Windfall tax formula chosen for electricity suppliers

The energy ministry has decided on a universal profit margin to be applied to all  electricity suppliers, along with individualized cost calculations for a windfall tax formula, proposed by RAE, the Regulatory Authority for Energy, covering earnings from August through October in 2022.

Several cost factors will be taken into account when calculating sums to be subject to the extraordinary windfall tax, including operating costs, bad debt resulting from unpaid power bills, and the burden of hedging – for companies that engage in hedging.

The difference between nominal tariffs charged by suppliers each month and their respective average cost of acquiring electricity from the domestic wholesale market, including balancing costs, will be calculated. Then, a reasonable margin of activity will be deducted from the amount.

The resulting figure, in euros per MWh, will be used to calculate each company’s increased cash flow from supply of electricity to customers. Excess revenues will be determined from these increased inflows by subtracting each company’s hedging cost for the month.

Once the windfall amounts have been calculated, electricity suppliers will need to make immediate payments covering 60 percent of their respective totals, while the other 40 percent will be expected at a latter date.