- Portugal’s Constitutional Court has nullified an illegal levy on renewable energy utilities.
- The CESE was introduced in 2014, without including renewables, as part of Portugal’s efforts to reduce the budget deficit.
Portugal’s Constitutional Court has nullified an illegal levy on renewable energy utilities. The court supported a challenge from companies that have paid hundreds of millions of euros of the so-called CESE levy for years.
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.
In 2023, renewable power sources such as dams and solar and wind parks supplied 61 per cent of Portugal‘s electricity, one of the highest ratios in Europe.
In a ruling, the Constitutional Court said applying the CESE to renewable utilities “is unconstitutional as it violates the principle of equality.” It is said that it cannot be concluded that renewable utilities caused tariff debt, nor do they benefit directly from the reduction.
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 lower than production costs.
The average CESE rate is equivalent to 0.85 per cent of the value of regulated assets subject to the tax, and it 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. The CESE has also affected foreign utilities operating in Portugal, such as Spain’s Iberdrola and Endesa.