European Commission has questions about electricity sales in Finland

Green MEPs see cost-price electricity sales to shareholders as tax-free dividend

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Finnish officials have until Midsummer to respond to the European Commission on whether or not Finnish electric utilities are evading taxes by selling electricity to their shareholders at cost price.
      Present legislation bans the sale of products to shareholders at special prices, but the law has been applied more leniently to power companies. The practice has been accepted, as it is supported by two decisions of the Supreme Administrative Court from the 1960s.
     
Earlier in the year, Finnish Green MEPs Satu Hassi and Heidi Hautala submitted a written question on the matter to the Commission. They feel that selling electricity at cost-price amounts to a concealed distribution of dividends, and that the benefit should be taxed. As the two see it, electric utilities have been granted a tax break that does not apply to other businesses.
      Joaquin Almunia, the European Commissioner for Competition, has asked Finland for a clarification of the matter.
     
Three Finnish government ministries are working on an answer. Although the inquiry sent to the Commission refers to honest competition, the decisive factor is the view that the Taxation Department of the Ministry of Finance takes on the matter.
      Lasse Arvela, the Director-General of the department, says that he does not yet know what the answer will be, he says that usually responses focus on defending Finnish practice.
      When the response is sent to the Commission, it will be made public.
     
The response will attract great attention, because Hassi and Hautala both feel that Fennovoima, a company in which 64 Finnish companies hold shares, and which wants to build a new commercial nuclear reactor in Finland, would probably not build the reactor without the cut-rate sales of electricity to its shareholders.
      Fennovoima is one of two Finnish companies whose applications for the construction of nuclear reactors have been endorsed by the Finnish government.
     
“If the Commission were to state that the corporate model goes against competition legislation, it should have the effect that Fennovoima could not get a licence”, Hautala says. “It would be an impediment that would need to be taken seriously.”
      In its application, Fennovoima states directly that “the company’s shareholders are entitled to buy electricity produced at the nuclear plant at cost price in proportion to their share of ownership.”
     
Fennovoima financial director Christoffer Ehrnrooth dismisses the objections as being completely without foundation. He says that there is nothing strange, in principle, about the arrangement. He notes that the shareholders also shoulder the responsibility.
      Teollisuuden Voima, which is currently building Finland’s fourth commercial nuclear reactor in Olkiluoto, also sells electricity to its shareholders at a discount.
      The Ministry of Employment and the Economy says that more than a third of Finland’s electricity production operates on the cost-price principle, as does part of the country’s heat production. The idea is to join forces and make joint investments in shared power plants when the company’s own resources are not sufficient.


Previously in HS International Edition:
  Government endorses two new nuclear reactors (22.4.2010)
  Parliament to decide on new nuclear power plants on July 1st (20.5.2010)
  Critics of nuclear energy in Parliament call for more clarity on waste problem (19.5.2010)

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