EU plans windfall levies on energy firms to tackle price spike (updated)

Fossil

14/09/2022 08:44

* EU proposes windfall profit levies on energy firms
    * Levies aim to raise cash to curb high energy bills
    * EU eyes bloc-wide power to use cuts to save fuel
    * Bloc backs away from Russian gas price cap

 (Recasts, adds detail)
    By Kate Abnett
    BRUSSELS, Sept 14 (Reuters) - The EU executive plans to
raise more than 140 billion euros  ($140 billion) to soften the
blow to consumers from soaring energy prices by skimming off
revenues from low-cost electricity generators and making fossil
fuel firms share windfall profits.
    European Commission President Ursula von der Leyen outlined
the plan on Wednesday as the 27-member European Union grapples
with an energy crisis fuelled by Russia's invasion of Ukraine.
    Governments across Europe have already ploughed hundreds of
billions of euros into tax cuts, handouts and subsidies to
tackle a crisis that is driving up inflation, forcing industries
to shut production and hiking bills ahead of winter.
    "In these times, profits must be shared and channelled to
those who need it most," von der Leyen told the European Union's
Parliament in Strasbourg, adding that the plans should raise
more than 140 billion euros for member states to rechannel into
helping businesses and retail consumers.
    EU countries will have to negotiate the Commission's
proposals and agree on final laws. 
    The plan did not include an earlier idea to cap Russian gas
prices. EU countries are divided over whether broader gas price
caps would help or harm efforts to secure winter supplies. 
    With gas price caps off the table, at least for now, some
diplomats were optimistic that deals could be struck at a
meeting of EU energy ministers on Sept. 30.
    Von der Leyen said the Commission was "discussing" price
caps and had launched talks with Norway on lowering gas prices. 
    A draft of the full Commission proposals, seen by Reuters,
would skim off excess revenues from wind and solar farms and
nuclear plants - by imposing a cap of 180 euros ($180) per
megawatt hour (MWh) on the revenue they receive for generating
electricity. Full details are due to be published on Wednesday.
    That would cap generators' revenues at less than half of
current market prices. Germany's front-year electricity price
was trading at just below 500 euros/MWh on Wednesday.
    
    'INVESTOR CONFIDENCE'
    Some energy firms have questioned how much cash the EU plan
would raise, since generators like wind farms sell their power
under fixed-price contracts, and are therefore not reaping
windfall profits from high market power prices.
    "The measures proposed to cap revenues for renewable and
low-carbon electricity producers risk damaging investor
confidence," said Kristian Ruby, Secretary General of Europe’s
electricity industry body Eurelectric.
    Fossil fuel firms would also face a windfall levy under the
EU plans, to claw back profit from soaring prices stoked by
Russia slashing gas deliveries since its invasion of Ukraine.
    Oil, gas, coal and refining firms would be required to
contribute 33% of their taxable surplus profit from fiscal year
2022, the draft, which could still be changed, stated.
    Von der Leyen said the bloc was working to establish a "more
representative benchmark" price for gas than the Dutch Title
Transfer Facility (TTF), where prices have rocketed higher.
    Brussels is also looking into amending collateral
requirements in energy markets to help companies facing a
liquidity squeeze, she said. 
    The draft EU measures also include a requirement for
countries to cut electricity use during peak hours, in a bid to
save fuel.
    EU countries' gas storage caverns are now 84% full - a
healthy pre-winter level - but analysts say Europe will still
need deep cuts in fuel use over winter to avoid shortages.
    Separately, von der Leyen said the EU was planning a deeper
overhaul of its electricity market to decouple power prices from
the soaring cost of gas. 
($1 = 0.9992 euros)  

 (Reporting by Kate Abnett and Ingrid Melander; additional
reporting by Susanna Twidale; Editing by Mark Potter, Edmund
Blair and Alexander Smith)
 ((Kate.Abnett@thomsonreuters.com;))