The new measures proposed by Brussels to combat the European energy crisis leave more doubts than news in Spain. As a result of the situation caused by the war in Ukraine, which has caused the price of gas to soar and with it the price of electricity generation, in recent days the European Commission has outlined a new tax to be levied on companies' extraordinary profits and a mechanism to limit the so-called profits that have fallen from the sky. In fact, the Spanish government has been studying and legislating rules along the same lines for more than a year now. An advance that sources in the energy sector attribute to the peculiarities of the Spanish market (more sensitive to the fluctuations of amounts because fewer contracts are signed at a fixed price and with shorter duration) and that now leaves the doubt of how they will be reconciled with what the Community Executive proposes.
This Tuesday, during her speech on the state of the Union, the President of the Commission, Ursula von der Leyen, insisted on the main lines of the plan: saving electricity and measures so that energy companies do not make a profit from a situation that is proving very harmful to consumers. For the latter, two fundamental measures are proposed. The first is a new 33% tax on the extraordinary profits of oil, gas, coal and refining companies.
What has been euphemistically called "solidarity contribution" will consider an extraordinary profit that exceeds 20% of the average profits of the last three years. And, as explained by the European Commission, each Member State will be responsible for its collection. The Spanish government, however, has already proposed another formula to tax what is considered an excessive profit for companies due to the current price situation. In this case it is not a tax, but has resorted to the figure of the non-taxed patrimonial benefit, and will be charged on income (so that companies pay 1.2% of their total turnover) instead of on profits.
In both cases it is a temporary surcharge, but there is another notable difference. For the time being, the European Commission is proposing it as a tax for this year only. In other words, it will be paid in 2023 from 2022 profits. The intention in Spain, however, is that it would be biannual, being paid in 2023 and 2024 from the turnover of companies in the sector in 2022 and 2023. Now it will be necessary to wait for the definition of the European standard, the aforementioned sources point out, to see if the Government can continue with its approach and justify to Brussels that the collection target on extraordinary profits is also met.
A higher cap
The second of the measures devised by the European Commission is the temporary revenue cap for infra-marginal producers. This targets windfall profits as it refers to electricity producers who use cheaper sources than gas but benefit in remuneration from the high prices of this or other raw materials (such as some types of coal). The Commission has stipulated that these companies cannot obtain more than 180 euros per megawatt hour (MWh), so that temporarily (until March 31) they would have to return what they obtain above that amount.
But again Spain moved forward with the same idea. The Government tried it a year ago, although its proposal was then decaffeinated as it could not be applied retroactively, and then went further down that path by proposing a lower cap (67 euros per MWh) than the European one. This and the so-called Iberian exception, which allows Spain and Portugal to reduce the influence of gas prices on electricity generation, limit the real effectiveness of the European measure on the Spanish market, according to industry sources. But once again there are unknowns as Brussels will introduce some retroactivity (which prevented until now) or if it will accept lower limits than the one proposed.
Overall, the European Commission said that with both measures it expects a collection of some 140,000 million. If the Spanish rules comply with the quota that the country should contribute to that overall figure, Brussels could be satisfied with things staying as they are, notes an expert. In fact, he sees this as "probable" because of the speed with which the authorities have to act in the current context. But we will have to wait at least until the end of the month, when the energy ministers of the EU-27 will meet to approve the Brussels proposal, to find out the fine print. A situation that adds uncertainty to the regulatory tangle suffered by the sector in recent times.