Brussels is looking to push ahead with a surprise levy on European power companies, setting the threshold at less than double current market rates.
In draft proposals seen by the Financial Times, the European Commission recommends that governments levy levies on revenues generated by non-gas electricity producers when market prices exceed €200/MWh. The current spot price for electricity in Germany, the regional benchmark, is over €450/MWh. Surplus income will be redistributed to help companies and households.
Band electricity prices soared because they are tied to the price of gas, regardless of whether the electricity is produced from gas or other sources. Gas prices are about 10 times higher than the average over the past decade as a result of Russia cutting supplies in response to Western support for Ukraine.
European Commission President Ursula von der Leyen said on Wednesday that producers of low-carbon energy — such as wind, solar and nuclear — are making “enormous returns, returns they never counted on, returns they never dreamed of and income they cannot invest as quickly.’ .
These “windfalls” should be sent to member states to support vulnerable consumers and businesses, she said.
The windfall tax is part of a package of five measures adopted by Brussels on Wednesday for member states in response to the enlargement energy crisis.
Other proposals of the commission include mandatory reduction of peak demand for electricity, a the price of Russian gaschanging collateral requirements for power companies and adjusting state aid rules to allow governments to bail out companies on the brink of collapse.
The proposed €200/MWh threshold for the excess revenue levy quickly drew criticism from Spain, a major wind and solar generator.
Teresa Ribera, Spain’s energy and environment minister, said: “It does not match the real costs and does not help electrification and the deployment of renewable energy.”
The official options document published on Wednesday did not give specific figures for the level of excess profits, but a senior EU official said they would be set out after an emergency meeting of energy ministers on Friday. In the previous project, it was proposed to reduce the peak power consumption by 5 percent.
On Monday, the Kremlin warned that supplies through the important Nord Stream 1 gas pipeline will be completely stopped until Western sanctions were lifted. Russia’s gas imports to the EU fell from about 40 percent of the bloc’s total consumption last year to about 9 percent.
Henning Glostein, director of energy and climate at Eurasia Group, said the €200/MWh cap on non-gas-fired power generators “is high enough to meet the planned decline in demand in Europe this winter, giving industry and small consumers at least some assurance. that costs will not rise further.’
Several EU diplomats and analysts said the common threshold for all non-gas producers failed to take into account that coal producers bear much higher costs than wind and solar generators. Coal use in the EU is rising to offset gas cuts.
Brussels has also put forward a proposal for a “solidarity contribution” from fossil fuel producers, which would be calculated nationally from the profits of energy companies.
The commission was careful not to call any of the proposed measures taxes. Common EU tax law requires unanimous agreement between member states.
Diplomats from the 27 EU countries will discuss the proposals on Wednesday before energy ministers meet on Friday.
Von der Leyen said the EU faced “difficult times and they will not end soon” and that any measures taken must be implemented “as quickly as possible”.
EU capitals broadly support plans to encourage demand reduction as the fastest way to tackle the crisis, but differ on how to tackle spiraling energy prices.
One senior EU diplomat said the commission’s plan had been “well received” by member states, but that there were significant differences in detail. Several, including Poland, Greece and Italy, oppose capping the price of Russian gas, fearing that Moscow will cut supplies further.
Other countries, such as Spain and Austria, have called for the separation of the gas and electricity markets – something the commission has said it is considering in the long term.
EU officials said the measures proposed on Wednesday would be in place for a limited time and would be agreed with EU capitals.
