European Commission Investigates Exemption from Renewable Energy Surcharge for Energy-Intensive Companies in Germany

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The European Commission today opened a State aid investigation into the German Renewable Energy Source Act (the EEG), claiming that the EEG may have given unlawful advantages to energy-intensive companies in Germany. These companies now face the potential risk that benefits totalling billions of euros may have to be repaid.

The European Commission (Commission) today opened a State aid investigation into the German Renewable Energy Source Act (the EEG). In its preliminary assessment, the Commission has come to the conclusion that the EEG may have given unlawful advantages to energy-intensive companies in Germany.

The EEG aims to support renewable energy by fixing the tariffs that electricity providers must pay for energy from renewable sources such as solar panels or wind turbines. This is known as the EEG Surcharge and electricity providers are entitled to charge their customers to finance these fixed feed-in tariffs for renewable energy. These tariffs are higher than those for energy from traditional sources. The EEG exempts energy-intensive companies from the EEG surcharge.

The Commission has come to the preliminary conclusion that exemption from the EEG surcharge constitutes State aid for the energy-intensive companies and therefore cannot be authorised. Energy-intensive companies that have benefitted from the exemption face the significant risk of the recovery of the alleged benefit. The potential State aid involved is likely to amount to billions of Euros.

Energy-intensive companies are threatened with recovery orders from two sides:

  • Should the Commission conclude that the exemption from the EEG Surcharge constitutes State aid and therefore cannot be authorised, it will order Germany to recover the advantages from the companies that benefitted.
  • Following a recent ECJ judgment (see McDermott website here), national courts, at the request of interested parties, may also order the recovery of the benefits before the Commission releases its final decision, on the basis of the purely preliminary Commission decision to open the State aid investigation.

Beneficiaries of the exemption from the EEG surcharge should therefore consider whether to appeal the Commission’s decision to open the State aid investigation or to participate in the investigation by commenting on the opening decision and then prepare to bring an action for annulment against the Commission’s final decision at the end of the investigation.

Beneficiaries also have to analyse whether or not, under national law, they are required to set up accruals for the reimbursement of the alleged aid. They are strongly advised to seek legal advice on this point.

The Commission’s investigation into the EEG should be seen in the broader context of its increased focus on State aid in the energy sector. The Commission today published its draft Guidelines on environmental and energy aid for 2014 to 2020 for public consultation. The text is currently not binding, but is supposed to enter into force in 2014. Amongst other things, it covers the compatibility assessment of State aid for renewable energy. The Commission also today opened a State aid investigation into a fixed feed-in tariff for a period of 35-years for the operator of a new nuclear power plant at Hinkley Point in the United Kingdom.

Katharina Dietz, a paralegal at McDermott Will & Emery’s Brussels office, also contributed to the article.

 

Topics:  EU, European Commission, Excise Tax, Renewable Energy, Tariffs, Tax Benefits, Tax Exemptions

Published In: General Business Updates, Energy & Utilities Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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