Creative Bookkeeping

According to the Commission for Energy Regulation (CER):

“The PSO levy is a subsidy charged to all electricity customers in Ireland. It is designed by the Irish government and consists of various subsidy schemes to support its national policy objectives related to renewable energy, indigenous fuels (peat) and security of energy supply.

The proceeds of the levy are used to contribute to the additional relevant costs incurred by PSO – supported electricity generators which are not recovered in the electricity market.”

The PSO Levy is yet another stealth tax, and more cynical commentators believe that it is the reason that the wind industry is so lucrative, as it protects the wind farm owner from having to compete on a level playing field with other energy suppliers. It also pushes up the price of electricity, and the proof in the pudding is Ireland’s meteoric rise in the EU table of electricity prices. We are currently lying in fourth place, already 35% more expensive than the UK, with the top spot held by Germany firmly in our sights.

The CER Public Service Obligation Levy 2014/15 Proposed Decision Paper was published on 6th June 2014 and contained a number of nuggets of information. The one that consumers want to know about is the proposed increase in the levy. This increase is extremely close to 50%, and this means that for an average Irish household the levy goes up from €42.87 to €63.01 p.a.

The explanation for this increase is ingenuous. The CER cheerfully tells us that the wholesale price of electricity has gone down (for which it congratulates itself without actually explaining what part it played in this reduction) but then proposes the abovementioned increase because more private wind farms will be built. On page 5 (the Executive Summary) it is explained thus:

“More renewable generation. Overall the amount of renewable generation, mostly wind, estimated to receive the PSO levy next year is 234 MW more than the current year, hence increasing the levy.”

In other words, despite us managing to buy electricity more cheaply, this saving did not generate enough profit for the wind industry and its government lapdogs. Instead of passing this saving onto the hard pressed consumer, the CER did exactly the opposite and increased the levy.

But that was not the only nugget that caught my eye. Under the heading “2.0 Proposed PSO Levy 2014/15 – Key Considerations”, and under the subheading “2.6 Other”, is the following passage:

“The category entitled “other” covers administrative costs associated with schemes in the PSO of circa €1 million. For 2014/15 the category also includes €9.8 million which corrects for a previous EirGrid calculation which is resulting in €9.8 million less being collected for the PSO for the current 2013/14 period than is allowed to be paid out. In other words the PSO costs being paid this year from customers are lower than they should be by €9.8 million. This was due to Eir-Grid assuming that the East – West Interconnector pays the PSO levy when it does not.”

What does this mean? Well, put simply it means that the PSO costs being paid this year from customers are LOWER than they should be by €9.8 million. This was apparently due to an EirGrid cock-up where EirGrid assumed that the East-West Interconnector pays into the PSO Levy when it does not.

However, the tale does not end there. If you examine the financial statements for EirGrid Plc, year ended 30 September 2013, which was filed with the CRO recently, the following detail was outlined at Note 7: “East-West Interconnector Operations”:

“Due to the significance of the East-West Interconnector (EWIC) linking the electricity grids in Ireland and Great Britain coming into operation during the year, the impact of EWIC on the Income Statement has been presented in a separate column on the face of the Income Statement.
EWIC was due to go into full operation on 1October2012, accordingly the regulated tariff for the year was based on full operation from that period and commenced on that date. However, commencement of full operation was delayed until 1May2013 as a result of resolution of final technical issues.
Revenue for the EWIC for the period comprised the full year regulated tariff of €33m……..In addition, due to the delay in the EWIC, certain expected operating and maintenance costs which had been included in the regulatory tariff determination were not incurred and resulted in an over recovery of revenue in the year. In line with normal practice any regulatory over recovery arising in the year will be returned to customers in a later tariff period and has not been provided for in the financial statements… .
Full year Profit Before Tax for EWIC operations was €34m, of which €15.8m is in respect of the period prior to full operation. In line with normal practice any regulatory over recovery arising in the year will be returned to customers in a later tariff period and has not been provided for in the financial statements.” (my bold)

As a result of another (earlier) EirGrid cock-up (a technical one this time), EWIC was only operational for 5 months of the financial year, but EirGrid were paid as if it had been operational and earning for the full year, which means they actually earned only €13.75million of the €33 million regulatory fee.


Accordingly, this means that EirGrid were gifted (by the Irish consumer) the amount of €19.25 million as a result of getting their figures wrong. Nice money if you can get it.

The obvious question is why is this regulatory over-recovery, pertaining to 2012/13, not factored into the CER report for 2014/15? Could it not be offset against the €9.8m ‘Other’ item above for 2013/14, thereby lessening the proposed increase and reducing the burden on consumers and SME’s, who are already struggling under a raft of stealth taxes, with more to come (i.e. the water charge)?

In other words, why is EirGrid not being made to compensate for its one cock-up with the proceeds of its other cock-up, for the benefit of the Irish consumer?

Failing this seemingly logical exercise to balance the books, how exactly does EirGrid propose to “return to customers in a later tariff period” that amount of €19.25million? Or was EirGrid hoping that either it would not be noticed, or that we would forget?

About Neil van Dokkum

Neil van Dokkum (B. SocSc; LLB; LLM; PGC Con.Lit) Neil is a law lecturer and has been so since arriving in Ireland from South Africa in 2002. Prior to that Neil worked in a leading firm of solicitors from 1987-1992, before being admitted as an Advocate of the Supreme Court of South Africa (a barrister) in 1992. He published three books in South Africa on employment law and unfair dismissal, as well as being published in numerous national and international peer-reviewed journals. Neil currently specialises in employment law, medical negligence law, family law and child protection law. He dabbles in EU law (procurement and energy). Neil retired from practice in 2002 to take up a full-time lecturing post. He has published three books since then, “Nursing Law for Irish Students (2005); “Evidence” (2007); and “Nursing Law for Students in Ireland” (2011). He is an accredited and practising mediator and is busy writing a book, with Dr Sinead Conneely, on Mediation in Ireland. His current interest is Ireland’s energy policy and its impact on the people and the environment. He is also researching the area of disability as a politico-economic construct. Neil is very happily married to Fiona, and they have two sons, Rory and Ian.
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2 Responses to Creative Bookkeeping

  1. Pat Swords says:

    The East-West Interconnector never had any economic justification and neither did the UK pay a penny towards its development, instead we were forced to pay for it. It’s only justification was to facilitate a greater development of wind energy on the island of Ireland:

    http://www.unece.org/fileadmin/DAM/env/pp/compliance/C2010-54/Communication/CommunicationACCC.pdf

  2. Thanks Pat. The phrase “salt in the wound” springs to mind.

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