Review of Member States' reports on the implementation of the EC Decision on the provision of State aid to the provision of services of general economic interest (SGEI) 10 May 2017, Brussels

Disclaimer The information and views set out in this study are those of the author(s) and do not necessarily reflect the official opinion of the European Economic and Social Committee. The European Economic and Social Committee does not guarantee the accuracy of the data included in this study. Neither the European Economic and Social Committee nor any person acting on the European Economic and Social Committee’s behalf may be held responsible for the use which may be made of the information contained therein.

2005 Package 2011 Package   Communication on the application of Art. 107 general de miminis rule applied: € 200.000 over 3 years specific de minimis regulation: €500.000 of compensation over 3 years Block exemption decision •Hospitals and social housing •Aid below €30M per year for providers with turnover below €100M per year •Annual approach •Hospitals and social services: •Aid below €15M per year •Multi-annual approach •Entrustment act <10 years (exc. investment) Framework •Compensation of all the net costs incurred by the provider •Compensation of the net avoided costs (NAC) •Efficiency incentives •Equal treatment •Control of serious competition distortions •Compliance with PP rules when applicable •Strengthened transparency Action No retroactive action Retroactive action

Contract Information Service Contract N° EESC/CSS/6/2016/23157 between the European Union, represented by the EESC, and ESTAT Ltd. Activities: Review of MS reports 2012-2014 and 2015-2016 Review of additional literature (academic and stakeholder views) and data Outputs: 2 Summary Excel Datasheets 2 Interview Guides (NRAs and USPs) 6 Conducted Interviews (in France, Italy, Bulgaria) 1 Draft and 1 Final Study 1 Universal Postal Service (UPS) Case Study Results: Findings concerning all the 7 Study Questions + Postal Services Case

Study Question 1: Do the current SGEI rules foster the provision of public services? Do they provide clear guidance and legal certainty? List the main difficulties encountered. Scope of public interest realm and SGEI Right balance between fostering provision and preventing distortions of competition Adequate working of exemptions from notification with possible need to extend Problematic aspects of mixing procurement, concessions and SGEI Unnecessary focus on efficiency, instead of framework for efficiency incentives Flexibility at central level, but lack of capacity and participation at regional and local level

Study Question 2: Are requirements on definition and entrustment adapted to SGEI needs? e.g. does the 10-year standard entrustment period give rise to particular problems and/or concerns? Reasonable requirement up to 10 years, with preventive character Typical exceptions of SGEIs requiring significant investment justifying > 10 years Unaddressed cases, e.g. related to exceeding the time limit, exempted or not; also, renewals or prolongations of existing contracts; in-house/publicly-owned with service provision as the main mission Inertia vs. selection Privatization forces that may be affecting decisions

Study Question 3: Do the PP rules and requirements, in particular the SGEI provision on the issue, create particular challenges for designing SGEI entrustments and designating the providers? To what extent can such as requirement be met by MS without undue burden or restrictions? Transparency and equal treatment as valid principles Debates whether PP could be compulsory Issue of direct no aid if PP/concessions procedure followed (type of procedure) Setting up and definition of public remit Competence distribution and subsidiarity issue MS decide on quality + access + affordability + continuity MS decide whether the standard requires public service MS decide on whether/how to fund

Study Question 4: How do public authorities tackle the need to draw ex ante the parameters for compensation? List the difficulties encountered in meeting this requirement. Compensatory amounts ex ante resulting in overcompensation or even more frequently under-compensation Reasonable profit avoided (not to be in breach) as well as risk calculations Cases of systematic underfunding Difficulties as to whether additional support is possible Difficulties with the method of calculating additional support without coupling ex ante with ex post (net cost) methodology

Study Question 5: How do public authorities meet the requirement to avoid and replay any overcompensation? List the problems. Expected vs. actually incurred costs and revenues Recovery procedure to avoid overcompensation in most MS No clear procedure to avoid systematic under-compensation Lack of procedure for triggering update of the parameters (reappraisal) Minor overruns (up to 10%) could ensure a more flexible approach on an annual basis. Ex ante and ex post methodologies complement each other

Study Question 6: Do public authorities face particular difficulties in granting aid through guarantees or soft loans? To what extent do SGEI rules discourage such compensatory schemes? Limited application of soft loans, guarantees, equity and tax deferrals Tiers for compensations Lack of knowledge and risk aversion Chain of options from public provision to privatization Need for transparency of good practices

Study Question 7: Do Member States face difficulties in applying compatibility method based on net avoided cost? Does coping with the need to set up a counterfactual scenario involving the absence of public services obligations implies any special difficulty? Do Community rules provide enough guidance on this critical issue? NAC presenting overall difficulties as mandatory ex ante tool Existing fear of rigidity Counterfactual scenario interpreted in different ways, de facto divergences Profitability cost approach advocated, but not undoubtedly introduced Issues of own capacity and resources for external expertise

Universal Postal Service (UPS) Case Study France special SGEI based on rural areas high number of auxiliary postal offices meant to cover this SGEI fostering a territorial coherence in rural and low populated areas running this non-USO network involves much higher unit costs (La Poste receives funding separate from Third Postal Directive) Italy the compensation for Poste Italiane is defined ex ante subsequently the state relies upon ex post assessment based on actual data for determining the cost of the universal service of the Poste Italiane the assumptions of the counterfactual scenario if discretional question the NAC method Bulgaria Three-tier system (Bulgarian Posts, CRC and Ministry of Finance) ex ante NAC performed by MF, Bulgarian Posts submit an application to CRC for annual costs of UPS provision

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