What are the rules for levies on excess income in the energy sector?
Several measures and legislative acts have recently been adopted in the context of the energy market emergency. While capping of energy prices has been introduced for households, a levy on the excess income from the sale of electricity produced has been introduced for electricity producers. The legal framework is provided by Council Regulation (EU) 2022/1854 of 6 October 2022. The measures have been implemented in Czech legislation through an amendment to the Energy Act No. 365/2022 Coll. and Government Regulation No. 407/2022 Coll. on the method of determining the amount of excess income from the sale of electricity produced.
The obliged entities with respect to the levy on excess income are producers and intermediaries participating in the wholesale market on behalf of producers. Thus, the levy does not apply, for example, to entities that only trade in electricity. It is therefore crucial that the production of electricity takes place on the territory of the Czech Republic, and it is not decisive where the electricity is supplied. Electricity generators from various sources, ranging from coal-fired power plants to renewable energy sources with partial exemptions, are regulated. Sources with installed electrical capacity of up to and including 1 MW are excluded, as are biomethane power plants or certain supported hydroelectric power plants.
“Excess income” is defined by the above-mentioned government regulation as “the positive difference between the market income and the market income cap for the levy period”. According to the relevant provisions, market income can be understood as net sales including the effect of hedging transactions. The price cap has been set at EUR 180/MWh in the base case. However, the cap may vary for selected sources – a complete overview of the caps is provided in Section 95b of the Energy Act. At the same time, for incentive reasons, the cap has been set at 90% of excess income. In other words, 90% of the income from the electricity price above EUR 180/MWh is subject to the levy, the remaining 10% remains with the electricity producer.
The source of information for the levies is the electronic records according to the business hours or accounting records for the period in question. At this moment, the relevant period is only December 2022 and the whole year 2023, which is effective for the moment of the actual production of electricity. The levy is administered by the Energy Regulatory Office. Given the speed of adoption of the regulations in this area, it cannot be excluded that the legislation will be subject to further adjustments.