A total of 140 billion euros, the European Commission has been promising itself since the introduction of a price cap on electricity generation and a tax on windfall profits. The proposed mechanism is designed to tame energy prices in the European market.
Price cap on production prices
The European Commission has proposed to set the price cap at 180 euros per megawatt hour of electricity. The cap relates to the generation, not the end, price of electricity. At the same time, it is intended to function as a border for extraordinary taxation Therefore, if any of the producers sells electricity more than 180 euros per megawatt hour, the states will be able to use any money above that price for support measures. The ceiling is supposed to apply only to non-gas-fired power plants.
Tax on windfall profits is set to be 33%
In addition, the European Commission proposes to introduce a windfall tax of 33 per cent. The tax is meant to apply to fossil fuel producers and oil processors. The taxes would be this year’s gains if by at least 20 percent they exceed the average gains of the past three years. Revenues from the price cap and taxes on windfall profits are set to total around €140bn.
The commission also proposed an obligation to reduce electricity consumption at peak times by at least five per cent. It also intends to work on long-term reform of the energy market.
