Germany reportedly plans to cap surging electricity prices partially by taxing excess profit at power companies

• Germany is considering a 90% tax on windfall profits made by power companies to fund a cap on electricity prices, Reuters reported.
• The potential price cap would also be financed by the government's €200 billion ($196 billion) relief package for households and companies.

Germany is planning to cap electricity prices to curb the impact of surging energy costs on households and industry in part by taxing windfall profits at power companies, Reuters reported Wednesday.

The cap would be based on previous annual electricity consumption, according to a ministry document reviewed by Reuters, and would be similar to a price break for gas that was announced earlier in October.

Berlin is considering taxing 90% of the power profits that electricity companies make above production costs to help finance the cap and to pay for the stabilization of power transmission grids.

For spot prices, the tax would apply retroactively from March, and for future prices from December, the report said. The ministry's document is expected to be presented to Germany's cabinet on November 18.

The price cap would also be financed by the government's €200 billion ($196 billion) relief package for households and companies. That plan was introduced by German Chancellor Olaf Scholz in September.

Energy prices across Europe have jumped this year in the wake of the war Russia launched against Ukraine in February. Higher energy prices have hit industrial production in Germany, Europe's largest economy. Output in August fell by 0.8% month over month.

German wholesale electricity futures this year spiked up to more than €600 per megawatt hour, more than tripling from the start of 2022, but have eased in recent months.