Date: 2023-04-19
James Cartlidge: It is always a pleasure to appear so early and unexpectedly. This grouping is about the electricity generator levy. Before I address the specific clauses, here is a reminder of why we are debating this ultimately exceptional new tax. We have to remember that Putin's weaponisation of gas supplies to Europe has pushed energy prices to record levels. In 2022, UK wholesale energy prices rose to eight times their historical level. Despite recent falls, gas prices, which currently drive the market price for electricity, remain at twice their pre-pandemic level, which means that the price achieved by some electricity generators has risen considerably, driven by natural gas prices. The Government have absorbed a substantial portion of the price increase through our generous support for households and businesses, which is why we have chosen to capture the windfall profits of oil and gas extraction with the energy profits levy. The Government are now introducing an electricity generator levy. The EGL is designed to capture only the exceptional receipts that electricity generators make, by taxing only the amounts above their normal return while preserving the incentive to invest in the capacity we need. Clauses 278 to 280 detail the calculation of the levy, which will be applied at a 45% rate on revenues above a benchmark price for UK generation activities. The benchmark price of PS75 per megawatt-hour is set approximately 1.5 times higher than the pre-crisis average. The benchmark price will be indexed to inflation from April 2024. To ensure that the levy applies only to large commercial operations with the capacity to administer the tax, the EGL includes an annual generation output threshold of 50 GWh, which is equivalent to approximately 15,000 domestic rooftop solar panels. A PS10 million allowance provides further protection for smaller businesses from undue administrative burden and reduces the impact of the levy for those in scope. The levy applies from 1 January 2023 and will end on 31 March 2028, although colleagues will appreciate that the design of the levy is such that, should prices return to normal, no tax will be due. To ensure that the tax does not have unintended consequences, clause 279 excludes certain technologies. Clauses 281 to 285 provide definitions for in-scope generation and the calculation of exceptional receipts. As I have outlined, the benchmark price has been set so that the EGL applies only to revenues from the sale of electricity at prices higher than the pre-crisis expectations of generators and investors. The levy applies to receipts from power sold on to the grid from wind, solar, biomass, nuclear and energy-from-waste technology. It applies to revenues that generators actually receive, taking account of contracts which might involve selling power over a longer period for a stable price. Certain types of transaction are excluded, such as "private wire" not sold via the grid, as well as power sold under contracts for difference with the Low Carbon Contracts Company, which is the Government's flagship scheme supporting investment in renewables. Clauses 283 to 285 set out provisions for the recognition of exceptional costs related to the acquisition of fuel and from revenue-sharing arrangements. These provisions reflect the fact that for some generators fuel acquisition costs will have increased as a result of the energy crisis. Clauses 286 to 300 deal with detailed arrangements for various structures of business operating in electricity generation. Owing to the size and complexity of projects involved, there are a number of common structures for generation undertakings. Those often involve large group companies, sometimes with significant minority shareholders. Others involve a number of businesses  forming a joint venture. For example, a company specialising in offshore wind might go into business with a finance provider to deliver a large and complex project, sharing the revenues and risk between them. There are rules to treat these so-called "joint ventures" as stand-alone generation undertakings for the purposes of the EGL. These clauses ensure that businesses with in-scope revenues pay an appropriate share of EGL liability. Clauses 301 to 305 provide rules for the payment of EGL. The EGL is a temporary measure that has been carefully designed to minimise the administrative burden on businesses. Firms within scope of the levy will pay it as part of their corporation tax return, albeit that EGL is a separate and new tax. The provisions for paying corporation tax are therefore applied here, including in respect of the supply of information, the collection of tax due and the right of appeal. I turn briefly to the final clauses on the EGL, clauses 306 to 312. Those provisions ensure that the EGL applies to in-scope revenues from generation activities regardless of company type. Appropriate anti-avoidance rules are also included. Clause 309 details the interaction between EGL and corporation tax for accounting purposes, including the fact that EGL is not deductible from profits for corporation tax purposes. In conclusion, these provisions ensure that, where electricity generators are realising exceptional receipts as a result of the current crisis, they make a fair and proportionate contribution to the support that the Government have provided to households and businesses. Importantly, the levy is designed to apply only to the excess portion of those revenues, in order to maintain the incentive to produce low-carbon electricity. This is in addition to the Government's extensive support for investment in UK electricity generation. I will of course respond to proposed amendments, assuming that we hear about them, in the debate. In the meantime, I ask that clauses 278 to 312 stand part of the Bill.