Electricity sector inquiry

Vestager

Last week it emerged that Competition Commissioner Margrethe Vestager is proposing to investigate the various ‘capacity’ payments paid by national authorities to EU electricity generators. See e.g. Reuters report.

This is significant. If confirmed, it will mark a positive shift in the ‘electricity chapter’ of “energy union” plans announced by Vestager’s colleagues earlier this year. Then in February Šefčovič and MAC spoke of legislation on new (but as yet unspecified) electricity market arrangements being tabled in 2016, preceded only by a consultation exercise this year.

A sectoral inquiry is a necessary and more rigorous approach, since without a solid evidence base there could not be an adequate impact assessment justifying legislative proposals. The inquiry in effect provides the basis for internal market legislative changes to 3rd package common rules (and/or network codes) only to the extent these may be justified under the acquis. (And if none are justified then there’ll be no changes.)

The evidence gathered could (and should) also lead to specific case-by-case decisions under competition law in particular state aid, e.g. the 2-yr-old non-notified incompatible Polish scheme.

Overall the situation is similar to the energy sector inquiry (then electricity AND gas) in 2005-07 prior to the passage and adoption of the 3rd internal energy market (IEM) legislative package in 2007-09 and the conclusion of several company-specific anti-trust cases that ran in parallel. The difference now is that this inquiry will concern state aid issues (capacity payments) rather than anti-trust issues (structural unbundling).

So, what are the legal bases for such a move? First, Article 108(1) TFEU reads:

“The Commission shall, in cooperation with Member States, keep under constant review all systems of aid existing in those States. It shall propose to the latter any appropriate measures required by the progressive development or by the functioning of the internal market.”

It’s also worth reading all of Articles 107-109 if you have not already done so. Article 109 provides basis for Council to adopt/amend procedural rules i.a. which it last did in 2013.

Second, and more specifically, the 2012-14 ‘State Aid Modernisation’ (SAM) reforms under VP Almunia finally introduced an explicit provision for sector inquires into the basic state aid procedural rules. So Council Regulation 659/1999 Article 20a as amended now reads as follows:

State aid Article 20a new 659-1999Notable in this rule is the option to target some but not all countries (‘choice of addressees’) and the power to target specific companies (‘undertakings’) and associations as well as member states. DG Competition is already wrestling with a number of cases including those from France and Poland. An inquiry with the force of law will force the hand of uncooperative member states.

The new inquiry may be the first time that this new provision is used since its 2013 enactment. (However the FT reports today that a similar inquiry in the banking sector is under preparation (link).

~o0o~

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