On 6 October 2022 the EU Council adopted Regulation 2022/1854: a solidarity contribution of at least 33% on fossil fuel companies, a €180/MWh cap on certain electricity revenues, and cuts in demand.
On 6 October 2022 the Council of the European Union adopted Regulation (EU) 2022/1854 on an emergency intervention to address high energy prices. The Commission had proposed it on 14 September and energy ministers reached a political agreement on 30 September. As a regulation, it applies directly in every member state without needing to be transposed into national law, although it leaves each country to choose how to carry out several of its measures. It will enter into force on the day after its publication in the Official Journal of the EU.
The solidarity contribution
EU companies and permanent establishments operating in the crude petroleum, natural gas, coal and refinery sectors must pay a temporary solidarity contribution on their surplus profits, unless the member state has adopted equivalent national measures (Article 14). The base is the part of taxable profit in fiscal years 2022 and/or 2023 that exceeds by more than 20% the average taxable profit of the four fiscal years starting on or after 1 January 2018, and the rate cannot be lower than 33% (Articles 15 and 16). The contribution is on top of ordinary taxes. Member states have until 31 December 2022 to adopt and publish the measures that implement it.
The revenue must be used, among other purposes, to support final energy customers, especially vulnerable households, to reduce consumption, to help energy-intensive companies that invest in renewables or efficiency, and to advance energy self-sufficiency (Article 17). In Spain, the government had already announced temporary taxes on the profits of the big banks and energy companies in July. The EU regulation allows the contribution to be replaced by equivalent national measures, provided they pursue similar objectives and generate comparable or higher revenue.
The revenue cap and electricity demand
Article 6 sets a cap of €180 per MWh on the market revenues of producers using low-cost technologies: wind, solar, geothermal, run-of-river hydro, biomass, waste, nuclear, lignite, crude oil products and peat (Article 7). It will apply from 1 December 2022 to 30 June 2023. Member states may set a higher cap if their costs justify it or limit revenues further (Article 8), and must use the surplus to support final electricity customers in a targeted way (Article 10).
On demand, member states will endeavour to cut their monthly gross electricity consumption by 10% against the average for the same months of the reference period (Article 3). In addition, each member state will determine peak hours — at least 10% of the hours between 1 December 2022 and 31 March 2023 — and must cut consumption in them by at least 5% an hour on average (Article 4). Each country chooses the measures, which must be transparent, proportionate and non-discriminatory, and has to notify them to the Commission by 1 December 2022 at the latest.
What to follow
The effect on each company will depend on how each member state adopts the measures. Fossil fuel companies are the target of the contribution; producers with low-cost technologies, of the cap; and large consumers may be affected by the demand-reduction measures each country decides. The regulation also lets member states apply electricity price interventions to small and medium-sized enterprises (Article 12).
The Commission will review the electricity part of the regulation by 30 April 2023 and may propose extending it or changing the level of the cap; the solidarity contribution will be reviewed by 15 October 2023 (Article 20). In general the regulation applies until 31 December 2023.
The regulation sets the European framework; what each company pays will depend on how each member state adopts it.
This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.
