Families could pay an extra €100 on their electricity bills from October to cover the cost of network bottlenecks, it has emerged.
Market overseers calculate that the cost of compensating electricity generators, prevented from operating by capacity squeezes on the national grid, will come to €870 million, or €22.80 a mega watt hour (MW/h) over the 12 months from next October, from €9.19MW/h currently.
This will translate into an extra charge of about €100 over those 12 months for households, which use 4MW/h a year on average, if the Single Electricity Market Operator (SEMO) sets this as the final charge following consultations.
That would wipe out the €89.10 credit due to consumers under the Public Service Obligation scheme that funds renewable electricity.
Any increase would apply from October, when the Government is due to restore VAT on electricity to 13.5 per cent from a reduced 9.5 per cent rate, and follow a likely round of electricity supplier price hikes expected between now and autumn.
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Customers will not see the extra payment, known as an “imperfection charge”, detailed on their bills. The SEMO adds it to the cost of wholesale power, so suppliers simply pay it and pass it on as part of the overall cost of electricity.
While the consultation may result in the market operator applying a different charge to the €22.80MW/h it proposes, the industry does not believe the final figure on which the SEMO decides will vary much from this.
National electricity grid limitations on both sides of the Border prevent some cheaper generators from supplying power to the wholesale market.
Consequently, more expensive plants generate electricity in their place. The SEMO applies the imperfection charge to compensate generators who lose out and to pay the extra amount to the more expensive power plants.
The SEMO estimates the total cost of this for the 12 months from October at €870.81 million, about 2.5 times the €341 million it applied from last October.
An extra €314 million bill for fuel, driven mostly by rising gas prices, and €42 million for carbon credits, are the main causes of this year’s increase.
The Commission for the Regulation of Utilities pointed out that the market operator’s consultation paper asks the industry for feedback on a range of measures that could reduce the final charge, including calculations better able to reflect future fuel and carbon prices.
The regulator added that this was an ongoing consultation with the final decision due at the end of September.
National grid operator Eirgrid plans to spend €2.2 billion on projects designed to boost its network.
The State company and System Operator Northern Ireland have planning permission in both jurisdictions for a North-South interconnector.
Eirgrid is at various stages with other projects, including building a line linking Laois and Kilkenny, while it is planning upgrades to connections between Kildare and Meath and Dublin and Meath.
It will spend another €1 billion under its Shaping our Electricity Future blueprint, published in November, which includes plans for Dublin and the northwest.
Erigrid’s past efforts to build lines to carry cheap renewable electricity from the west to the east and south, where it is needed, met strong local and political opposition.
