New legislation to address windfalls in the energy sector has been approved by the government.

Minister for the Environment, Climate and Communications, Eamon Ryan, announced the publication of the Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Bill 2023 – which provides for a temporary solidarity contribution on windfall gains made in 2022 and 2023 by the fossil fuel production and refining sector as a result of the war in Ukraine.

The estimated proceeds from the temporary solidarity contribution are in the range €200 million to €450 million. These proceeds can be used towards financial supports to households and businesses affected by high energy prices and may also be used to support investment in areas such as renewable energy. Government will determine how best to distribute these proceeds later this year as part of the Budgetary process.

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Minister Ryan stated: "This Bill is welcomed as it will collect significant proceeds that can be used to ease the impact of high energy prices on vulnerable energy consumers."

The Minister has also announced his intention to bring the Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Bill 2023 to Government in July 2023. This Bill will pass through the Houses of the Oireachtas when the Dáil resumes after the summer recess.

The Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Bill 2023 will introduce a cap on market revenues of specific technologies in the electricity sector. The proceeds from the cap on market revenues will be retained and used in the electricity sector to lower prices for consumers.

The timelines for companies required to make formal declarations and payments to the Commission for Regulation of Utilities (CRU) will be adjusted in accordance with the enactment of this Bill later this year. Adjusted provisional dates are:

• 30 November 2023 deadline for submission of formal declaration, and

• 31 December 2023 deadline for payment

The temporary solidarity contribution is calculated on a portion of a company’s taxable profits which are more than 20% higher than a baseline and is applied at a rate of 75%.

This will lead to an effective rate of 0% for windfall gains of up to 20%, an effective rate of 50% for windfall gains of 60%* and an effective rate of 60% for windfall gains of 100% (that is, where profits have doubled). The baseline will be the average taxable profits for the company for the period 2018 to 2021.

*(60% minus 20% baseline = 40% eligible for contribution at rate of 75%; that is, 30%).