EGL20500 - How liability is computed: EGL computation overview

The mechanism by which this is achieved is to look at the receipts of the undertaking from the sale of its attributable generation of electricity and compare the average price achieved with a benchmark price that is initially set at £75 per MWh but will adjust in line with the Consumer Prices Index during the life of the charge (see EGL21000). The levy is charged on the exceptional receipts above a group-wide revenue allowance of £10m per annum. Exceptional receipts are the amount by which actual receipts exceed the amount that would have arisen if the achieved price for their electricity was at the benchmark price, but after making a deduction for any exceptional costs incurred.

The Levy does not apply to generation from certain projects for which there had been no substantive decision to proceed as at 22 November 2023. The conditions for the exemption for new investments are explained at EGL22500+

F(2)A23/S279(5) sets out the fundamental calculation in a number of steps as follows –

• Step 1 – What are the generation receipts attributable to the undertaking?
• Step 2 – What would the receipts be if the generation was charged at the benchmark price?
• Step 3 – Deduct the result of step 2 from that of step 1. If there is no positive result, then there are no exceptional receipts chargeable to the levy.  If there is a positive amount, then go to the next step.
• Step 4 – Deduct any allowable exceptional costs from the result at step 3.  If there is no positive result, then there are no exceptional receipts chargeable to the levy.  If there is a positive amount, then go to the next step.
• Step 5 – Deduct the revenue allowance from the result at step 4. 
• Step 6 - If there is no positive result at step 5 then. there are no exceptional receipts chargeable to the levy.  If there is a positive amount, then that is the amount on which the levy is charged at a rate of 45%.