Outgoing Prime Minister Boris Johnson has abandoned mooted plans to introduce a profits tax on electricity producers.
Former chancellor Rishi Sunak raised the prospect of hitting power firms with a tax similar to the energy profits tax on North Sea oil and gas operators.
A decision on whether to move forward with the tax was expected this week. Johnson spokesman Max Blaine was asked Monday if the energy profits tax would be extended to power producers, and he said: “We’re not going to be looking to make new policies or major fiscal decisions. So no plans for that.
“We will continue to assess the scale of the gains and consider appropriate steps, but there are no plans to introduce or extend this to this group.”
The move sent shares of listed energy companies soaring. Shares in Drax, the operator of the eponymous power station in North Yorkshire, rose 6%, while the SSE rose 3% and British Gas owner Centrica jumped 3%. All three suffered punitive sell-offs when it emerged in May that Sunak was considering extending the producer tax.
Adam Berman, deputy director of trade body Energy UK, said: “The generator tax will deter, delay and increase the cost of the investment we need to meet both our domestic energy security and reform targets of the climate.”
SSE’s chief executive, Alistair Phillips-Davies, said a profit tax could hamper work on building domestic energy supplies.
In May, Sunak announced the tax on energy profits as part of a £15bn package of measures to tackle the cost of living crisis. He hoped to raise £5 billion from the tax. A vote on the levy is expected to take place in Parliament on Monday night.
Ahead of its introduction, Business Secretary Kwasi Kwarteng wrote to energy companies in April to state “the need to accelerate and maximize domestic oil and gas production as we move towards clean indigenous energy” as the war in Ukraine put the focus on supplies of fossil fuels .
Oil companies including BP and Shell warned the levy could hit UK investment after Sunak’s announcement. The levy includes tax breaks for domestic investment.
The North Sea Transition Authority (NTSA), an independent agency controlled by the business department, has asked UK oil and gas operators to outline their investment plans.
In a letter to the companies seen by the Guardian, the NSTA’s director of operations, Scott Robertson, said: “The NTSA would like to know what plans you have to meet the Secretary of State’s challenge and what opportunities there are in your North Sea portfolio for accelerated investment and production in both the short and medium term.’
Robertson said he was “aware that you may be reassessing your business plans and joint operating programs and budgets for 2023 in light of the recently announced energy profits tax.”
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The authority gave the companies until the end of the month to respond, identifying projects that could be accelerated now or over the next two years or “may no longer be able to progress in light of the energy profits tax”. He then plans to meet with businesses in August.
Separately on Monday, National Grid shareholders waved off a £6.5m payment for its chief executive John Pettigrew.
Pay campaigners criticized the package, which was £1.1m more than a year earlier, arguing that consumers had little choice about where they got their energy, meaning the pay package was not justified. Consumers are also grappling with huge increases in their energy bills.
Shareholder advisory group Pirc urged investors to vote against the pay package. However, only 5.5% of votes were cast against the remuneration report at the company’s AGM in London.
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