New tax to hit windfall energy profits by 2011

Energy utilities denounce government plan

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The Finnish government plans to tax so-called windfall profits of those electric utilities which derive monetary benefit from trading in carbon dioxide emissions.
      The price of the emission rights is factored into the rates that the electricity utilities charge their for electricity - even for electricity which does not cause any such emissions.
     
The wholesale price of electricity is set at the Nordic electricity exchange Nordpool in Oslo, according to the most expensive form of electricity.
      Utilities generating electricity using nuclear, and hydroelectric plants are entitled to charge the same for their output as those who are burdened by emission fees. The resulting windfall profit is what the government now wants to tax.
     
The tax is to be levied on hydroelectric and nuclear power facilities built before 1997. The tax would be introduced either from the beginning of 2010 or 2011; the latter is seen as most likely.
      Minister of Economic Affairs Mauri Pekkarinen (Centre Party) says that the tax on the unearned profit will be “less than 50 per cent, but more than ten per cent.
      The revenue generated from the tax has been estimated at EUR 33-330 million. Pekkarinen says that a “good price” would bring EUR 165 million into the state budget.
     
The tax would probably have its greatest impact on Fortum, but Pekkarinen emphasised that when drawing up the tax, the effect on individual companies was not a major consideration.
      He said that statements by two experts indicate that the tax would not push up consumer prices of electricity. Energy utilities disagree.
      “There is no perpetual motion machine. If we take money from somewhere, it has to be replaced from somewhere”, said Jarmo Tanhua, CEO of Teollisuuden Voima.
     
“It seems that this tax on no emissions has nothing to do with saving the climate, but we certainly do understand that state finances need it”, he said.
      Timo Karttinen, head of development at Fortum, also feels that the tax on hydroelectric and nuclear energy goes against climate and energy policy. He also believes that the price of electricity will rise in some time frame.
      Juha Naukkarinen, director of Finnish Energy Industries (ET), noted that the tax would partly lead to multilayered taxes.
      “Nuclear and hydroelectric power end up paying significantly higher property taxes than other forms of production. The property tax was raised in 2006, and the reason given for that was the competitive edge that hydroelectric and nuclear energy have as a result of climate policy”, Naukkarinen said in a statement issued on Tuesday.


Previously in HS International Edition:
  Vanhanen: Climate technology can help in downturn (17.10.2008)
  New EU emissions trading period raises consumer price of electricity (3.1.2008)
  New international climate agreement would saddle Finland with sizeable supplementary bill (2.9.2008)
  EU energy package to hit consumers in coming years (24.1.2008)
  COMMENTARY: Emissions trading for dummies (19.1.2008)

Links:
  Press release: Fortum’s comment on the Finnish Government’s planned tax 31.3.2009 16:42

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