EU proposes price cap and windfall tax for energy companies

The European Union plans to raise more than $140 billion to protect consumers from rising energy prices, taking revenue from low-cost electricity generators and making fossil fuel companies share windfall profits.

The European Commission published the proposals on Wednesday as the bloc’s 27 members grapple with an energy crisis generated by Russia’s invasion of Ukraine.

“In these times, profits must be shared and channeled to those who need it most,” European Commission President Ursula von der Leyen told the EU Parliament in Strasbourg.

The Commission’s proposals will eliminate excess revenue from wind, solar, nuclear and lignite coal plants, imposing a cap of €180 per megawatt hour (MWh) through March on the revenue they receive. by the generation of electricity.

This will limit generator revenues to less than half of current market prices. EU energy prices are typically set by gas, so the measure will apply to generators that sell their energy at these rising prices but don’t have to buy expensive fuel.

Europe’s electricity industry body Eurelectric said on Wednesday that limiting yields for renewable energy generators could undermine investor confidence in the sector.

The EU said the move was designed to ensure generators are still profitable and have money left over to invest in the vast wind and solar construction needed to meet climate targets.

Fossil fuel companies would face a separate extra profit levy under EU plans to return profit from rising prices fueled by Russia cutting gas deliveries since the Ukraine invasion.

The EU has also proposed a mandatory target for countries to reduce their electricity use during peak hours by 5% in a bid to save fuel.