Commission Decision
of 28 January 2009
on aid implemented by Luxembourg in the form of the creation of a compensation fund for the organisation of the electricity market (C 43/02 (ex NN 75/01))
(notified under document number C(2009) 230)
(Only the French version is authentic)
(Text with EEA relevance)
(2009/476/EC)
THE COMMISSION OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Community, and in particular the first subparagraph of Article 88(2) thereof,
Having regard to the Agreement on the European Economic Area, and in particular Article 62(1)(a) thereof,
Whereas:
By letter dated 2 July 2001, registered as received on 16 July 2001 under number N 475/01, Luxembourg notified the Commission under Article 88(3) of the Treaty of the creation of a compensation fund for the organisation of the electricity market. The notified measure had, however, been de facto implemented on 1 January 2001. The Commission accordingly took the view that the measure could not be considered planned aid within the meaning of Article 88(3) of the Treaty and on 30 July 2001 entered it in the register of non-notified aid under number NN 75/01.
Following an exchange of correspondence with the Luxembourg authorities, the Commission notified Luxembourg by letter dated 5 June 2002 of its decision to open the procedure laid down in Article 88(2) of the Treaty in respect of the measure. It also invited Luxembourg to submit its comments and provide any information that might be helpful in assessing the measure within one month from the date of receipt of the letter.
By letter dated 22 July 2002, registered as received on 26 July 2002, Luxembourg requested an extension of the time limit for sending its comments. The Commission granted the request by letter dated 30 July 2002, fixing the time limit at 5 September 2002.
The Netherlands sent the Commission its comments on the measure by fax dated 4 December 2002, registered as received on the same day. By letter dated 18 February 2003, the Commission forwarded the Netherlands’ letter to Luxembourg, together with a request that the latter submit its comments within one month. After having sent a reminder on 16 May 2003, the Commission received from Luxembourg by fax dated 28 May 2003, registered as received on the same day, a request for an extension of the time limit for replying.
By letter dated 4 June 2003, registered as received on 5 June 2003, Luxembourg sent the Commission its comments both on the Commission’s letter of 5 June 2002 and on the comments submitted by the Netherlands. Luxembourg provided additional information by letter dated 3 May 2004, registered as received on 13 May 2004.
A working meeting between Luxembourg and the Commission was held on 25 January 2005.
By letter dated 31 March 2005, the Commission sent Luxembourg a request for information. The Commission received a reply from Luxembourg by letters dated 20 April and 20 May 2005, registered as received on 27 April and 1 June 2005 respectively.
By letter dated 22 June 2005, the Commission sent Luxembourg a request for additional information. By letter dated 22 November 2005, registered as received on 23 November 2005, Luxembourg asked for an extension of the time limit for replying, in response to which the Commission, by letter dated 5 December 2005, set the time limit at 31 January 2006. The Commission received a reply from Luxembourg by letters dated 31 January 2006, registered as received on 3 February 2006.
By letter dated 27 March 2006, the Commission sent Luxembourg a request for additional information. The Commission received a reply from Luxembourg by letter dated 11 April 2006, registered as received on 18 April 2006.
A working meeting between Luxembourg and the Commission was held on 12 December 2006.
By letter dated 21 November 2007, the Commission sent Luxembourg a request for additional information. By letter dated 6 December 2007, registered as received on 10 December 2007, Luxembourg requested a further extension of the time limit for replying, which request the Commission granted by letter dated 14 December 2007, fixing the time limit at 17 January 2008. The Commission received a reply from Luxembourg by letter dated 28 January 2008, registered as received on 30 January 2008.
A working meeting between Luxembourg and the Commission was held on 27 February 2008.
The Commission received additional information from Luxembourg by letter dated 19 June 2008, registered as received on 20 June 2008, and by letter registered as received on 12 September 2008.
Under Article 23 of the GDR of 22 May 2001, the contribution for 2001 was set for all non-exempted customers at EUR 2,73/MWh.
category A comprised customers at whose metering points annual electricity consumption was less than or equal to 25 MWh. For 2007, the contribution payable by category A consumers was set at EUR 7,00/MWh,
category B comprised customers at whose metering points annual electricity consumption was greater than 25 MWh, with the exception of metering points classified in category C. For 2007, the contribution payable by category B consumers was set at EUR 2,70/MWh,
- category C concerned customers in category B who, in addition, had to ‘commit themselves to achieving a substantial improvement in their overall energy efficiency by agreement to be concluded between the Government and the enterprise concerned […]. The agreement to be concluded will include a penalty clause in case of failure to meet commitments’13. All agreements came to an end on 31 January 2008. For 2007, the contribution payable by category C consumers was set at EUR 0,75/MWh.
The Luxembourg authorities have undertaken to replace the GDR of 9 December 2005 with a new, as yet unpublished GDR, scheduled to enter into force on 1 January 2009. According to the Luxembourg authorities, the new GDR provides that distributors may collect a contribution towards the costs associated with green electricity from their final customers. The level of the contribution is thus no longer set by the public authorities but is left to distributors’ discretion.
From a practical standpoint, the GDRs of 22 May 2001 and 9 December 2005 provided that the principal distributor in Luxembourg, Cegedel, the shares in which were majority privately owned, had to purchase all the green electricity produced in Luxembourg at the price set by the State. Cegedel made such purchases either in its own name or on behalf of other distributors who had concluded supply contracts with green electricity producers. It then sold the green electricity to its competitors according to their respective market shares in the Luxembourg market and at a selling price set by the State on the basis of the electricity market price established the previous year. The additional costs associated with green electricity corresponded to the difference between the purchase price paid to producers of such electricity (feed-in tariff) and the selling price charged to other distributors, both of which were set by the State. All distributors reported on their green electricity purchases each month to the Luxembourg energy regulator, the Institut Luxembourgeois de Régulation (ILR). At the end of the year, the regulator performed a compensation operation between distributors: if the share of green electricity produced in Luxembourg and purchased by a distributor was greater than its share of the electricity market, then it received compensation from the fund; conversely, if its share of green electricity purchased was smaller than its share of the domestic market, then it had to pay a corresponding contribution to the fund. The compensation fund was therefore designed to ensure that each distributor active in Luxembourg purchased a share of green electricity produced in Luxembourg that matched its share of the domestic market.
The measure conferred an advantage on green electricity producers, who ultimately benefited from the proceeds of the compensation fund. Moreover, the exemption from compensation payments applicable until 31 December 2005 favoured large electricity-consuming enterprises over other enterprises which had to contribute to the compensation fund. On the other hand, distributors enjoyed no advantage as they simply played the part of intermediary in collecting the contributions made by final customers and paid on to green electricity producers.
This advantage was provided through State resources, not by reason of the introduction of the green electricity purchasing obligation but by reason of the creation of the compensation fund. The latter was set up by the State, was financed by a system of compulsory contributions, and the sums paid into it were controlled by the State.
The measure was selective in that it favoured only certain enterprises or certain activities, and in particular green electricity producers as opposed to other electricity producers and large electricity-consuming enterprises as opposed to other electricity-consuming enterprises.
Lastly, the granting of an advantage to green electricity producers was liable to affect intra-Community trade in electricity and distort competition, as was the advantage enjoyed by large electricity-consuming enterprises, active as these were in various sectors of the economy.
- the system did not ensure that the aid was limited to the difference between the production cost and the market price of the energy concerned. It did not limit the duration of the operating aid to that necessary to cover plant depreciation. Nor did it take account of any investment aid received by producers for their plants, such as the ecological premium in Luxembourg16 (point E.3.3.1 of the 2001 guidelines),
the system made no provision for a market mechanism such as green certificates (point E.3.3.2 of the 2001 guidelines),
the operating aid was not calculated on the basis of the external costs avoided (point E.3.3.3 of the 2001 guidelines),
the operating aid was not limited to five years’ duration, it was not degressive, and its intensity was not limited to 50 % of the extra costs (point E.3.3.4 of the 2001 guidelines).
Lastly, the Commission questioned the measure’s compatibility with Articles 25 and 90 of the Treaty. The compensation mechanism did not make provision for any exemption from contribution payments for imported electricity or from the tax on exports. The measure ultimately benefited only domestic producers of green electricity. Imported electricity was therefore taxed without ultimately benefiting from the support enjoyed by green electricity produced in Luxembourg.
The new GDR referred to in paragraph 23, scheduled to enter into force on 1 January 2009, amends the compensation mechanism in such a way that it no longer numbers among the reasons for opening the formal investigation procedure. Consequently, this Decision examines the existence of State aid and the compatibility or otherwise of the compensation mechanism under Article 87(3)(c) of the Treaty up until 31 December 2008.
Luxembourg pointed out first of all that, under the GDR of 30 May 1994, Cegedel was alone obliged to purchase Luxembourg-produced green electricity. Other, competing distributors had since emerged owing to liberalisation (they were 13 in number in June 2003). They had all been placed under an obligation to purchase green electricity. In actual fact, however, the additional costs still fell largely on one operator, Cegedel. Consequently, the compensation fund in reality promoted fair competition between distributors since it divided among them the additional costs associated with the green electricity purchasing obligation.
Luxembourg pointed out secondly that the measure produced significant environmental benefits and helped to achieve the environmental protection objectives to which Luxembourg has committed itself in accordance with the Community anti-climate change policy: for Luxembourg, the target was to reduce carbon emissions by 28 % compared with 1990. The Luxembourg authorities accordingly called on the Commission to assess the potential competition-distorting effects or the effect on intra-Community trade in the light of the environmental benefits of the measure.
Luxembourg considered that the creation of the compensation fund did not constitute State aid within the meaning of Article 87(1) of the Treaty.
Luxembourg pointed out secondly that the compensation fund did not create any advantage for green electricity producers inasmuch as there was no contractual or financial link between the fund and the producers. The latter were remunerated directly by the distributors when they purchased green electricity, according to the tariffs set at the time by the GDR of 30 May 1994. The compensation fund, for its part, made compensatory payments only between distributors.
The compensation fund likewise did not create any advantage for large electricity-consuming enterprises compared with enterprises which contributed to the fund. The beneficiaries of the exemption — the chemical and steel industries — had no competitors in Luxembourg which should have contributed to the fund. Luxembourg considered, moreover, that the beneficiaries of the exemption were not placed at an advantage compared with competitors situated outside of Luxembourg.
Luxembourg considered lastly that the competition-distorting effect and the effect on intra-Community trade associated with the compensation fund were no more than theoretical. In particular, it was not proven that the exemptions from which Luxembourg heavy industry benefited affected trade between Member States.
Luxembourg considered that the compensation mechanism did not infringe Articles 25 and 90 of the Treaty. According to Luxembourg, the system did not treat electricity produced in Luxembourg any differently from imported electricity. Moreover, green electricity produced in accordance with the GDR of 30 May 1994 was not exported. Therefore, a producer situated in another Member State but having customers in Luxembourg was treated in exactly the same way as a producer situated in Luxembourg and selling in the domestic market. The same was true if the customers of the two producers were situated in another Member State.
Although they challenged the assertion that the exemption from contribution payments for large electricity-consuming enterprises constituted State aid, the Luxembourg authorities maintained that the measure might be deemed compatible with the 2001 guidelines.
Luxembourg pointed out that the exemption was granted on the basis of a voluntary agreement comprising energy efficiency improvement objectives for signatory companies. The voluntary agreement had been concluded between Luxembourg and the Fédération Nationale des Industries (National Industries Federation — FEDIL) in March 1996 and renewed in April 2001.
While it acknowledged that the agreement did not stipulate any penalties in case of failure to meet commitments, Luxembourg undertook to include such a mechanism in order to bring the agreement into line with point 51.1(a) of the 2001 guidelines.
Only the Netherlands submitted comments following the opening of the formal investigation into the Luxembourg compensation mechanism.
The Netherlands pointed out further that each Member State had to be left some latitude when it came to achieving the environmental objectives of the Kyoto Protocol. It suggested, therefore, that the Commission should adopt a case-by-case approach to the green electricity support measures taken by each Member State.
In conclusion, the Netherlands called on the Commission to view the measure proposed by Luxembourg favourably given the current need to further promote green electricity production.
Luxembourg did not respond to the comments submitted by the Netherlands.
It will be examined below whether the compensation mechanism constituted State aid during the period in question, i.e. up to 31 December 2008.
As regards imputability, the ILR calculated the aid and distributed it to each beneficiary according to a formula laid down by law. The State thus exercised control, through the law, not only over the amounts distributed and the beneficiaries, but also over the granting of the aid. The Commission considers, therefore, that the aid was imputable to the State.
The compensation mechanism was directed only at some electricity producers, namely green electricity producers in Luxembourg.
The compulsory contribution imposed by the compensation mechanism manifestly conferred an advantage on green electricity producers, since the very aim of the scheme was to enable such producers to sell their electricity at a price higher than the market price.
Large electricity-consuming enterprises manifestly enjoyed an advantage due to the exemption from — or, from 1 January 2006, the reduction in — the contribution to the compensation mechanism.
The measure affected economic operators in sectors open to competition, be they the electricity production sector or sectors in which large electricity-consuming enterprises operate (including chemicals and steel) and which engage in trade with other Member States.
Consequently, the aid was liable to distort competition and affect intra-Community trade.
On the basis of these elements, the Commission considers that the version of the compensation mechanism that was in place between 1 January 2001 and 31 December 2008 constituted State aid within the meaning of Article 87(1) of the Treaty.
For the reasons given in paragraphs 32, 33 and 34, the Commission decided to open a formal investigation procedure in this case as it had doubts about the compatibility of the measure with the common market — a compatibility which also implied its conformity with Articles 25 and 90 of the Treaty.
It is necessary therefore to assess, firstly, the measure’s compatibility in the light of the 2001 and 2008 guidelines and, secondly, its conformity with Articles 25 and 90 of the Treaty.
The Commission has assessed the compatibility of the aid, during the period from 1 January 2001 to 31 December 2008, with respect to two types of beneficiary: on the one hand, green electricity producers, which benefited indirectly from contributions to the compensation fund, and, on the other, large electricity-consuming enterprises, which benefited first from exemption from, then — from 1 January 2006 onwards — from a reduction in, contributions to the compensation fund.
On the basis of these elements, the Commission considers that the aid was limited to the difference between the cost of producing green electricity and the electricity market price.
For the period from 1 January 2001 to 1 April 2008, during which the 2001 guidelines were applicable, the Commission considers therefore that the aid granted to green electricity producers was in keeping with the 2001 guidelines, and in particular points 58 to 60 thereof concerning operating aid, and that it was accordingly compatible within the meaning of Article 87(3)(c) of the Treaty.
In its decision to open the formal investigation procedure, the Commission expressed doubts about the compatibility of the exemption from contribution payments enjoyed by large electricity-consuming enterprises up until 31 December 2005. As from 1 January 2006, such enterprises contributed to the compensation fund, albeit at a reduced rate.
As to the determination of the rules applicable to assessing the aid’s compatibility, it should be noted that the contribution for 2008 was calculated on the basis of data for 2007, and that the decision to grant the aid was taken before 2 April 2008, the date on which the 2008 guidelines entered into force. Consequently, for the whole of the period from 1 January 2001 to 31 December 2008, the compatibility of the aid granted to large electricity-consuming enterprises falls to be assessed in the light of the 2001 guidelines.
The Luxembourg authorities have made clear first of all that all exempted large electricity-consuming enterprises undertook to improve their energy efficiency under voluntary agreements concluded with the State in 1996, then in 2002, covering the period from 2000 to 2006. Luxembourg amended these agreements, moreover, on 13 April 2005 at the Commission’s request.
- enterprises which did not meet their commitments had to purchase a certain quantity of green electricity on the market or produce it for their own consumption43,
enterprises which did not meet their commitments to have the improvement in their energy efficiency certified by auditors at the beginning and end of the period had to purchase or produce themselves volumes of green electricity representing 1 % of their consumption.
Moreover, the exemption from contribution payments was created at the same time as the contribution to the compensation fund itself, on 1 January 2001.
On the basis of the elements outlined in paragraphs 77, 78 and 79, the Commission considers that the exemption from, then — from 1 January 2006 — the reduction in, contributions to the compensation fund for large electricity-consuming enterprises in exchange for the conclusion of voluntary agreements was in keeping with point 51.1(a) of the 2001 guidelines. Consequently, the measure was compatible within the meaning of Article 87(3)(c), as from December 2005.
For the period from January 2001 to December 2005, the Commission notes that the exemption from contribution payments was also obtained in exchange for energy efficiency improvement commitments by large electricity-consuming enterprises. These agreements, which were first concluded in 1996, were renewed in 2002 for the period between 2000 and 2006. Moreover, the penalties introduced in 2005 applied if enterprises had not improved their energy efficiency in 2005 by 15 % compared with 1990. The Commission considers, therefore, that the environmental target and the penalties applied to the conduct of the beneficiaries of the exemption between 2001 and 2005. Consequently, the Commission considers that the exemption from contribution payments for large electricity-consuming enterprises between January 2001 and December 2005 was in keeping with point 51.1(a) of the 2001 guidelines and that it was therefore compatible within the meaning of Article 87(3)(c) of the Treaty.
As regards the risk of imported green electricity being discriminated against compared with green electricity produced in Luxembourg, which alone benefits from the revenue from contributions, the Luxembourg authorities have undertaken, by a ministerial letter, to set up a procedure for reimbursing contributions to the fund for green electricity imported up until 31 December 2008. To benefit therefrom, consumers will have to prove that they have purchased imported green electricity.
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The Commission finds that Luxembourg unlawfully implemented the measure of creating a compensation fund for the organisation of the electricity market, in infringement of Article 88(3) of the Treaty.
However, in the light of all the above elements, the Commission concludes that, for the period from January 2001 to December 2008, the aid granted to green electricity producers in Luxembourg and the exemption from, then — from 1 January 2006 — the reduction in, contributions for large electricity-consuming enterprises, constitute aid compatible under Article 87(3)(c) of the Treaty, as stated in the 2001 and 2008 guidelines,
HAS ADOPTED THIS DECISION:
Article 1
The creation and administration, between 1 January 2001 and 31 December 2008, by Luxembourg of a compensation fund for the organisation of the electricity market constituted State aid under Article 87(1) of the Treaty for green electricity producers in Luxembourg and for large electricity-consuming enterprises.
The aid was compatible with the common market under Article 87(3)(c) of the Treaty.
Article 2
This Decision shall be valid subject to amendment of the compensation mechanism, such as Luxembourg has undertaken to provide in its legislation.
Article 3
This Decision is addressed to the Grand Duchy of Luxembourg.
Done at Brussels, 28 January 2009.
For the Commission
Neelie Kroes
Member of the Commission