PSO Levy: What Is It and Why Is It Being Reduced?

Electricity bill with a checkmark above it

The PSO levy has been an added extra charge on electricity bills since 2010. However, with the energy crisis making the cost of living more and more expensive, the PSO is being reduced to give customers some breathing room. In our PSO levy guide, we walk you through what it is and why it’s being reduced.


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What Is the PSO Levy?

electricity bill

The Public Service Obligation (PSO) levy is a tariff imposed on all electricity customers. Currently, the PSO levy is set at €51.60 after it was decreased from €88.80 for the 2021/2022 period and is set to be reduced to €0 in the most recent budget for 2023. The PSO levy is collected to go towards investing in the generation of renewable energy in Ireland.

How Does the Government Work Out the PSO Levy?

The government sets the level of the PSO levy each year either increasing or decreasing it accordingly. Due to the volatility of energy markets, the PSO levy rate is usually determined by a number of factors in order to keep up with the general conditions, but the most important is the wholesale price of electricity.

Why Do We Have a PSO Levy?

The PSO levy is important because it helps invest in renewable energy and allows for renewable energy producers to receive a guaranteed minimal price. This is vital since renewable energy is a very volatile business venture and having a guaranteed price is allows for Ireland’s renewable energy market to remain stable.

Who Pays the PSO Levy?

The PSO levy is charged to all electricity customers. It is applied directly to your electricity bill and is paid over the course of the year so it’s not all in one go. At the current domestic rate of €51.60, Irish electricity customers are paying an extra €4.30 on their energy bills every month.

Does the PSO levy on my bill? You will see the PSO levy appear on your bill, along with the number of kilowatt hours (kWh) you’ve used and VAT. You will usually find it in the breakdown under your standing charge.

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How Much Will the PSO Levy Decrease By?

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For domestic electricity customers, the PSO levy is currently set to be removed entirely given the global energy crisis and the continuous rise in the cost of living. The reduction of the PSO levy will start from the 1 October 2022 and will remain at this €0 rate until October 2023. Small business customers will also see their energy bills drop by €72.72 per year with a 28% decrease of the levy whereas larger businesses will see a decrease of 36%.

Why Is the Decrease Necessary?

As mentioned above, one of the main factors in determining the PSO levy, according to the Commission for the Regulation of Utilities (CRU), is the wholesale price of electricity, which has been increasing rapidly since September 2021.

The CRU has stated that there is an inverse relationship between the PSO levy and the wholesale price so when the wholesale price decreases, the PSO levy increases and vice versa. With wholesale prices at record levels, it means that the PSO levy needs to come down accordingly.

The higher expected market price, the smaller the subsidy that is needed

the CRU

Here’s a graph to show how the PSO levy has evolved since its introduction in 2010:

Will Electricity Prices Continue To Rise?

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Household are already facing higher electricity prices due to both the COVID pandemic and the war in Ukraine. Unfortunately, these prices are unlikely to stabilise in the near future despite intervention by the the EU in the electricity markets and the new 2023 budget. Many households are likely to see increases of 51% higher in 2023, according to the CRU.

The CRU estimates that the PSO levy must raise €285.6 million in the coming year in order to enable Ireland to meet its renewable energy targets. This figure is down by more than €107.5 million from the current year. This overall amount may still change, however, if the market fluctuates over the next few weeks.

How Else Can I Decrease My Energy Bills?

Even with the PSO levy set to decrease to zero from 1 October 2022, you can still take action to help decreases your own energy bills through implementing some energy efficient measures. Also, since many suppliers offer discounted rates and cashback offers to new customers, you can also save money switching.

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Selectra can help you save money on your energy bills.

Our energy advisers can help you find a better energy offer for your home.

1800 816 036 or
Ad
Selectra man

Selectra can help you save money on your energy bills.

Selectra is currently closed. You can leave your phone number and get a free callback.

Will the Government Provide More Help?

It’s latest budget for 2023, the government has pledged to spend on reducing the cost of living crisis and making things a bit easier for energy customers across the country. Among tax decreases and other help for social welfare, as well as dealing with the housing crisis, the government has offered two other measures other than the decrease in the PSO levy to help battle the crisis:

  1. Extra Fuel Allowance Payment
    The fuel allowance will now be available to more people and those who are already on it will receive a once-off payment of €400 in November 2022 to help with the rising in the energy prices.
  2. €600 Electricity Payment
    Every electricity customer will also receive a €600 electricity payment for their electricity bills over the next 6 months. This payment will be paid three instalments of €200, the first in November 2022, the second in January 2023 and the third in March 2023.

Check Out Our Guide to the 2023 Budget!

Will the PSO Levy Increase Again?

The PSO levy is likely to rise again in the future due to the eventual fall of wholesale gas prices in the future. The EU’s intervention in the electricity markets is to include a cap on the the amount of revenue that a renewable energy producer can receive, which has been excessive due to the high gas prices, and this will likely mean that the PSO levy will need to rise again to maintain investment in renewable energy generation. However this is still a while off before it has any effects so for the time being the PSO levy is likely to remain zero.

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