| 8.3°C Dublin

Windfall tax might only fund €600 electricity credit


Leo Varadkar

Leo Varadkar

Leo Varadkar

The Government might only use a new windfall tax and solidarity contribution from energy companies to fund the existing €600 electricity credit and other cost-of-living supports announced in the Budget, it has emerged.

Ministers were told earlier this week that the Government could decide in future to use the proceeds from new price caps and taxes on fossil fuel companies to offset the cost of supports that have already been provided.

A €600 electricity credit to be applied to utility bills in three instalments was announced in last September’s budget, at a cost of €1.2bn to the Exchequer.   

A range of  other energy supports to less well-off households, including a one-off fuel allowance payment of €400, were also announced. 

The first of the €200 universal electricity credits has been applied to bills for every household in the country this month. Another €200 will be applied in January of next year. The third €200 will be   applied in March.

It is estimated that the measures signed off by Cabinet on Tuesday will raise between €340m to €1.9bn,  depending on the cost of energy in the coming months.

A memo given to ministers says the   new EU regulations give member states flexibility to pre-finance support measures to electricity customers,  and collect the market revenues at a later stage.

“Government may decide in future to use the proceeds to offset the cost of supports which are already being provided,” it states.

Meanwhile, the Cabinet was also told that the EU requirement for Ireland to reduce electricity consumption during peak hours by 5pc between December and March is likely to be “extremely challenging” in the context of “significant electricity demand growth”.

The new EU regulations give countries the power to impose taxes on profits and introduce wholesale price caps on energy generated by major firms. On Tuesday, the Cabinet signed off on plans to cap the revenues of companies producing electricity using coal fire and oil at €180 per megawatt hour, meaning anything they charge above that will be collected by Revenue.

Daily Digest Newsletter

Get ahead of the day with the morning headlines at 7.30am and Fionnán Sheahan's exclusive take on the day's news every afternoon, with our free daily newsletter.

This field is required

Firms producing electricity using solar, wind or hydro power will have their market revenue capped at €120 per megawatt hour. Fossil fuel producing companies will also be asked to pay a solidarity contribution on taxable profits they make from the sale of the fossil fuel.

Tánaiste Leo Varadkar yesterday insisted that revenues from these new measures would give the Government additional resources.

“We will review the situation later in the year to see if we need to extend them  and do more. We will have some resources to do that. ”

He was speaking at the launch of a new partnership between semi-state energy company Bord na Mona and Ocean Winds.

“One of the advantages of having this windfall tax is having additional resources that we didn’t have on Budget Day. We can use that to provide further help for households and businesses next year, but it’s too soon to make that call now.

“We need to see where we stand in terms of energy prices, whether they’re going up or down or staying the same – and we also need to see where we stand economically, more broadly. We can’t make that decision at this stage, but I do want to assure people that a lot of the help announced in the Budget has yet to arrive.”

Most Watched