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German Court Doubts Legality of Nuclear Fuel Tax

German Court Doubts Legality of Nuclear Fuel Tax
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Τρι, 19 Νοεμβρίου 2013 - 19:42
Germany's biggest utilities, still reeling from the country's early exit from nuclear power, scored a major victory Tuesday when a Hamburg court said the national tax on nuclear fuel rods may violate European law.
Germany 's biggest utilities, still reeling from the country's early exit from nuclear power, scored a major victory Tuesday when a Hamburg court said the national tax on nuclear fuel rods may violate European law.

The Hamburg finance court said it "cannot assess beyond any doubt" whether the tax on nuclear fuel used for electricity generation complies with European law. It will now ask the European Court of Justice to decide whether the levy conforms with rules that prohibit member states from creating new taxes on electricity for "general budget financing purposes."

The referral to the European Court of Justice comes as a relief for Germany 's battered utilities, which are cutting thousands of jobs as profits plunge because of fierce competition from subsidized renewable energies.

The decision allows nuclear reactor operators, including E. ON SE, RWE AG and Sweden's Vattenfall, to formally request suspension of the tax and the reimbursement of payments already made, which amount altogether to EUR1.6 billion euros ($2.2 billion) a year.

The decision Tuesday relates specifically to a complaint by RWE and E. ON filed for their jointly owned 1.3-gigawatt reactor Emsland in western Germany , in which the companies argued that the levy on nuclear fuel rods violates the German constitution and the rules of the European Union. The case will likely set a precedent for similar lawsuits ongoing across Germany .

Both RWE and E. ON last week reported third-quarter losses that highlighted again how deeply Germany 's push toward renewable energies has pressured earnings as green power muscles out coal-, gas- and nuclear-fired power plants.

"Our traditional business model is collapsing under us," RWE Chief Executive Peter Terium said last week.

An RWE spokesman said Tuesday the company will wait for the court's written opinion before commenting.

A spokesman for E. ON , Germany 's largest utility by market value, said the company would request such a suspension and the reimbursement of previous payments.

In Berlin , Germany 's Finance Ministry said the government remains convinced that the nuclear fuel tax complies with European law, and it expects the European Court of Justice will confirm its legal opinion.

The tax was introduced at the beginning of 2011 and came as part of an extension of nuclear reactors' operating lives that the government had agreed on. However, the nuclear disaster at Japan 's Fukushima power plant in March of that year triggered a U-turn in German energy policy, with Chancellor Angela Merkel ordering the immediate shutdown of the oldest plants and the early phaseout of nuclear energy by 2022. Out of 17 reactors that were in operation in March 2011, only nine are still producing power. But the fuel-rod tax remains in place, to the utilities' annoyance.

The acceleration of the exit from atomic energy hit Germany 's reactor operators hard as it forced the companies to book billions of euros in write-downs on nuclear assets, increase provisions for the early decommissioning of the facilities as well as lost earnings.

In January, the Hamburg-based finance court had determined that the nuclear levy violates the German constitution, saying it equates to an income tax rather than an excise tax, as it has been labeled by the government. At the time, it referred the case to the country's supreme court, the Bundesverfassungsgericht.

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