EU plans tax changes to reduce electricity bills, draft shows

By Kate Abnett

BRUSSELS, June 8 (Reuters) - The European Union is preparing changes to energy taxes and network charges, including plans to tax electricity at a lower rate than gas, in a bid to cut consumers' power bills, a draft proposal seen by Reuters showed.

The European Commission proposal is part of the EU's response to the fallout from the Iran war in energy markets, which has pushed up oil and gas prices, raising consumer bills due to the bloc's reliance on imported fossil fuels.

The move would require national governments to tax electricity at a lower rate than natural gas, aiming to speed the shift from fossil fuels to electricity in transport, industry and heating, where oil and gas still dominate. By cutting relative power costs, it would boost the competitiveness of technologies such as electric cars and heat pumps.

Fast EU action is needed "to decrease electricity bills and the EU dependence on fossil fuels", the draft said.

INCENTIVES AND OPPOSITION

Governments would still be able to set national tax rates, provided they comply with the overall rule.

The draft, which could still change before publication, would also require countries to incentivise consumers to shift usage to times of day when power is cheaper.

"Users of the grids should be incentivised to behave in a system-friendly way, adjusting their energy use or shifting it towards times and places where the cheapest energy sources are available," the draft said.

To support this, the EU would set a target for half of all electricity customers to have a smart meter by 2030, enabling them to track consumption and take advantage of cheaper off-peak prices.

Network charges - the fees collected by operators to run and upgrade grids - account for roughly a quarter of an average EU household's power bill.

The tax changes would need approval from EU lawmakers and a reinforced majority of EU countries. EU diplomats said some countries oppose the plans, arguing tax changes should require unanimous approval and warning this could set a precedent for fast-tracking such measures.

The draft is due to be published on July 22. A Commission spokesperson declined to comment.

(Reporting by Kate Abnett. Editing by Mark Potter)