Utility companies making huge profits during cost-of-living crisis could be hit with windfall tax

Minister of State at the Department of Finance Sean Fleming TD said the action against utility companies could take the form of financial measures. Picture: Gareth Chaney/Collins

Utility companies who use the cost-of-living crisis or war in Ukraine to turn higher profits could be hit with a windfall tax — but only if it doesn't mean higher bills for consumers.

The Department of Energy, Climate and Communications is examining whether to take action against companies who are making hyper-normal profits throughout the crisis.

Junior Finance Minister Sean Fleming, responding to a parliamentary question from Labour's Ged Nash, said this action could take the form of financial measures.

Sean Fleming was responding to a parliamentary question from Labour's Ged Nash. Picture: Damien Storan

However, Mr Fleming's answer was tempered by caution that no move would be taken if it was felt the burden would be passed on to customers.

"Officials in DECC are working to examine where gains created by the current crisis situation may be occurring and to consider what, if any, action would be appropriate having regard to over-arching energy policy. 

"This includes engaging with Department of Finance officials to determine potential fiscal response measures," the answer reads.

"This work, which will help inform the implementation of the National Energy Security Framework, includes consideration of potential negative impacts of any such action. 

"For example, there is a risk that a windfall tax may lead to higher consumer costs and negatively impact upon investment in the energy sector, particularly in the area of renewables. 

This would, in turn, impact on the Government's ambitions to tackle climate change through the reduction of carbon emissions.

The response added that the "best long-term approach for Ireland to insulate consumers from volatility on international wholesale energy markets is to invest in energy efficiency and renewable energy".

Mr Nash said that the move would be welcomed but said that the broad framework of any plan must be seen soon.

"I would welcome that move and the response itself is the clearest indication yet that the Minister for Finance and officials across the Government are taking calls for windfall tax seriously. 

"But we need a response and a structure about what that would look like ahead of the budget and time is running out.

"It is bizarre that homes are struggling to pay energy bills while vast profits are being hoarded by energy companies. There may be something else going on that the department and regulator need to look at.

It's important that money is put back in the pockets of the everyday person. 

"It's important that any windfall tax would then be ringfenced, along with the VAT windfall from energy prices to make real moves to ease the cost of living crisis."

Mr Nash has previously pointed to profits being posted in the energy sector in Ireland.

The ESB posted €670m in pre-tax profits in March, paying a €126m dividend to the Exchequer, while the Irish arm of the company that operates the Corrib gas field, Vermillion Energy Ireland, posted more than $1bn (Canadian dollars) in pre-tax profits last year.

Earlier this month, Minister for the Environment Eamon Ryan told the Dáil he has not ruled out a windfall tax on energy companies.

"We will have to manage this through next autumn, and winter is going to a particularly difficult period so I will work with the minister, Deputy Donohoe, and look at whatever range of measures might be needed to help further," he said.