HOUSEHOLDERS are to be hit with a massive hike in a state-approved levy on their electricity bills.

The 50pc rise in the levy used to subsidise energy generated from peat and wind has been condemned as "just another sneaky tax rise".

The move will add €23 a year to the average household bill, and comes after a similar-sized increase in the levy last year.

The Public Service Obligation (PSO) levy is being imposed despite a fall in the wholesale cost of generating electricity.

Vice-chairman of Consumers' Association Michael Kilcoyne called on Energy Minister Pat Rabbitte to change the rules which result in householders and businesses being forced to subsidise the cost of generating power from wind and peat.

"This is just another sneaky tax rise. The regulator, the minister and officials are not in touch with reality if they are imposing such a large increase in the levy."

The Commission for Energy Regulation (CER) has issued a "proposed decision" which will lead to the hefty increase in the PSO levy on electricity bills.

Even though the decision is a proposed one, experts said it was highly unlikely to change.

Householders will be charged €63 a year in the PSO levy, up 47pc. When valued added tax (VAT) is added the annual cost on each household bills will go to €71.52.

Renewables

This works out at a rise of €23 a year when compared with the cost of the levy last year, calculations by Simon Moynihan of price comparison site Bonkers.ie show.

The PSO levy is designed to subsidise energy companies for generating electricity from renewable sources and to help fund peat-burning stations.

The rise comes into effect in October, and will raise €328m.

A spokesman for the energy regulator said it had no discretion on whether or not to turn down a rise in the levy. This is because the rules around the levy are set by Government policy, and the regulator only has a role in calculating the cost generators need to recoup from the levy each year.

The levy is going up despite a fall of up to 10pc in the wholesale cost of generating electricity. A warm winter means there is spare gas capacity, which has seen costs fall.

Firms which generated electricity from wind and peat need a higher subsidy to cover the fall in revenue from the market for the electricity they produce, the spokesman for the regulator's office said.

Funds from the levy also go to two gas-fired electricity plants on the west coast to ensure there is "security of supply".

Business body IBEC said that overall the levy was to go up by 55pc, when the impact on companies was calculated, and risked damaging the country's international competitiveness.

Irish Independent