EU Commission proposes price cap on market revenues for power plant operators and a solidarity contribution for gas and oil producers

In view of the high energy prices, the EU Commission plans to introduce a cap on market revenues for electricity producers as well as a solidarity contribution for companies in the oil, gas, coal and refinery sectors.

The draft regulation made public today first provides regulations for a reduction of electricity consumption. EU member states are to implement measures to reduce their total electricity consumption at peak price hours by 5 percent.

Furthermore, market revenues of electricity producers shall be capped. This concerns electricity generated from wind energy, solar energy, geothermal energy, hydropower without reservoir, biomass fuels (excluding bio-methane), waste, nuclear energy, lignite, oil shale and crude oil.

Member States shall ensure that the cap targets all market revenues of producers, regardless of whether the electricity is traded bilaterally or in a centralised marketplace. According to the draft regulation, profit is to be capped at 180 euros per megawatt hour. The draft regulation lacks provisions on the application of the cap in the case of futures marketing and on financial hedging transactions. The handling of the marketing of large power plant portfolios and the allocation of revenues to individual types of power plants in the portfolio is also not addressed.

Revenue surpluses are to be used by the member states to finance measures that mitigate the impact of high electricity prices on end consumers. Those consumers can be granted financial compensation for the reduction of electricity consumption or receive direct transfers.

Member States may conclude agreements to share the surplus revenues. The draft regulation also provides that member states can regulate electricity prices for small and medium-sized enterprises.

In addition, companies in the oil, coal, gas and refinery sector are to pay a solidarity contribution from 31 December 2022 at the latest. The solidarity contribution in the amount of 33 percent will be levied on taxable profits in 2022 that are 20 percent above the average of the past three years.

Member States shall use the proceeds generated from the temporary solidarity contribution to grant financial assistance to end-users and for measures to reduce energy consumption, among other things. Furthermore, the revenues can be used to reduce the energy prices of end-consumers for a certain amount of energy or to provide financial support to energy intensive industries.

The legal basis for the regulation is Art. 122 (1) TFEU. According to this, the Council, acting on a proposal from the Commission, may decide on measures appropriate to the economic situation if serious difficulties arise in the supply of certain goods, notably in the area of energy.


(14 September 2022)