Power suppliers oppose ‘faulty’ tax plan for windfall earnings

Electricity suppliers have reacted against a formula the energy ministry appears to have settled with for an extraordinary 90 percent tax on windfall earnings.

Officials at electricity supply companies, contacted by enegypress, described the formula likely to be adopted by the energy ministry as hastily prepared with shortcomings, especially its dimension concerning the setting, universally, of reasonable price levels to be used to calculate windfall earnings.

A reasonable universal price level cannot be set as electricity supply companies each have unique profiles and different pricing policies, company representatives pointed out.

In any case, there are parameters in the equation that decisively shape the cost of each kilowatt-hour for supply companies, beyond what is objectively derived from the wholesale market.

The most decisive parameter is hedging, which supply companies are obliged to engage in when announcing price lists each month. Vertically integrated companies hedge mainly by locking in gas prices which they pay, regardless of whether prices subsequently fall or rise, while independent suppliers hedge by locking in prices and quantities of electricity from producers or international exchanges.

The energy ministry plans to bring to parliament, by the end of this month, an amendment for windfall earnings benefitting suppliers between last August and the current month.