The EU proposes revenue on energy companies

On Wednesday, the European Commission proposed capping the profits of renewable and nuclear power producers, and taxing the profits of oil and gas companies.

Profits for electricity generators using wind, solar and nuclear power have soared as their rates are tied to the wholesale price of natural gas, which hit a record high in March. After Russia invaded Ukraine, it is now up about 550% from last year’s levels.

Europe sanctioned Russian oil and coal exports after the invasion, prompting Moscow to cut gas supplies in return.

EU Commission President Ursula von der Leyen said on Wednesday the bloc would undertake a “deep and comprehensive reform” to separate the cost of gas from the price of electricity.

“These companies are getting revenues they have never accounted for, never dreamed of,” he told EU lawmakers in a speech in Strasbourg, France. “It is wrong to receive record profits on the backs of war beneficiaries and consumers,” he added.

The Commission’s proposals still need to be discussed and approved by EU member states.

The bloc could impose a cap of 180 euros ($180) per megawatt hour on electricity produced by renewable energy companies, the commission said in a statement.. The European benchmark wholesale gas price is 212 euros ($212) per megawatt hour.

Natural gas and oil prices started It rose last year as countries reopened from their pandemic lockdowns, sparking a surge in demand. But Russia’s invasion of Ukraine in late February—and the resulting power outages between Europe and Moscow—sent it through the roof. Oil has retreated as a global economic slowdown dampens demand, but natural gas prices remain higher than their March peak.
The EU’s proposal is part of a package of measures to help the region deal with the energy crisis in winter, when temperatures drop and demand normally peaks.
The package includes a “crisis contribution” from oil, gas and coal producers, which have made huge profits, and includes mandatory targets for countries to reduce electricity consumption during peak hours.

The commission said in its statement that EU member states should levy an additional tax on profits that exceed the average profits of the last three years by more than 20%. He did not specify the tax rate.

“They have to pay their fair share,” von der Leyen said.

A billion national governments have already pledged, he said helping consumers “wouldn’t be enough” on their own.

Together, European countries and the United Kingdom — which is mired in its own energy crisis — have so far pledged about 500 billion euros ($500 billion) in subsidies to help households and businesses cope with high energy bills.
The UK imposed a 25% tax on the profits of its oil and gas companies earlier this year to provide an initial relief to customers this year.

But Prime Minister Liz Truss has ruled out raising or extending the tax to help fund her bolder plan to cap household bills at £2,500 ($2,888) a year for the next two years and support businesses for the next six months. Analysts say the measures could cost 150 billion pounds ($173 billion).