Electricity customers won’t have to carry ESB’s €5m Midlands Just Transition contribution

The Commission for Regulation of Utilities (CRU) has continued to insist that the ESB cannot recover its €5m contribution to the Just Transition Fund for the Midlands from a scheme by which all electricity customers pay a special levy.

The CRU, in a its decision paper on the level of the Public Service Obligation (PSO) levy for 2021/22 published this week, noted that for the 2020/21 PSO levy, the ESB had made a cost submission of €5m for Just Transition costs and €10.599m in dismantling costs for the Lough Ree and West Offaly power stations.

The PSO levy is an additional cost placed on all consumers’ electricity bills to help subsidise the Government’s national energy policy objectives, including in relation to indigenous fuels such as peat.

It is designed to compensate electricity providers, including the ESB, for the costs of meeting obligations imposed on them by the Government.

PSO support for Lough Ree and West Offaly peat-fired power stations expired at the end of 2019.

In 2019, the ESB announced that it would make a €5m contribution to the Just Transition Fund for the Midlands, to supplement the Government’s €6m allocation for that year.

The CRU said that it did not include the dismantling costs or Just Transition contribution cost in the 2020/2021 PSO levy as it considered that these were not provided for in the relevant State Aid notification.

Whilst the CRU noted that the ESB maintained its position in relation to the dismantling and Just Transition costs, the decision paper showed that the ESB had not made a submission for the costs for the 2021/22 PSO levy.

However, the CRU said it had nonetheless written to the Department of Energy, Climate Change and Communications in June of 2020 seeking confirmation as to whether the Just Transition and dismantling costs were provided for under the relevant EU State Aid Notification.

It said its correspondence to the department noted “in detail the differing views between the CRU and ESB on the matter.”

In its response to the CRU, the Department said: “It is for the CRU to determine the amount of additional costs incurred by ESB in fulfilling its obligation under the PSO Order and the Minister/Department cannot intervene in the process”.

The CRU said that given the department’s response on this matter in 2020, the CRU’s position in relation to the Just Transition costs and dismantling costs “remains unchanged.”

Separately, ESB made an ex-post (after the fact) PSO submission for Environmental Provision costs and closure costs for the 2019/20 PSO year as part of the current calculation of the PSO levy for 2021/22. The CRU said the costs, a figure for which was not specified, related to the environmental remediation of the West Offaly and Lough Ree power sites and with costs associated with the cessation of both sites.

These costs were provisionally included in the 2021/22 indicative PSO levy.

The CRU has now confrrmed that following a detailed review of ESB’s submission, and the provision of additional information by ESB, allowed the cost submission stating it had determined that these costs are provided for under the relevant EU State Aid Notification

It said the environmental provision and closure costs claimed by ESB in their 2021/22 PSO submission were only an estimate of the final cost associated with environmental remediation and cessation of both station sites. The final costs will not be known until a period after the closure of both plants, it said.

The CRU continued that it would ensure that such estimates were reconciled, once actual costs are known, and that these costs are appropriately verified by ESB though an independent auditor.

The CRU said it also noted ESB’s stated position that the environmental provision costs claim is their final position and that ESB will bear any additional costs in the future and will repay any underspend.

Earlier this year, the ESB told the Offaly Independent: “Each year in accordance with the agreed PSO procedures, ESB makes a submission to the Commission for Regulation of Utilities to draw down the agreed costs over the lifetime of the Midland plants which are now closed.

“In 2020, this submission included the cost of the contribution to the Just Transition fund. These funds were not made available.

“As a result, the costs submitted in 2021 include the ongoing site remediation and environmental management costs, which form part of the closure costs for the stations but did not include the cost of the contribution to the Just Transition fund.”

The paper published this week by the CRU for the levy to electricity customers from 1 October 2021 to 30 September 2022 proposes a monthly PSO Levy amount to be charged to domestic customers of €4.30 per month, down 34%.

The proposed monthly PSO levy to be charged to small commercial customers is €13.63 per month (down 36%) and to medium/large commercial customers is €1.63/kVa per month (down 41%).

The decrease is driven in the main by a higher expected market price available for electricity generators, such as the ESB, for the forthcoming year.