September 25, 2022

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EU plans unexpected taxes to counter 'astronomical' energy bills

EU plans unexpected taxes to counter ‘astronomical’ energy bills

The European Union is pressing for unexpected national taxes on bloated profits of energy companies to counter what European Commission President Ursula von der Leyen called “astronomical” electricity bills.

The planned tariffs, which EU energy ministers will discuss on Friday, will target both fossil fuel producers and low-carbon power generators that have reaped windfall profits thanks to artificially inflated electricity prices, according to people familiar with the plan. They will seek to pass the proceeds to vulnerable consumers and households.

Wholesale electricity prices have risen due to their correlation with the price of gas, whether or not electric power is produced by gas or by other means. Gas prices are about 12 times higher than they were a year ago.

Von der Leyen said in prepared remarks that the national duties will come alongside measures to reduce electricity use by shifting demand away from peak periods.

She said Brussels would also work with member states to ensure that electricity producers had adequate liquidity.

Officials said the commission’s interim framework for government assistance could be modified to speed up decisions and that Brussels was talking to governments about state aid requirements. A number of EU utilities are looking to governments to help them increase safeguards as energy price volatility increases.

The commission’s plans come along with proposals for a gas price cap on Russian pipelines to limit President Vladimir Putin’s profits from his “heinous war against Ukraine,” according to von der Leyen.

Russia said on Monday that its state-owned gas company Gazprom will cut off supplies through its Nord Stream 1 pipeline until Western sanctions are lifted.

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“This is a satirical game for Putin and for us it is a test of unity and solidarity,” von der Leyen said.

The authority’s plan seeks to reduce electricity consumption during peak times through measures that include shifting industrial operations to low usage times such as weekends and nights. This comes on top of a voluntary plan to reduce gas demand by 15 percent, which member states agreed to in the summer.

Unexpected national taxes will be applied to profits made by low-carbon energy producers such as wind farms and nuclear power plants.

Besides, there will be national duties on oil and gas producers who have been enjoying record profits.

Von der Leyen called on the European Union to help utilities that were grappling with “Putin’s manipulated market volatility,” adding that Brussels would work closely with member states to ensure adequate liquidity in the sector.

Christian Ruby, general secretary of Euroelectric, the trade body for the European electricity industry, said regulators need to “extend the list of assets that will qualify as collateral” to accept other monetary assets and prepare to “avoid a domino effect” and extend credit lines for companies in crisis.

Additional reporting by Javier Espinosa in Brussels