Page 18 - Lawtext Utility Law Review Journal Sample

16[2006/2007]4 ULR LEVY FUNDING, STATE INFLUENCE & APPLICATION OF COMMUNITY LAW – DOWNIE 165

Essent Noord The Advocate General’s Opinion

This case concerns a reference from proceedings in the In his opinion, the Advocate General considered whether the
Netherlands raised by Essent Netwerk Noord BV (‘Essent’) surcharge arrangements should be characterised as a form of
against Aluminium Delfzijl BV (‘Aldel’) for recovery of a state aid within the meaning of Article 87(1) EC.
surcharge due in respect of electricity distributed by Essent The Advocate General began by noting the essential
for Aldel. ingredients of state aid, namely, (a) the existence of an
advantage for an undertaking, (b) the selective character of
Context the relevant measure, (c) financing by the state or through state
resources, and (d) an impact on trade between Member States
The proceedings concerned the four entities responsible and the distortion of competition.
for the generation, import and transmission of electricity Of these four elements, the Advocate General took the
in the Netherlands (‘the EPEs’) and their subsidiary, SEP. view that three ((a), (b) and (d)) were clearly present. However,
In the period prior to the liberalisation of the Dutch the presence of the final element, financing by means of public
electricity market in 1998, SEP had made certain long-term resources, raised more complex questions.
investments in pursuit of public energy and environmental In particular, he referred to the court’s previous
11
policies (such as urban heating and experimental coal- PreussenElektra decision, in which it had ruled that Article
gasification projects). 87(1) EC did not apply to a Member State regulation which
Under a 1997 agreement, the country’s electricity required private companies engaged in the supply of electricity
distributors had undertaken to pay SEP an annual charge to buy electricity produced from renewable sources of energy
over the period 1997 to 2000 of NLG 400 million. This at minimum prices higher than its economic value and
annual charge (which the distributors would in turn recover spread the financial burden resulting from this obligation
via their customer charges) was designed to recoup costs between those suppliers and the private owners of electricity
incurred by SEP in making those long-term investments, networks located upstream. According to the court, such a
which would otherwise become ‘stranded’ as a consequence measure did not result in the direct or indirect transfer of state
of liberalisation. resources.
12
Until 1999 the EPEs were all controlled by Dutch local He also referred to the court’s Pearle decision. In that
authorities, although by the time of the reference only one case, the court had also excluded from Article 87(1) EC a
of them remained subject to indirect state control via its scheme adopted by a professional organisation established
shareholders, Essent and Delta. under public law for the financing, by means of obligatory
Special legislation was introduced in December 2000 contributions taken from its members, of a collective
for the purpose of facilitating recovery of the stranded costs advertising campaign agreed upon by its members. The court
identified in the 1997 agreement. Under this legislation, had in particular attached importance to the fact that the
electricity consumers were required (in respect of the period expenditure incurred by the organisation for purposes of
from August to December 2000) to pay their distributor the campaign had been entirely compensated by the
and their supplier tariff surcharges (which those entities contributions taken from the member undertakings which
were then required to cede to SEP). To the extent that the benefited from it. Consequently, according to the court, the
surcharges yielded more than NLG 400 million, any excess intervention of this organisation did not tend to create an
was to be surrendered to the Dutch state. advantage which would constitute an additional burden for
The Netherlands brought the surcharge provisions of the state or this organisation.
the 2000 legislation to the Commission’s attention by letter The Advocate General then proceeded to observe that
dated 30 August 2000. By its decision dated 25 July 2001, the PreussenElektra decision had the potential to reduce markedly
the Commission cleared those provisions for the purposes the powers of the Commission to review national measures
of Article 87 EC. However, by then the legislation had providing assistance via levy arrangements. The resulting risk,
already come into effect (on 29 December 2000) and had according to him, was that public measures likely to have a
required the payment of the relevant surcharges by 1 July significant impact on market liberalisation would escape
2001. scrutiny and control under the Community rules on state aid.
Aldel is a Dutch electricity consumer. Essent is the On that basis, he took the view that it was appropriate to confine
electricity distributor responsible for the transportation of the approach adopted by the court in PreussenElektra to the
electricity to Aldel and, pursuant to the legislation of 2000, specific factual circumstances of that case. In particular, he
Essent sought to recover from Aldel the stranded cost proposed that this decision be regarded as confined to the
surcharge due by it in addition to its distribution charges. situation where aid granted by the public authorities to specified
Aldel refused to pay the surcharge, arguing, amongst other undertakings is exclusively financed via the imposition of
10
things, that it was an unlawful state aid within the meaning burdens on private operators and is paid to the recipients
of Article 87(1)EC. Essent then brought a payment action directly by these operators.
before the national court, which referred a number of That, in the Advocate General’s view, permitted the
questions to the European Court of Justice. application of Article 87(1) EC: (i) in the case in which the
assistance is financed by imposing burdens on public

10 It was also argued that the surcharge violated Article 25 EC
(prohibition on imposition of customs duties or charges having equivalent
effect on inter-state trade) and Article 90 EC (prohibition on 11 Judgment of 13 March 2001, Case C-379/98.
discriminatory taxation). 12 Judgment of 15 July 2004, Case C-345/02.
UTILITIES LAW REVIEW PUBLISHED BY LAWTEXT PUBLISHING LIMITED
www.lawtext.com