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German court approves windfall profit skimming for 2022 energy crisis
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KARLSRUHE, Germany (Reuters) – Germany’s constitutional court on Thursday ruled in favour of a government policy that required
KARLSRUHE, Germany (Reuters) – Germany’s constitutional court on Thursday ruled in favour of a government policy that required renewable energy producers to surrender excess revenues to help offset surging electricity costs during the 2022/2023 energy crisis.
The case, brought by 22 operators of renewable energy plants, challenged provisions in Germany’s Electricity Price Cap Act that required producers to hand over surplus earnings from electricity sold between December 2022 and June 2023.
The funds were used to cap electricity prices for households and companies to mitigate the sharp rise in energy prices following Russia’s invasion of Ukraine and the disruption of Russian energy exports to Germany.
German businesses have struggled to keep a lid on higher energy costs at a time when Europe’s largest economy faces a second year of contraction.
The complainants argued the measures unfairly targeted renewable energy producers, while gas-fired power plants, which they said were responsible for driving up prices, were exempt, adding that the relief measures for consumers should have been financed through broader societal means, such as taxes.
The ruling means the government will not be forced to refund around 750-850 million euros ($790 million-$895 million) to affected operators in what could have strained already tight public finances.
Stephan Harbarth, President of the constitutional court, said the profit skimming “was justified as a reaction to a special exceptional situation on the electricity market that arose after the start of the war in Ukraine in February 2022.”
($1 = 0.9491 euros)
(Reporting by Ursula Knapp and Riham Alkousaa, editing by Matthias Williams and Thomas Seythal)
Renewable energy is energy derived from natural processes that are continuously replenished, such as sunlight, wind, rain, tides, waves, and geothermal heat.
An electricity price cap is a regulatory measure that limits the amount a supplier can charge customers for their electricity, aimed at protecting consumers from excessive price increases.
A windfall profit refers to an unexpected and unearned financial gain, often resulting from favorable market conditions or regulatory changes.
The Electricity Price Cap Act is legislation that establishes a maximum price that energy suppliers can charge consumers for electricity, intended to provide financial relief during energy crises.
Surplus earnings are profits that exceed the expected or normal level of income, often prompting regulatory actions or redistributions to address economic disparities.
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