🚀 June’s AI-picked stocks soar, with Adobe +18.1% in 11 days. Don’t miss July’s upcoming picks.Unlock full list

Portuguese court declares levy on renewable utilities unconstitutional

Published 08/05/2024, 15:01
Updated 08/05/2024, 16:26
© Reuters. FILE PHOTO: Electric power transmission pylon miniatures and EDP Renovaveis logo are seen in this illustration taken, December 9, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
EDP
-
IBE
-
ELE
-

By Sergio Goncalves

LISBON (Reuters) - Portugal's Constitutional Court has declared an extraordinary levy on renewable energy utilities illegal, backing a challenge from companies that have paid hundreds of millions of euros of the so-called CESE levy for years.

Renewable power sources such as dams, solar and wind parks supplied 61% of Portugal's electricity in 2023, one of the highest ratios in Europe.

The 2024 budget predicted the government would collect 125 million euros ($134 million) from the CESE across the entire energy sector, the same amount as last year.

The CESE was introduced in 2014, without including renewables, as part of Portugal's efforts to reduce the budget deficit after a debt crisis and international bailout. Despite being envisaged as a one-off, successive governments have kept the levy in force.

In 2019 it was expanded to tax renewable utilities' feed-in tariffs with a new objective - to ultimately reduce the electricity sector's accumulated tariff debt, which resulted from it previously applying regulated electricity prices to end customers that were lower than production costs.

In a ruling dated April 23 and released late on Tuesday, the Constitutional Court said the application of the CESE to renewable utilities "is unconstitutional as it violates the principle of equality".

It said that it cannot be concluded that the tariff debt was caused by renewable utilities, nor do they benefit directly from its reduction.

The normal CESE rate is equivalent to 0.85% of the value of regulated assets subject to the tax and is in addition to the income tax that utilities already pay.

Portugal's largest utility EDP, which has challenged the levy, chose not to pay 49.4 million euros in CESE tax for 2023, pending a court decision.

Since the CESE's introduction, the EDP Group has paid 558 million euros worth of the levy on its renewable and non-renewable assets, and its chief executive Miguel Stilwell de Andrade has criticised the tax as discouraging investment.

© Reuters. FILE PHOTO: Electric power transmission pylon miniatures and EDP Renovaveis logo are seen in this illustration taken, December 9, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The CESE has also affected foreign utilities operating in Portugal, such as Spain's Iberdrola (BME:IBE) and Endesa.

($1 = 0.9304 euros)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.