Exemptions for Energy Intensive Companies From Renewable Energy Surcharges: Commission Opens In-Depth State Aid Investigation Against France

by McDermott Will & Emery
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The European Commission has opened an in-depth State aid investigation into a French scheme, under which energy intensive companies are exempted from renewable energy surcharges. The decision to open the formal investigation comes only days before the announced date for the publication of the new Guidelines on environmental and energy aid for 2014-2020, which will set the scene for the future assessment of energy aids.

The European Commission (Commission) opened an in-depth State aid investigation on 27 March 2014 into a French scheme, under which energy intensive companies are exempted from renewable energy surcharges. The decision comes at a time when Germany is already being targeted by the Commission for granting energy intensive companies an exemption from the renewable energy surcharge, and publication of the new Commission Guidelines to this field is imminent.

The Investigation in Context

The French system provides for surcharges intended to support renewable energies, known as the Contribution to Electricity Public Services (CSPE). The law exempts certain consumers from paying the (full) levy and provides for certain caps.

In its preliminary assessment, the Commission has come to the conclusion that the current French scheme may have given unlawful State aid to energy intensive companies in France. According to the Commission, the exemptions appear to give the companies concerned a selective advantage that could possibly distort competition in the Single Market.

On 18 December 2013 the Commission opened a similar in-depth investigation into the German Renewable Energy Source Act (EEG), in which the exemption from passed-on charges of fixed feed-in tariffs for renewable energy is under scrutiny (See OTS 18 December 2013). Similar rules in Austria are currently under review at the General Court of the European Union (T-251/11) as Austria seeks to overturn a 2011 Commission decision that a partial exemption for energy-intensive companies from paying the full costs for renewable energy amounted to illegal State aid.

In relation to the Emission Trading Scheme (ETS), the Commission’s Guidelines on certain State aid measures in the context of the greenhouse gas emission allowance trading scheme post-2012 (ETS Guidelines) includes a list of sectors that can benefit from reductions. The topic of reductions of energy price elements for energy intensive industries is not, however, addressed sufficiently in the current 2008 Community guidelines on State aid for environmental protection.

New Energy Guidelines

The new Guidelines on environmental and energy aid for 2014-2020 (new energy Guidelines) are expected to give clear guidance in this space once published. Their expected publication has been announced for 9 April. It is, however, likely that the final text of the new energy Guidelines will be materially different to the current publicly available draft of September 2013. They are expected to include a list of energy intensive sectors that are exempted from paying surcharges and some form of cap. Some EU Member States are pushing the Commission to make this list of energy intensive sectors that can benefit from an exemption as wide as possible.

Once adopted, these Guidelines would apply to this current case, as well as the other ongoing cases. To enable companies to be in compliance with the State aid rules, clear cut new energy Guidelines will be much needed.

Implications

The timing of the Commission’s decision to open this in-depth State aid investigation indicates that the Commission is willing to issue a final decision before the end of its term this summer. Speedy decisions in the French and German cases are key to providing legal certainty for all stakeholders.

For EU Member States, this certainty is vital to allow them to devise their future renewable energy funding systems in accordance with the State aid rules. Energy intensive companies must have planning reliability with respect to their production costs, as must energy producers and energy distributors with respect to their expected revenues.

French companies that have benefitted and/or are still benefitting from the CSPE exemption currently under investigation by the Commission should consider taking the necessary measures to protect their interests (See OTS 26 November 2013).

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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