Before Christmas, the Storting decided that municipalities with income from concessionary power in areas with high electricity prices will receive a one-year reduction in the framework subsidy of NOK 2.2 billion in 2023. The decision has “hit like a bomb” among mayors, who in a more or less diplomatic manner have ask the municipal minister to go back to the desk and make new calculations. On Thursday, it became clear that the municipal minister must also explain himself to the Storting. The reason for this is that the cuts affect different parts of the country, and that the distribution key is difficult to obtain. – The way this has been done turns out to be very unfortunate for some municipalities, says Lars Haltbrekken (SV). He points out that in the proposal for the state budget it was signaled that the reduction would correspond to a third of the total income from the licensing authority in the municipality. – There are many indications that certain municipalities have been drawn more than this, says Haltbrekken. Lars Haltbrekken (SV) demands that the Minister of Municipal Affairs explain to the Storting whether they reduced the transfers to several power municipalities. Photo: Håkon Mosvold Larsen / NTB Sandnes and Kvinnherad lose the most In absolute terms, the list of the biggest “losers” looks like this: Sandnes, Rogaland (loses NOK 141 million) Kvinnherad, Vestland (loses NOK 131 million) Suldal, Rogaland (loses NOK 124 million kroner) Ål, Viken (loses NOK 121 million) Sauda, Rogaland (loses NOK 106 million) Lærdal, Vestland (loses NOK 92 million) Voss, Vestland (loses NOK 87 million) Vaksdal, Vestland (loses NOK 84 million) Kvinesdal, Agder (loses NOK 69 million) Modum, Viken (loses NOK 59 million) Høyanger, Vestland (loses NOK 54 million) – We have not budgeted for such a large withdrawal, but will probably handle this. I still think that this is income that should go to the local environment, and not to a super-rich state, says Pål Morten Borgli (Frp), who is acting mayor in Sandnes. The revenues of the power municipalities were NOK 4 billion in 2021. For comparison, calculations show that they amount to NOK 13 billion in 2022 and NOK 11 billion this year. The deduction varies because some municipalities have sold the power at a fixed price and have not received a share of the price increase. Others have sold him at a spot price; and still others he has distributed to his own inhabitants and his own industry. Sandnes loses NOK 141 million on the new adjustment. – We have not budgeted for such a large withdrawal, says the mayor of the municipality. Photo: Erik Waage / news – No one knows how the ministry has arrived at the distribution. What SV demands an answer to is what else is the basis for the calculations. The same demand comes from several quarters: Jon Rolf Næss, leader of the National Association of Water Power Municipalities (LVK): – We see that the burden on the municipalities is very different, for several reasons. But what the ministry has emphasized in this “jungle” – we do not know. Olav Hallset, day-to-day manager of Kraftfylka: – Neither we, nor apparently some others, know how the ministry arrived at the distribution. Trond Erik Lunder, head of the Revenue System Committee: – An extraordinary situation such as these electricity prices is not something that can be solved through the revenue system. In general, there is a point that cost differences between municipalities should be compensated, but the revenue system is not designed to handle cost differences between municipalities. Jøril Mæland, Department of Finance (NHH): – In general, it is a good principle that the model is as transparent as possible and easy to count on, so that it does not come as a surprise to the municipalities. See the answer from the Minister of Local Government below: – There is a big difference between the municipalities because they have allocated the power differently Sigbjørn Gjelsvik (Sp), Minister of Local Government and Districts – I see that some municipalities have laid out a certain number of moves, but the government has never presented one model for how the move should be done concretely. The government has said that the move must be made on the basis of actual values that can be realised, and that is precisely why we are opening up for a voluntary report from the municipalities with a deadline of 1 December. – We have considered legally binding agreements and other political decisions that were made before the scheme was announced, which the municipalities have reported to us. There is a big difference between the municipalities because they have allocated power differently. At the same time, it is important to emphasize that we have planned for municipalities that get a move to still be left with large net revenues from the hall of concession power next year. – We have said all along that we will follow developments closely and that we will return to this in the revised national budget if necessary. We have also said that municipalities that have questions about the calculations can get in touch. The ministry has a dialogue with all the municipalities that want and need it. Another picture of the distribution of the burden between the municipalities is to break down the number of kroner deductions per amount of power. For example, we then see that Nes municipality, which in 2021 had a licensed power amount of 4,729,400 kWh, has been deducted 12.6 million in frame subsidies. While Hol municipality, which had 46 times as much licensing power, is not drawn at all. The municipalities that lose the most with this calculation method are: Nes, Viken Ringerike, Viken Sandnes, Rogaland Bjørnafjorden, Vestland Voss, Vestland Rælingen, Viken Os, Vestland Hamar, Innlandet Bjerkreim, Rogaland Utval will discontinue the scheme with concession power – This illustrates that the scheme with concession power does not is a good way to compensate municipalities for making natural resources available, says Ragnhild Camilla Schreiner at the Department of Economics. In 2018, she was a member of the so-called Sanderud committee, which was commissioned by the Solberg government to “make a comprehensive assessment of power plant taxation”. Among the proposals for the committee was to discontinue the scheme with licensing power. A proposal that was immediately shot down. Schreiner adds that the government’s handling of the concession power “stands out as arbitrary” and that she still believes that the scheme with concession power should be abolished (see the full answer in the quote box below). – Shouldn’t changes be thrown out to cover a short-term revenue need Ragnhild Camilla Schreiner, University of Oslo (UiO) – This primarily illustrates that the scheme with licensing power is not a good way to compensate municipalities for making natural resources available. The value of the licensed power fluctuates with the power price, while the natural intervention is the same regardless of whether the prices are high or low. Most people see this as unreasonable. – In my view, we should compensate power municipalities for encroachment on nature in a different way, and reassess the arrangement with concession power. It will also reduce another problem. Concessional power is a gross tax on power plants that is independent of the payroll. Taxes that are decoupled from profitability can weaken investment incentives in the hydropower sector. – The Government’s proposal for handling the licensing power seems arbitrary. Some municipalities are drawn more than others in the framework subsidy depending on whether they are outside the high price area or not, or whether they have sold the power at a fixed price or a spot price. Changes to the tax system should be paid for and well-founded, and not thrown forward to cover a short-term revenue need. The high price subsidy imposed on the power company is another example of little thought given to tax policy, which can weaken investments in hydropower and result in lower water levels in the reservoirs. Lars-Erik Borge, head of research at the Center for Economic Research (SØF) – Electricity prices may also be high in the years to come, and in that case will contribute to reinforcing the income differences between municipalities and thus also differences in municipal service provision. This speaks for an equalization of the concession power income for the municipal sector, as the Revenue System Committee has recently proposed, or a reduction of the concession power income, as the Energy Tax Committee has proposed. KS director Helge Eide says the scheme with licensing power is “well-established”, “well-known” and “popular”. – In principle, it is probably possible to think of arrangements that could replace licensing power, but I think this is a theoretical discussion at this point, he says. He adds that it is “not difficult to understand” those who claim that rich power municipalities north of the Sognefjord should also be included in the distribution of the draft. On the other side: – These municipalities will be able to argue with strength that a sudden move towards the end of the year is unreasonable when there is no increased electricity income that can defend it. In the first half of 2022, Ullensvang municipality had NOK 104 million in revenue from licensing power. Photo: Leif Rune Løland / news
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These municipalities lose the most from the state’s “power grab” – news Vestland
