Our price cap and related energy regulation overview

On 6 October 2022, the EU member states adopted Council Regulation 2022/1854 on an emergency intervention to address high energy prices (EU Regulation 2022/1854) in response to significantly increased energy prices on the market. EU Regulation 2022/1854 does not fix the price of electricity on the market, instead it provides for a cap on the market revenue to a maximum of EUR 180 per MWh of electricity produced (Articles 6 and 7 of the EU Regulation 2022/1854), with any surplus revenue above that cap being surrendered to EU member states. The cap will apply to energy sources referred to in Article 7(1) of EU Regulation 2022/1854, including so-called infra-marginal technologies, such as renewable energy, nuclear energy, and lignite. The cap is proposed to apply temporarily from 1 December 2022 and remain in place until 30 June 2023 (Article 22(2)(c) of the EU Regulation). The adopted regulation applies EU-wide and does not have to be implemented on a national level. Pursuant to Articles 8 and 9 of EU Regulation 2022/1854, member states may deviate from the agreed measures to achieve the objectives of such regulation.

This alert is accurate as of 20 January 2023 and focusses on countries where legislation has either been published or is at an advanced stage. Energy price regulation across Europe is constantly changing with almost every country considering measures of some sort. These changes will be updated in the Simmons & Simmons Clean Energy Tool.

For the purposes of this client alert: “Windfall Tax” will mean a tax levied by governments against energy producers who are experiencing extraordinary revenues. Further, “Price Cap” will mean a cap on the price of electricity which business consumers pay on electricity.