The European Commission unveiled proposals for a sweeping EU-wide energy cap and levy in a bid to stop member states imposing divergent national measures as they scramble to quell public outrage over high electricity bills.
In her set-piece annual state of the union address, European Commission president Ursula von der Leyen unveiled the much-awaited measures and urged Europeans to keep steadfast in their backing for Ukraine, saying Kyiv could win the war with sufficient support.
She announced plans to allow member state governments to cap and redistribute all money paid for renewable and nuclear energy above a rate of €180 per megawatt hour, saying that companies were earning “revenues they never accounted for, they never even dreamt of”.
“In our social market economy, profits are good. But in these times, it is wrong to receive extraordinary record profits benefiting from war and on the back of consumers,” Dr von der Leyen told the European Parliament in Strasbourg.
“In these times, profits must be shared and channelled to those who need it the most.”
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In addition, fossil fuel energy companies would be hit with a tax of at least 33 per cent on all profits for the 2022 fiscal year that are above 20 per cent more than the average profits made by the company over the last three years.
She said that the two measures would raise over €140 billion for EU governments to redistribute to struggling households and businesses and invest in homegrown energy sources.
But commission sources acknowledged this figure was optimistic, and was based on the cap being in place for a year rather than the expected six months, and energy prices continuing at record levels.
The measures would apply where energy companies are based and where the energy is produced, meaning it has greatest earning potential for countries that are big energy suppliers, and less for countries that are highly dependent on imports, such as Ireland.
The commission also proposed that member states should identify three to four hours in each weekday in which national electricity use peaks, and reduce electricity use by 5 per cent during those hours according to a “binding” target. This is to avoid the use of gas power, which kicks in during surges in demand and sends prices spiking.
Further proposals included an SME relief package, including a plan for a single set of tax rules for doing business in the EU, and a revision to the Late Payment Directive. Dr von der Leyen said it was unacceptable that 25 per cent of bankruptcies are due to invoices not being paid on time.
Other measures proposed by Dr von der Leyen included a shift to a “more representative benchmark” than the one currently used in the gas market.
She also proposed amending collateral rules and introducing measures to limit intra-day price volatility to address the knock-on problem of high gas prices for which energy companies must hold vast cash collateral to make trades, causing many to quit the market.
State aid rules would also be amended to allow governments to give guarantees to energy companies to avoid bankruptcies, amid fears that such turmoil could interrupt electricity supply.
