Fuel tax twist to nuclear row

A legal battle over a tax on uranium and plutonium that was put in place last year to fund Germany's transition away from nuclear power and fossil fuels to renewable energy is the latest twist in the country's nuclear saga, says David Stellfox

The prolonged tug-of-war between German utilities and the government over nuclear power took a new twist on 11 January, when a Stuttgart financial court ruled against utility EnBW, upholding the federal government’s nuclear fuel tax as constitutional.
The nuclear fuel tax – €145 per gramme of uranium or plutonium fuel – took effect on 1 January 2011 as a means to fund Germany’s transition away from nuclear power and fossil fuels to renewable energy.
The tax is triggered when new fuel rods are put into the reactors, although rods that are replacing defective rods are exempt.
The nuclear tax was part of a 2010 agreement between the government and utilities over a nuclear phase-out in Germany.
The 2010 agreement, which allowed the plants to run longer in return for renewables funding, updated a 2000 nuclear phase-out agreement.

Extended operation
The 2000 agreement imposed strict limits on plant operation, based on operating hours equivalent to an average lifetime of 32 years.
German plants were coming up against those limits when the 2010 agreement extended them by between eight and 14 years from the 2001 agreed closure dates, depending on the age of the reactor. This meant that the newest German reactor could continue running until 2036.
After Fukushima the government abandoned the extension, immediately closed the oldest eight of Germany’s 17 reactors, and ordered the rest to close by 2022, the deadline in the original 2000 phase-out plan.
However, the government retained the nuclear fuel tax and German utilities Eon, RWE and EnBW, and Swedish utility Vattenfall, have been fighting the tax and the phase-out ever since.
But resolution of the argument about Germany’s nuclear fuel tax and its related phase-out policy is not yet in sight.
The Stuttgart court ruling against EnBW clashed with separate court opinions in Munich and Hamburg, which ruled in favour of RWE and Eon, respectively, on the nuclear fuel tax.
According to Matthias Lang, a lawyer with Bird & Bird LLP in Dusseldorf, the Munich and Hamburg courts ruled that the federal government did not have competence to impose the tax, which came down to a question of whether the tax was a consumption tax, as the government claimed, or not.
In the Munich case, the court said it was not a consumption tax and therefore the government did not have competence to levy it. The Munich court ordered RWE to be refunded the ¤74 million in nuclear fuel tax it paid when it refuelled its Gundremmingen B nuclear power plant last year.
Lang says a second legal argument made by the utilities relates to whether the tax is discriminatory against a single fuel type – nuclear fuel – but this argument was not addressed in the court decisions.
He says the Hamburg and Munich courts struck down the tax on competency ground. The Stuttgart court ruled it was a consumption tax and therefore legal.
Another argument made by the utilities is that the tax constitutes an unlawful taking of ­private property, but the only court that addressed that question was the Stuttgart court, which said the tax did not constitute an unlawful taking of private property.

Government appeal
Meanwhile, the federal government has appealed the Hamburg and Munich rulings in favour of Eon and RWE and the case awaits a hearing in the Federal Fiscal Court.
Lang says the case will be decided there or in the European Court of Justice, because there remain unlitigated questions about the tax under European law.
He says Eon claimed the nuclear fuel tax violated Directive 2003/96, regarding the taxation of energy products and electricity, as well as the Euratom Treaty, but the Hamburg court did not address that claim in its decision.
Until the case is finally ­decided, “we will recognise the levy as a tax liability – irrespective of its enforcement”, RWE said in its financial report for the first three quarters of 2011.
The utilities are also challenging the legality of the reactor shutdown orders and, in the alternative, seeking compensation for lost business, the decommissioning costs that had to be brought forward and the fuel tax.
Regarding how long the legal battle will go on, Lang says: “You can never safely predict how long courts will take to finally resolve a case. However, even if the Federal Fiscal Court decides this year, the fact that a constitutional law case may be filed with the German Federal Constitutional Court or a European law case may be filed with the Court of Justice of the European Union in my view means that it may take years until the questions are finally resolved.”

Phase-out cost
In all, the bill for the post-­Fukushima phase-outs could reach ¤10 billion, according to the World Nuclear Association.
Eon took a ¤2.3 billion hit on profits in the first three quarters of 2011 as a consequence of the early closure of its nuclear plants and the nuclear fuel tax, the company said. Its wholly or partially owned reactors at Unterweser, Isar 1, Krummel and Brunsbuttel were among the eight German reactors ordered to close immediately after Fukushima.
RWE said the nuclear power station phase-out, together with the nuclear fuel tax, cut its operating results by about ¤1 billion in the first three quarters of 2011.
David Stellfox is a freelance journalist

This article first appeared in Utility Week’s print edition of 17 February 2012.
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