The Reform of State Aid Rules on Services of General Interest Collège d‘Europe, Bruges, 30 September 2011 The Impact of the Almunia-Reform on the Energy Sector Prof. Dr. Joh.-Christian Pielow Institute for Mining & Energy Law Ruhr University Bochum

2  “Important part of the Commission’s practice and the case law of the ECJ”; (L. Hancher, 2001) Case groups:  Promotion of primary fossil carriers (coal  ECSC until 2002 & Regulation 1407/2002 until 2010; nuclear  EAEC (e.g. Insuring nuclear risks)  State aids for energy undertakings and for energy infrastructures  State aids through (public) energy undertakings, e.g. early ECJ – Gasunie and, in general, to energy consumers  State aid & energy taxes – and exemption clauses in other (environmental) funding schemes, conc. in particular the promotion of “renewables” (see also ECJ – Preussenelektra), of energy efficiency and within the Emission Trading Scheme (ETS)  Community Guidelines on State Aid for Environmental Protection (under art. 107 III TFEU), O.J. C 82 of (serves to an integrated European energy and climate protection policy within the Energy Action Plan) In general: State Aids in the Energy sector Pielow | Collège d‘Europe Bruges | 30 September 2011

3 Impacts of sectoral regulation  Current Internal Market-Directives 2009/72 & 73 for Energy & Gas:  Transmission and distribution activities = natural monopolies  subject to specific (network/access) regulation  (Electricity) production, wholsesale trading and retail opened to competition  Electricity and gas markets still remain mostly national in scope; Council’s commitment 2011 to complete the IM by 2014  Article 3.2 Electr./Gas Directive: MS may impose, in the general economic interest, public service obligations which may relate to security (incl. security of supply), regularity, quality and price of supplies an environmental protection (including energy efficiency, energy from renewable soruces and climate protection)  3d legislative package 2009: MS ensure universal services to household consumers (voluntarily also to SME), i.e. supply with electricity of a specified quality at reasonable, comparable, transparent and non-discriminatory prices; “supplier of last resort” (Article 3.3 Dir. 2009/72)  3d legislative package 2009: MS take appropriate measures in particular to vulnerable customers and final customers in remote areas (Articles 3.23 resp Dir. 2009/72 and 2009/73/CE) In particular: State Aids to energy related SGEI Pielow | Collège d‘Europe Bruges | 30 September 2011

4 Despite of manifold hints in energy-Directives and efficiency of large scale commercial Services entrusted with SGEI is a specific focus of the draft package... :  “The Commission has limited experiences concerning State aid granted as compensation for the fulfilment of public service obligations in the electricity or gas sector” (Working paper SEC[2011] 397)  Few SGEI case law because of few market failure?  Previous decision practice (by applying of specific evaluation schemes on clear definition of PSO, transparency, non-discrimination and verifiability):  Reference prices for gas retail supply, ECJ C-265/08 (2010) – Federutility a.o.  Commission’s (few) decisions: Costs of transition to competition, electricity generation out of peaks, stranded costs compensations, electricity tariffs, preferential dispatch mechanisms for indigenous coal power plants (long-term power purchase agreements: see EUECJ, T-179/09 – Hungary, pending)  Little relevance in particular in terms of supply of last resort because this is regularly imposed on incumbents with strong positions on their home markets – and without any separate financial compensation !  insofar, also the resort to tendering procedures is rare In particular: State aids to energy related SGEI Pielow | Collège d‘Europe Bruges | 30 September 2011

5 Consequently: Practical relevance of the Alumni draft package in the energy sector is low (for the time being)  - irrespective of decreased thresholds within the “Decision” (up to 15 Mio. €)  “Framework” – mainly concerning service compensation  Net avoided costs vs. cost allocation; reasonable profit; efficiency incentives  Interpretation & application in view of experiences (and conflicts!!) within incentive network regulation regimes (“quality regulation”) and/or under the guidelines for environmental protection ?  “Efficient” costs comparison may result extremely difficult in view of manifold and diverse types and scales of energy undertakings (e.g.: more than in Germany)  De minimis aids (“Regulation”):  Draft regulation only applies to grants by local authorities up to inhabi- tants; application concerning (local) “energy services” in upcoming “Smart Cities” ?  again: SGEI regime regularly not applies to “minimum services” in the framework of energy supply of last resort In particular: State aids to energy related SGEI Pielow | Collège d‘Europe Bruges | 30 September 2011

6  Even if energy “as such” is a public service par excellence – the sector is not in the main focus of (genuine) SGEI rules:  Look ahead:  coal fired or nuclear power plants as a backup for intermittent renewables (E, H, Pl, D)  foreseeable extension of innovative financing regimes, in particular in the context of energy efficiency (climate protection) policy & new technologies (Smart Energy, smart grids)  Matching of environmental guidelines and Alumni rules?  on the other side: Energy efficiency oriented “enrichment” of EU public procurement rules !  Roadmap to a resource efficient Europe from – COM[2011] 571  Simplification & debureaucratisation (e.g. in municipalities)? Conclusion & outlook Pielow | Collège d‘Europe Bruges | 30 September 2011

7 Many thanks for your attention ! Any questions? Prof. Dr. Joh.-Christian Pielow Ruhr-Universität Bochum Institut für Berg- und Energierecht Tel.: – Web: Pielow | Collège d‘Europe Bruges | 30 September 2011