern over planned electricity levy price rise

By Ann Marie Foley - 29 July, 2020

The Society of St Vincent de Paul (SVP) has called on the government to review a potential €70 a year levy increase in electricity costs as Irish people struggle to emerge from the COVID-19 crisis.

The Public Service Obligation Levy (PSO), which is added to electricity bills, comes up regularly for review, and this year SVP wants the government to look at its social impact on low income and energy poor households.

“Energy usage during the restrictions has increased as people are at home more, and many households will experience bill shocks at a time when they are on a reduced income. This must be factored into decisions regarding the application of the PSO levy in 2020/2021, as the proposed increase will add additional pressure to already struggling households,” said Kieran Stafford, National President, SVP.

Of particular concern is the fact that the levy is at a flat rate which means that people on low income pay a larger percentage of their total income on PSO compared with the better off.

The Commission for Regulation of Utilities (CRU) is to announce this week the proposed increase in PSO which will have to be paid from October 2020. SVP states that there will be a 184 per cent increase in the levy for 2020/2021, as it will increase from €34 to €96. When VAT is added the increase will come to around €70 for the year.

In a submission to the CRU earlier this month SVP highlighted that the method of calculating the PSO is causing uncertainty for customers. It said that the state must be more involved in price setting and monitoring.

The PSO levy is charged to all electricity customers as a subsidy for renewable electricity. The funds raised pay for the costs of supported electricity generators which are not covered by the market. SVP wants these costs to be spread more evenly between the energy companies and their customers.

In these days where renewable energy is so important Issy Petrie, SVP Policy and Research Officer, noted that SVP supports the change to more environmentally friendly energy production and that change should not be a burden on those in energy poverty.

The CRU has stated the people can switch supplier to get a better deal or improve their energy efficiency. However, SVP states that this is not easy for low income households.

“Switching suppliers doesn’t always lead to significant savings, especially if a customer has a poor credit history; cannot use direct debits; or are wary of beginning a relationship with a new supplier when they have knowledge and confidence built up with their current supplier,” said Issy Petrie. “It is also significantly more difficult to switch supplier if you are renting and using a prepay meter, which is often the only option for many low-income households.”

She pointed out that there is a target to have 40 per cent of energy generated from renewable by 2020 and it is time to revisit the premise of a PSO levy which was introduced more than 15 years ago.

It is estimated that 1-in-6 households in Ireland experience energy poverty and SVP spends approximately €4.5 million annually to help low income households with heating and lighting bills.

The charity welcomed the increases in the Fuel Allowance in recent budgets but says they have not kept up with rising energy costs, which have increased by over 26 per cent since 2010. Currently the payment does not meet the minimum energy needs of most households.

In its submission about PSO the SVP stated that in 2018 in Ireland 8.6 per cent of the total population was in arrears on utility bills – this is the second highest rate among 15 EU countries after Greece which has 35.6 per cent of population in that situation.

While this may in part be explained by more people per household in Ireland compared to other European countries, it is also because of the higher cost of energy and electricity. Ireland has the fourth most expensive electricity among EU 27 countries. The need to invest in the grid and taxes are part of the reason for this.

In its Pre-Budget Submission SVP stated in mid-July 2020 that it is already receiving more than 15,000 calls for help each month. That is almost 1,500 extra per month when compared with the SVP annual report 2018 (published 2019). The calls are from people and families who have lost their jobs and are struggling with rent and utility bills.

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