‘Windfall tax must take into account month’s likely losses’

Electricity suppliers are reacting against a new windfall profit tax, to be applied on a quarterly basis without taking into account end-of-year financial figures and possible losses.

Many of the country’s electricity suppliers have forwarded financial data such as volume sales, customer arrears and bad debt expected by RAE, the Regulatory Authority for Energy, still awaiting data from the remainder of suppliers before it establishes a profit margin recommendation, linked to a new windfall tax. The authority plans to forwards its proposal to the energy ministry next week.

RAE will take into account the financial data forwarded by suppliers to establish a windfall tax rate for an initial first three-month period, covering August 1 to October 31.

According to the new tax measure, suppliers will need to pay 60 percent of any resulting windfall profit tax by December 23, meaning the measure’s details will need to be finalized within the next two weeks.

Some of the country’s electricity suppliers could incur operating losses in December as a result of rising wholesale electricity prices and a recently introduced rule requiring them to announce their prices for each ensuing month by the 20th of the preceding month.

Suppliers have announced retail electricity prices ranging from 28 to 38 cents per KWh for December. Those pursuing more aggressive pricing policies stand to incur losses this month as a result of the latest rise in energy prices.

 

December power prices to fall 20%, windfall tax ‘lacks clarity’

Most of the country’s electricity suppliers are preparing to announce December retail electricity prices of between 32 and 35 cents per MWh, down 20 percent compared to November, a reflection of lower natural gas prices at the Dutch TTF hub in recent weeks.

Some suppliers are set to go as low as just over 30 cents per MWh, the lowest retail power prices have been since August, when new rules were introduced requiring suppliers to announce prices for each forthcoming month by the 20th of the preceding month.

Given this requirement, helping consumers make price comparisons, suppliers must announce their December prices by midnight Sunday.

The anticipated price reduction will not result in lower prices for consumers. But the state, subduing the cost of retail electricity at 15 to 16 cents per KWh through subsidies, will benefit as it will be able to maintain this desired price level by contributing less.

Like in November, no state budget money will be needed for energy subsidies offered by the government, meaning it will have some leeway to subsidize other sectors, most probably auto fuel, once again on the rise.

On another front, suppliers have expressed complaints about a new windfall profit tax, set to be introduced over successive three-month periods, beginning with August to October. Suppliers protest the initiative’s formula lacks clarity and has increased the complexity of cost calculations.

Power suppliers windfall profit recovery plan proceeding

The energy ministry has just submitted to parliament an amendment for a mechanism designed to recover windfall earnings gained by electricity suppliers, initially from August 1 to October 31 this year.

The mechanism will be implemented repeatedly over additional three-month periods for as long as it is needed.

A universal windfall earnings level will be set as a benchmark. Earnings exceeding or falling below this level from month to month will be offset for each three-month period, according to the plan.

Electricity suppliers found to have benefited from windfall earnings will need to swiftly return 60 percent of amounts determined by the new formula, while payment of the remaining 40 percent will be expected at latter dates.

For the measure’s initial three-month period, electricity suppliers will need to return 60 percent of windfall earnings by December 23.

The energy ministry notes it has taken into account concerns raised by suppliers over factors shaping actual cost of electricity supply.

 

Suppliers demand cost consideration ahead of extraordinary tax

Electricity suppliers facing an extraordinary tax of 90 percent on windfall earnings between August and November argue the energy ministry, engineering the tax, should take into account hefty costs they have been prepared to shoulder as a means of subduing retail price levels for consumers.

The energy ministry, currently finalizing a formula for this tax, insists electricity suppliers have benefited from excessive earnings, especially in September and October, implying suppliers overpriced their electricity during this two-month period.

Suppliers, on the other hand, contend they are forced to purchase electricity in advance to protect themselves against fluctuating prices and are engaging in hedging activities as a result of being required, by law, to announce their retail prices for upcoming months by the 20th of each preceding month.

Hedging, as well as other business costs, should be taken into account before the extraordinary tax is imposed, electricity retailers have stressed.

Electricity producers react against tax on windfall profit

Electricity producers have reacted against an extraordinary 90 percent retroactive tax on windfall profits from October, 2021 to June, 2022, opposing the logic behind the measure, not its resulting sums. Some producers claim the initiative amounts to confiscation and appear to be preparing for legal action.

Dinos Benroubi, president of ESAI, the Hellenic Association of Independent Power Producers, told the recent Renewable & Storage Forum, an event staged by energypress, the measure punishes anybody who makes money without taking into account how this money is made. He described the government measure as “confiscation”.

Electricity producers contend they have not been taken by surprise as the sums to be paid had, more or less, been anticipated and budgeted.

Even so, some company representatives told energypress they will react to the plan, while others seem to be preparing legal challenges.

The retroactive tax is expected to raise 373.55 million euros, of which a sum estimated between 260 and 270 million euros concerns power utility PPC, the dominant market player. The majority of the remaining 100 or so million euros, or 70 to 80 million euros, concerns the country’s four independent power producers, while renewable energy producers will be responsible for the rest.

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.

 

Extraordinary tax on power supplier windfall earnings

The energy ministry is preparing an amendment for an extraordinary tax of 90 percent on any windfall earnings gained by electricity suppliers since August, which it expects to submit to parliament by the end of November, sources have informed.

This extraordinary tax will be imposed on any windfall earnings made by electricity suppliers between August, 2022 and November, 2022.

Excess earnings will be calculated based on a reasonable monthly electricity supply price to be set for all companies. Earnings exceeding or not reaching resulting levels from month to month will be offset and the net sum will be subject to the 90 percent windfall tax.

This measure comes in addition to a number of other extraordinary tax measures introduced in the energy sector as the government seeks to raise revenues to ensure the continuation of electricity bill subsidies and safeguard state budget resources.

Officials are already moving ahead with another extraordinary tax of 90 percent on windfall earnings of electricity producers between October, 2021 and April, 2022, the aim of this measure being to raise 460 million euros.

Extraordinary tax on producer windfall profits to raise €460m

A new joint ministerial decision by the finance and energy ministers has introduced a formula for a temporary extraordinary tax on windfall earnings accumulated by vertically integrated energy groups during the nine-month period between October, 2021 and June, 2022.

The windfall tax, whose coefficient has been set at 90 percent, is expected to result in a collection of approximately 460 million euros.

The joint ministerial decision, published in the government gazette, overcomes a delay in the delivery of certified data by a certified accountant to RAE, the Regulatory Authority of Energy, as was foreseen in the original joint ministerial decision. It enables preliminary calculation by RAE, based on the uncertified data, so that a provisional extraordinary levy can be paid immediately by all electricity producers.

Specific amounts, and any corrections needed, will be calculated at a latter date, based on data that will have been certified.

Wind farms not earning windfall profits, association notes

Wind farms are not earning windfall profits as they are remunerated based on long-term fixed tariff agreements not influenced by wholesale electricity prices, which have skyrocketed as a result of soaring natural gas prices, ELETAEN, the Greek Wind Energy Association, has clarified.

A 90 percent windfall profits tax imposed on electricity producers essentially does not apply to wind farm producers as they have always been returning any amounts exceeding their long-term fixed tariffs for output they have agreed to, ELETAEN noted.

Wind farm investors have secured fixed tariffs for the output of their facilities through long-term contracts with DAPEEP, the RES market operator, the association noted.

Older wind farm investors have agreed to tariff prices, through administrative procedures, based on the cost of their projects at the time of their development, while newer wind farms have secured fixed tariffs through RES auctions staged by RAE, the Regulatory Authority for Energy, ELETAEN reminded.

As a result, wind farms are not benefiting from elevated energy market prices and are not earning windfall profits, ELETAEN underlined, adding remuneration prices in the sector are low.

The average price paid for wind energy production in Greece is approximately 94 euros per MWh, just 22 percent of the average price of electricity last month, the association pointed out.

 

 

 

 

EC windfall profits tax soon, revision to local plan possible

Greece will not be required to make adjustments to its windfall profits tax on electricity producers now that the European Commission is preparing to implement a corresponding tax mechanism covering the entire EU, energy ministry sources have told energypress.

Brussels’ related directive notes that EU member states already implementing wholesale electricity market interventions to contain retail prices, namely Greece, Spain and Portugal, can maintain their measures, with any revisions being at their discretion, the ministry sourced added.

However, revisions to the Greek formula, influenced by details in the European model, cannot be ruled out, as government officials will examine whether partial changes can be made to improve the formula recovering electricity producer windfall profits for the country’s day-ahead market, the ministry sources added.

 

 

Brussels placing energy crisis hopes on windfall profits tax

The European Commission is placing its hopes on greater revenues to be generated by a windfall profits tax on refineries, wholesale gas companies and electricity producers as a solution to get the EU through the energy crisis.

According to the plan, the EU-27 will use these increased tax collections to subsidize, as widely and as generously as possible, electricity bills of European households and businesses.

Thoughts of imposing a price cap on natural gas from all sources, including Russia, have been abandoned, following objections raised by many EU member states at a recent meeting of EU energy ministers.

The windfall profits tax on oil, gas, coal and refining companies, to be announced today by European Commission president Ursula von der Leyen, could reach as high as 33 percent, according to Bloomberg. Drafts of this extraordinary tax measure do not include its tax rate.

 

Windfall tax for oil and gas firms, government decides

Windfall profits earned in 2022 by petroleum companies, through their refineries, as well as by natural gas wholesalers, will be subject to an extraordinary solidarity tax, the government has decided, energypress sources have informed.

The money to be collected through this extraordinary tax will go towards the Energy Transition Fund to support the government’s energy subsidies offered to households and businesses.

The government’s plan to move ahead with this extraordinary tax is linked to a probable European-wide solidarity tax on windfall profits earned by fossil fuel companies.

The Greek plan will be shaped along the lines of a windfall tax model imposed on electricity producers.

This new windfall tax on oil and gas companies was discussed at last Friday’s emergency meeting of EU energy ministers. It was supported by Greek energy minister Kostas Skrekas, as well as his German and Spanish counterparts.

The Greek government appears determined to implement the windfall tax on oil and gas companies even if it fails to receive EU approval. Athens recently imposed a 90 percent windfall tax on electricity producers without EU approval.

 

 

Electricity producers windfall tax now imminent

Joint ministerial decisions needed by the finance and energy ministries for the implementation of a 90 percent windfall tax on recent extraordinary gains achieved by vertically integrated electricity producers are set to be signed by the two ministries, energy minister Kostas Skrekas has told a news conference.

RAE, the Regulatory Authority for Energy, has delivered its report for electricity producer earnings covering a six-month period from October, 2021 to March, 2022, to be subject to the new windfall tax.

As for a second period to be subject to this extraordinary tax, a three-month term covering April to June this year, RAE has requested further details from the energy groups on discounts offered as well as returns linked to bilateral agreements. These details will be delivered to RAE once they have been approved by a certified public accountant.

 

Windfall profit tax worth €270m, PPC covering 70%

The government will collect approximately 270 million euros from a windfall profit tax imposed on electricity producers for a six-month period covering October, 2021 to March, 2022, sources have informed. A 70 percent share of this tax sum concerns power utility PPC.

The tax payments to be provided by electricity producers are based on a formula ratified by the government. It was applied in a study conducted by RAE, the Regulatory Authority for Energy, whose results have been handed over to the government.

All discounts offered by electricity consumers to customers were deducted before the extraordinary tax, at a rate of 90 percent, was applied to windfall profits for the six-month period.

These deductions have more-than-halved an initial 590 million-euro tax revenue forecast that had been made by RAE to 270 million euros. PPC, covering 70 percent of the total, will pay a tax sum of approximately 190 million euros, while all other producers will pay further amounts totaling roughly 80 million euros, according to sources.

 

Windfall profit tax collection from September, two stages

A tax on windfall profits earned by vertically integrated energy groups since the beginning of the energy crisis will be applied over two stages, the first covering the period between October, 2021 and March, 2022, and the second between April and June.

RAE, the Regulatory Authority for Energy, has already begun working on details concerning the first period, but more processing is needed before the windfall profit tax, set at 90 percent, can be imposed.

Also, a ministerial decision from the energy and finance ministries, required by a legislative revision concerning the windfall profits, is still pending. It will specify amounts to be taxed.

Tax collections through this extraordinary measure, to help fund support for consumers through the energy crisis, are not expected to begin until September.

 

Producers want discount, fixed tariffs cost deducted from tax

Electricity producers have called for their total cost of discounts and fixed electricity tariffs offered in the market to be deducted from an extraordinary 90 percent tax to be imposed on energy-crisis windfall profits, rather than a deduction of just a percentage of this total cost, as is currently planned.

If the total cost of discounts and fixed electricity tariffs is not deducted from the extraordinary tax, introduced to help fund energy-crisis support measures, then it makes no sense for producers to keep offering discounts, company officials argue.

Heavy taxation after having offered discounts and low fixed tariffs is pointless, especially amid a period of energy crisis, they added.

In other parts of Europe, producers are being offered incentives to maintain tariffs at fixed levels as this approach offers protection at a turbulent time for electricity prices.

The extraordinary measure is planned to tax windfall profits earned by electricity producers between October, 2021 and March, 2022.

 

 

RAE finalized windfall profit figures soon, producers react

RAE, the Regulatory Authority for Energy, is examining objections and observations made by electricity producers in response to the authority’s report on sector windfall profits, headed for taxation.

The electricity producers, including vertically integrated energy groups with retail representation, have objected to details of a formula applied by the authority to determine excess profits during the ongoing energy crisis’ period between October, 2021 and March, 2022.

The producers, claiming the report’s findings are erroneous, want a series of additional factors to also be taken into account, including discounts offered to customers, losses incurred through fixed tariffs, as well as financial costs resulting from initiatives taken to boost cashflow.

Energy ministry Kostas Skrekas has asked RAE to take into account the factors raised by electricity producers before delivering a finalized windfall profit figure, expected imminently.

The government is preparing a legislative bill for a 90 percent tax on windfall profits once RAE has delivered its finalized figures, sources informed.

The RAE report has valued the total sum of windfall profits earned during the aforementioned six-month period at 927.44 million euros.

Power utility PPC holds the lion’s share of this amount, 729.91 million euros, while the independent players Mytilineos, Elpedison, Heron and RES producers active in the market are linked to the remaining amount.

 

 

 

RAE completes windfall profits inquiry in electricity generation

RAE, the Regulatory Authority for Energy, has completed an inquiry into windfall profits earned by electricity producers during the energy crisis and is set to forward its results to the government and energy ministry this coming Friday, once they have been endorsed by the authority’s board, energypress sources have informed.

The inquiry covers the period up to the end of 2021. The government has announced windfall profits will be heavily taxed.

To determine profits in electricity production, RAE officials took into account electricity production-unit profit levels every 15 minutes, the frequency at which energy exchange offers are made, for all facilities of all production technologies (natural gas, lignite, renewables) and then compared these results to annual profit figures posted by each producer.

Though the amount of windfall profits resulting from RAE’s inquiry is not yet known, the results are not expected to be spectacular, according to energypress sources.

Just over a month ago, Prime Minister Kyriakos Mitsotakis announced that a 90 percent tax rate will be imposed on windfall profits earned in electricity production.

RAE will follow up with an inquiry into possible windfall profits in the wholesale and retail gas markets, as well as electricity supply.