German Court Questions Legality of Nuclear Tax

A German finance court in September questioned the constitutionality of a controversial tax on fuel used in nuclear power plants, a decision that could influence rulings in various finance courts around the country that are reviewing complaints by nuclear operators regarding the levy.

Germany established the tax last year as part of the government’s landmark deal with four utilities to extend the lives of the country’s 17 operational reactors, seeking to raise €2.3 billion ($3.1 billion) per year for the German treasury. Following the Fukushima crisis in March of this year, however, the government announced an abrupt U-turn in policy, saying it would scrap the extensions, immediately shutter eight older reactors, and phase out nuclear power in the country by 2022. But it retained the tax, which requires E.ON, EnBW, RWE, and Vattenfall to continue paying €145 ($198) per gram of nuclear fuel loaded into a reactor after Jan. 1, 2011.

The utilities have decried the tax and have launched legal action. The generators are also separately suing for compensation for revenues lost from the eight closed nuclear reactors. E.ON, which has paid some €470 million ($637 million) and expects additional costs of up to €600 million ($813 million) in nuclear tax this year, warned that the tax could force it to shed 11,000 jobs. EnBW has said the tax would cost the company more than €100 million ($136 million) a year. Swedish state-owned utility Vattenfall said it expects to be reimbursed for costs of up to SEK 10 billion ($1.5 billion) relating to the tax over the first six months of the year.

The Hamburg Tax Court in September backed the nuclear plant owners, saying the tax did not qualify as a excise consumption tax, which is collected from a seller at the point of purchase—as opposed to the point of use. It also ruled that the federal government should pay back nearly €96 million ($131 million) to an unnamed utility—likely E.ON, analysts speculate—and suspended further collection of money.

The federal government said the court’s decision wasn’t a final ruling in the matter and that it would appeal. Analysts say that it could be a long time before a final decision is reached. Nevertheless, E.ON and RWE have hailed the decision, saying in separate statements that it confirmed their legal assessments of the tax.

—Sonal Patel is POWER’s senior writer.