Romania’s Constitutional Court has ruled that a surcharge levied on energy production companies under the country’s support mechanism to cap end-user energy prices is in violation of the principles of fair taxation. The court determined that provisions in Emergency Ordinance OUG 27/2022, which applied measures to electricity and natural gas markets for the period between April 1, 2022, and March 31, 2023, are unconstitutional.
Under this mechanism, the surcharge revenue was used to cover the gap between the price paid by energy suppliers on the wholesale market and the regulated prices charged to final consumers. However, the scheme failed to achieve its intended goals, resulting in the government accumulating hundreds of millions of euros in unpaid subsidies to energy suppliers.
The specific provision invalidated by the Constitutional Court imposed excessive taxes on all electricity producers, including those in the renewable energy sector. According to the ruling, any electricity producer generating revenues from prices above 80 euros/MWh was required to contribute 100% of those earnings to the Energy Transition Fund. This fund was then used to compensate energy suppliers who were required to bill capped prices to their customers.
The court’s ruling now raises questions about the future of the surcharge mechanism and its impact on the energy market in Romania, especially as the government grapples with finding alternative solutions to support energy suppliers and stabilize prices for consumers.
