Levy on surplus market revenues of electricity producers
In November, an amendment to the Energy Act passed through the legislative process at record speed, introducing a levy on surplus market revenues for most electricity producers and implementing part of EU Council Regulation 2022/1854 of 6 October 2022, on an emergency intervention to address high energy prices. It also includes a mechanism to introduce caps on energy purchase prices for large businesses. The amendment was published in the Collection of Laws on 30 November 2022 under No. 365/2022 Coll. and entered into effect on 1 December 2022.
Levy on surplus market revenues
The levy payers are electricity producers and any intermediaries participating in the wholesale electricity markets on behalf of the producers, irrespective of the market timeframe and whether bilateral transactions or transactions on a centralised market are involved. In addition, these also include persons directly or indirectly related to levy payers who supply electricity to the wholesale market.
The subject of this levy is the producer's surplus revenue determined as the difference between the revenue actually earned and the market revenue cap. The levy on surplus revenues amounts to 90% of the surplus revenues expressed in the Czech currency.
Market revenue means the revenue received by the producer in exchange for the sale and supply of electricity produced in the territory of the Czech Republic to the electricity grid. The manner in which the surplus revenue amount is to be established shall be determined by the government through its decree.
Depending on the type of energy, the cap on market revenue from the sale of 1 MWh is:
- EUR 180 (wind, solar and geothermal energy, hydropower without the use of dams, energy from peat and mineral oils)
- EUR 240 (gaseous fuel from biomass) EUR 210 (solid fuel from biomass)
- EUR 100 (recovery of waste except biomass)
- EUR 70 (nuclear energy)
- EUR 170 or EUR 230 (lignite energy depending on the type of power plant).
Hence, a market revenue cap has not been set, e.g., for electricity generated from coal, natural gas, and water using dams. The law also excludes from the levy revenues from the sale of electricity produced in an electricity generation plant with an installed capacity of up to and including 1 MW and electricity produced from biomass.
According to the explanatory report, the levy will be a tax-deductible expense. The Energy Regulatory Office will be the administrator of the levy under the Tax Procedure Code. The levy will be applied in two levy periods: December 2022 and calendar year 2023. The levy payer must submit the levy statement for the first levy period within two months after the end of the period, i.e., by 28 February 2023, and pay the levy within that period.
The levy for the second levy period will be paid in monthly prepayments. The levy payer is required to report a prepayment of the levy within 25 days after the end of the monthly prepayment period, and to pay it within that period. The procedure for determining the levy prepayment shall be similar to that for determining the levy itself. The final statement of levy prepayments made in the period shall then be submitted within 3 months after the end of this levy period. Levy payers required by law to have their financial statements audited must ensure that the auditor verifies the accuracy and completeness of the selected information provided in the levy statement for the second levy period. The government shall determine the scope of such information and the minimum extent of the verification through a decree.
Mechanism for introducing caps on energy prices for large businesses
During the debate in the parliament, an amending proposal unrelated to the levy on electricity producers was adopted, containing a proposal for a mechanism to cap energy prices for large businesses as customers. This mechanism operates based on the quantification of financial benefits (advantages) that the customer receives by buying electricity or gas at a fixed (capped) price (for example, at the level currently set for retail customers) compared to paying a higher contractual price for electricity or gas.
If this financial benefit exceeds a certain permissible limit, e.g., the public aid intensity under the Temporary Crisis Framework, the business will have to return the undue benefit. Given the ongoing energy consumption, this amount can only be determined after the end of the period for which the prices are capped. It can be expected that the government will propose the specific functioning of this mechanism, depending on the outcome of negotiations between EU member states.