EU proposes windfall levies on energy firms to ease price pain

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The European Commission still wants an EU price cap on Russian gas, but more work is needed to assess the impact of the measure.  European Union energy commissioner Kadri Simson said on Wednesday, 14 September 2022, “We continue to believe that a gas price cap on Russian pipeline imports is warranted, but more work is needed to assess adverse impacts on some members.”

Simson says adding that Brussels was analysing the impact of the measure. The Commission mooted a Russian gas price cap earlier this month, but EU countries rejected the idea with some worried Moscow would retaliate by cutting off the remaining gas it still sends to Europe.

European Union’s 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.

The European Commission published the proposals today as the 27-member European Union grapples with an energy crisis fuelled by Russia’s invasion of Ukraine.

The European Commission says Ukraine should be granted status as a candidate for membership in the European Union:

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.

European Commission President Ursula Von der Leyen told the EU Parliament in Strasbourg, that in these times profits must be shared and channelled to those who need it most. 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 the 30th of September. Von der Leyen said the Commission was discussing price caps and had launched talks with Norway on lowering gas prices.

The Commission’s proposals 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. That would cap generators’ revenues at less than half o current market prices. Germany’s front-year electricity price was trading at just below 500 euros/MWh on Wednesday.

“The measures proposed to cap revenues for renewable and low-carbon electricity producers risk damaging investor confidence,” said Kristian.

Secretary General of Europe electricity industry body Eurelectric, Ruby says 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.

Brussels is looking into amending collateral requirements in energy markets to help companies facing a liquidity squeeze, she said. The EU also proposed a mandatory target for countries to cut electricity by 5% 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).

Europe’s largest economy has secured a power link to a planned offshore wind hub in the Danish part of the Baltic Sea: