Does the Supply of Electricity below the Market Price Constitute Illegal State Aid?

This is one of the questions that the European Commission is currently reviewing after the opening of an in-depth investigation in an ad hoc case against Greece.

Two sets of measures are at stake. The first measures concern suspected preferential economic advantages conceeded to Aluminium of Greece, an aluminium production company, by the national state own utility Public Power Corporation. The investigation is based on two complaints addressed to the Commission and relative to the alleged imcompatible state aids granted to Aluminium of Greece, i.e.: lower electricity prices, tax exemptions, deferral of taxation obligations, loans under privileged terms, land expropriation, exclusive use of seashore and sea area.

In its press release, the European Commission talks about a presumption of state aid. However, as it underlines, most of the aids were granted before Greece's accession to the EU, and constitute "existing aid", no subject to reimbursement. "Those privileges were put into force in the context of the company's establishment in 1960, long before Greece's EU accession in 1981. Most of them were not modified after the accession and constitute therefore existing aid, which need not be repaid."

The application of lower electricity prices seems however to have continued along the years: "as regards electricity prices, the Commission found taht Greece had continued to apply lower electriicty prices for Aluminium of Greece, for 15 months after the expiry of the establishment contract. The difference between the privileged pricing and the normal one would amount to EUR17.4 million."

A second set of measures examined by the European Commission services concerns the construction costs of a high-pressure natural gas pipeline connecting Aluminiun of Greece co-generation power plant with the transmission grid. Those costs are suspected to have been partially paid by the Greek state. The Commission is still awaiting for comments from Greece on that point.

These are the facts subject to investigation. The qualification of lower electricity price is of particular interest, and any decision from the Commission will be reported here.

Not a new question - Price subsidies resulting in low energy prices have already been qualified as illegal state aids by the European Commission. First, and without having access to the facts of the case (not yet published), the nature of the aid seems to fit into the definition of state aid. The question of possible justification remains to be seen. Second, recent decisions taken by the European Commission underlines a constant practice regarding price subsidies. Among the most recent cases are: Alcoa case (2009), which includes a judicial side (Alcoa lost before the Tribunal of First Instance (T-332/06) under appeal); or previously against Italy regarding lower electricity tariffs applied to manufacturing companies (ThyssenKrupp, Cementir and Terni Nuova; C 36/A/2006).

Reference: Case nr. NN 62/2009, Alleged aid to Aluminium of Greece. Press release IP/10/58 of 27 January 2010, State aid: Commission opens in-depth inquiry into preferential electricity tariffs for Aluminium of Greece.

ACER: First Nominations Published

The names of the appointed members of the Administrative Board of the Agency for the Cooperation of Energy Regulators have been published in the Official Journal of the European Union of 28 January.

Among the five appointed members is a French man, Philippe Guillard. He was previously co-director for energy, Directorate Energy and Climate, at the French Ministry of Ecology, Energy, Sustainable Development, and the Sea.
In order to ensure continuity in the work of the Administrative Board, the terms are of different length. The one of the French member is of four years, starting on 28 January 2010.

A next spot will detail the role and functioning rules of ACER.

Reference: Council Decision of 22 December 2009 appointing five members and five alternates of the Administrative Board of the Agency for the Cooperation of Energy Regulators, JOEU 28.1.2010 C21/1.

NVE Rapporterer til OED om den Samlede Reguleringen av Strømnettet

Norges vassdrags- og energidirektorat (NVE) leverte den 20. januar 2010 til Olje og Energidepartementet (OED) sin rapport om den samlede nettreguleringen.

Rapporten lastes ned her.

Jeg kommer straks med en sammendrag av dokumentet.

On Defining Energy Precarity by Law - The French Debate

The political context - One of the follow-up initiatives of the French Environmental Roundtables (Grenelle de l'Environnement, hereafter "Grenelle") was focussed on energy consumption in the housing sector and the situations of energy precarity (précarité énergétique). This took of the name of Grenelle Housing Plan (Plan Bâtiment Grenelle). The concerned expressed during the Grenelle were not immediately transposed in concrete proposals. The request for the elaboration of a national action was formally put forward on 11 September 2009 by the a letter of mission from the State Secretary to the Minister of Ecology, Energy, Sustainable Development and the Sea. Latter on, the efforts on energy precarity at households' level were strengthened by the announced financial support granted to the National Agency for Housing (Agence Nationale de l'Habitat) under the National Loan (Emprunt National) to be launched. In order to answer the political requests expressed by the French government, the working group of the Grenelle Housing Plan has elaborated a report on energy precarity (hereafter "the Report") that was presented on 6 January 2010.

Defining energy precarity - One of the very first tasks of the Report is to define the concept of energy precarity. According to the Report, there are three main constitutive elements:

1. households are in a situation of vulnerability due to their low incomes;
2. the building has a bad thermal performance;
3. high energy costs.

The situation is described as complex, because resulting from the interaction of several separate factors, both social, technical and financial. For that reason, energy precarity is "a spiral": from difficult economic situation, reduction of incomes, enability to pay bills, reduction costs related to the heating system, deterioration of the housing building, health problems, safety issues (also for neighbours).
One can say that while energy poverty focuses primarily on difficulties in accessing energy services in developing countries (see for exanple the Energy Poverty Action), energy precarity concern difficulties in covering energy needs in industrialised countries.

A definition enshrined in law? - The Report put forward several proposals to act on energy precarity, both at national and local levels. The existing initiatives are reviewed by the report, but are described as: not always equitable in terms of beneficiaries (in particular low incomes families); not enough targeted towards the most urgent or dramatic situations.
The first national action proposed relates to the framework definition of energy precarity by law. As the measure concerns the housing sector, it is proposed to amend Article 4 of Law No.90-449 of 31 May 1990 concerning the Implementation of a Right to Housing. The main amendments proposed are focused on the treatment of energy precarity situations as an integral part of the Department Action Plans for the Housing of Disadvantaged People (Plan Départmental d'Actions pour le Logement des Personnes Défavorisées - PDALPD).

The Report proposed to define a person in a situation of energy precarity as: "a person experiencing in its housing some difficulties of energy supply in such an extent that it cannot cover its elementary needs in relation to inadequate economic resources or housing conditions."
This is the formal framework definition proposed by the Report. It intends to be clear, but its appearance, just as a part of the PDALPD in Article 4 of the Law might surprise, taken into account the strong political will to act on the topic, as recalled above. The "national" scope of application of the concept is by law reduced to a "local" implementation.

This might be explained by three reasons. First, the local authorities are best placed to identified and managed the situations of energy precatiry. The PDALPD is the main instrument in the matter, and energy precarity could now constitute an integral part of it. Second, a "right to electricity" is already defined by law. Law No. 2000-108 of 10 February 2000 on the modernisation and development of the public electricity service defines in its Article 1 a "universal right to electricity" and the necessity to "combat exclusion" through the enforcement of a public electricity service. Not all housing building are heated by electric power, but it still covers a larger proportion. In so, the access to energy services is already partially ensured by Law No.2000-108. In addition, the provision of "competitive energy prices" is defined as a national objective by Law No.2005-781 (Article 2). Third, the purpose of defining energy precarity by law seems to be the establishment of a legal basis for the adoption of public policies rather than the establishment of a right that can use private persons in damage or liability charges (so far they are aware of this right). As written in the report: "Cette modification du text doit permettre de généraliser dans les PDALD la création de dispositifs performants de lutte contre la précarité énergétique, en insistant sur la nécessité d'une démarche d'évaluation au regard des enjeux spécifiques liés au développement durable," p.16)

The proposed amendments should form part of a law proposal on a national commitment to the environment (so-called Grenelle Law II).

Resources:

• Website of Le Grenelle de l'Environnement.
• Press release, Presentation of the Report on Energy Precarity, 6 January 2010.
• Report on "Energy Precarity", 15 December 2009 (full text, French). See in particular pp.5, 16, 22-23.
• Legislative file of Grenelle Law II, Senate website, here.

A Glimpse Over the Agenda of the Spanish Presidency of the EU: Limited Indirect Effects on Energy Policy

The Agenda presented by the Spanish presidency of the EU that started on 1 January 2010 is meant to be part of a joint programme framed together with the two following presidencies, i.e. Belgium and Hungary.

The Spanish government defined four priorities for its Presidency:

1. the full and effective application of the Lisbon Treaty;
2. the guarantee of the economic recovery of Europe through greater co-ordination of every member state and the approval of the European strategy for sustainable growth for 2020;
3. the reinforcement of the presence and influence of the EU in the new world order;
4. the focus to be put on European citizens, their rights and freedoms, as they should be "at the centre of EU policy".

This means that priority is not directly given to energy policy. If this policital agenda may affect energy policy, that will be indirectly, through in particular: the focus on European citizens rights; the European strategy for sustainable growth and the incentives towards a "green economy"; the adoption of a European Innovation Plan; the development of the European External Action Service and a series of ambitious bilateral and regional negotiations.

Climate change is identified in the Agenda as a common challenge but the main action of the Spanish presidency will be to "work to make sure that any agreement reached in Copenhagen comes to fruition as soon as possible in a global treaty..." This also means that the European Commission and its services will be the main actor of the energy policy in the months to come, both in terms of initiatives, follow-up of climate/energy and liberalisation packages and control of implementation by Member States.

Document: Political Programme - The Spanish Presidency 2010 (PDF document).