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Treasury Update
20 December 2022
Type
Written Ministerial Statement
Department
Treasury
At a Glance
Issue Summary
The statement addresses the imposition of a temporary tax on electricity generators in response to record-high wholesale gas and electricity prices.
Action Requested
From January 1, 2023, a 45% tax will be applied to extraordinary returns made by UK electricity generators. This levy is designed to address the impact of high electricity prices on households and businesses while maintaining support for investment in clean energy. The measure will expire on March 31, 2028.
Key Facts
- A temporary 45% tax on extraordinary returns from some UK electricity generators starting January 1, 2023.
- Extraordinary revenues are defined as revenues above £75/MWh, approximately 1.5 times the average price over the last decade.
- The levy applies to revenues from renewable (including biomass), nuclear, and energy from waste sources with a generation threshold of 50GWH annually and a £10 million allowance.
- The tax will end on March 31, 2028, but may be reconsidered if prices fall below the benchmark price.
- In April 2024, the £75/MWh benchmark price will be indexed to CPI inflation.
- Relief is provided for certain exceptional costs that reduce benefits from higher electricity prices.
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