Parliamentary report on electricity windfall tax idea

Report (64 pages, PDF) and evidence (591 pages, PDF) of a select committee of the UK House of Commons on energy prices.

On the idea of a windfall tax to take the profits that generators have made as a result of the introduction of carbon pricing without auctioning of permits, the report says:

We recommend that the Government now conducts and publishes a rigorous analysis, estimating the value of any windfall profits which companies have gained, and the use to which they have been put, or are planned to be put. It is only on this basis that the Government can then decide if there is a case for reallocating some of this windfall ...

We recognise the claims made by the generators about the way in which they have used the ‘windfall gains’ under Phase 2 of the EU ETS, and we understand the danger that regulatory uncertainty could delay investment plans. However, given the apparent size of the gain (something we have already asked Ofgem to examine more carefully), and the extreme need of many households, we believe there is a compelling rationale for at least a modest, one-off top-slicing of these gains to help fund action to reduce the energy bills of vulnerable families in the long term. However, we also note the windfall gains accruing to HM Treasury, and believe it too must make its contribution in these exceptional circumstances.

For further information or advice please contact Franck Latrémolière.

Filed under DTI/BERR, Electricity, UK parliaments.

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