In Brief: T‑57/11 Castelnou Energía v Commission (judgment of 03.12.2014)

burning coal
On Wednesday 3rd December the GC found Spanish aid granted to coal power plants to secure supply to be compatible State aid (judgment not yet available in English).
After a busy day at the EStALI Autumn Workshop yesterday (we’ll give you all the hubbub from that as well as the conference later today), the following is a preliminary post on the General Court’s ruling in Castelnou Energía v Commission, based on the press release and the French language version. Note that the ruling is not yet available in English (Spanish, Estonian, Danish, Greek, French, Latvian, Maltese and Dutch language versions have been published).The ruling stemmed from a complaint against European Commission Decision SA N178/2010 of 29th September 2010 in which the Commission authorised aids under the Spanish a Spanish decree requiring that the 10 electrical energy production plants must obtain ‘indigenous’ Spanish coal and produce a quota of 23.35 TWh per year of electricity from that coal.


Do you know we also publish a journal on State aid?

EStAL banner
The European State Aid Law Quarterly is available online and in print, and our subscribers benefit from a reduced price for our events.


 

This indigenous coal came at a significantly higher price than coal from normal supply routes and to counter the higher costs of these 10 plants, the Spanish decree also introduced a ‘preferential dispatch mechanism’ (‘mécanisme d’appel prioritaire’). This stipulated that energy from those plants should be bought in preference to that produced by others, and to make sure that this happened in practice a certain level of energy from other sources is taken off the market; essentially, the electricity produced by indigenous coal gets used first. The owners of plants using indigenous coal are granted compensation equal to the difference between the additional production costs incurred by them and the selling price on the daily electricity market. The calculation for this compensation and the method for fixing the volumes of electricity that these plants must produce annually is set by decree and the compensation itself comes from a fund controlled by Spain.

Spain notified the measure to the Commission in January 2010; the Commission found there to be State aid, the 4th Altmark criteria (relating to the method for determining the level of compensation) not having been met. Nonetheless, it considered this to be compatible aid under Article 106(2) because this qualified as a service of general economic interest (SGEI) necessary to secure the electricity supply in Spain. As providers of SGEIs, the 10 undertakings are subject to the Treaty rules only where these do not obstruct the performance of the particular tasks placed on them. As such, the Commission took the decision under Article 108 not to raise objections to the measure.

Castelnou Energía owns a ‘combined cycle’ plant and as such was not a beneficiary of the aid. Backed by Greenpeace Spain (for their take on things see this post), it brought an action to annul the Commission decision finding the aid to be compatible with the Treaty on the basis that is competitive position was affected by the measure due to its location in the Aragon region, produces a surplus and is close by to the plant of Teruel, the main beneficiary of the aid because it is responsible fro the production of more than a quarter of the volume of electricity specified by the measure that must be produced from ‘indigenous’ coal (paragraph 33 of the ruling).

In Wednesday’s ruling, the GC dismissed Castelnou Energía’s action, upholding the Commission’s finding that the measure was a necessary SGEI. The GC found that the applicant failed to show that there was a manifest error of assessment in the Commission decision when it found that the service to be justified and proportionate.

The case deals with the interaction between the State aid and environmental policy more broadly. The Court, finding in this case that the stated that the Commission must verify the compatibility of the aid with other provisions outside the sphere of State aid and that this can lead to a finding of incompatibility. Where the objective of the aid is not environmental, the Commission need not take the EU environmental rules into account in its assessment. The Court limits the obligation to also consider non-State aid rules “to those rules capable of having a negative impact on the internal market, defined as an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured” (Press Release).

In the context of the case, the GC recognised that the Commission was correct in its finding that the overall level of CO2 emissions would not be increased because there would be a one for one substitution of polluting production. Thus, the measure could not be considered as disregarding the ‘aim and spirit’ of the Directive on greenhouse gas emission allowance trading because it encourages electricity production from coal.
Finally, the ruling found that the specific State aid rules relating to the coal industry were not infringed: EU law permits State aid measures to maintain coal production capacity and the Council has extended a decision allowing the costs in connection with coal for the production of electricity to be covered by Member States.

Stats:

Case: T‑57/11 Castelnou Energía v Commission, 03.12.2014.
Paragraphs: 228
Sector: Energy (coal)
State of Alleged Aid: Spain
Notification: January 2010
Date of Decision: 29.09.2010
Date of Application: 27.01.2011

 

Emma Linklater (Lexxion, European University Institute)

 

 Links

Tags

Über

Emma Linklater

Zusammenhängende Posts

13. Feb 2024
State Aid Uncovered von Phedon Nicolaides
State Resources, Control and Imputability - State Aid Uncovered photos 1

State Resources, Control and Imputability

Introduction A public measure can be classified as State aid only when it is funded from state resources. Measures funded from the budgets of public authorities are always considered to be supported by state resources. However, measures not funded from state budgets may still be supported by state resources. This is because, rather counterintuitively, the concept of state resources covers […]
01. Mrz 2022
State Aid Uncovered von Phedon Nicolaides
Security of Energy Supply - State Aid Uncovered SM posts

Security of Energy Supply

Guaranteed supply of electricity at fixed prices to a state-owned network operator involves a transfer of state resources to the supplier. Guaranteed supply of electricity at fixed prices confers an advantage to the supplier. Introduction Member States are allowed to take measures to ensure the security of energy supplies. There is a variety of such measures: imposition of obligations on […]
09. Nov 2021
State Aid Uncovered von Phedon Nicolaides
Compensatory Payments and State Resources - blog 45 KV

Compensatory Payments and State Resources

Funds used in compensation mechanisms mandated by the state become state resources Introduction The Court of Justice has stressed repeatedly that any resource over which the state can exercise control becomes a state resource, regardless of whether it is managed by a public authority or a private entity. Member States, however, keep inventing novel and complicated arrangements in which mandated […]
12. Okt 2021
State Aid Uncovered von Phedon Nicolaides
Security of Supply May Justify a Deviation from Public Procurement Rules - steta aid blog photo

Security of Supply May Justify a Deviation from Public Procurement Rules

Security of supply justifies a deviation from the normal procurement procedures as long as the same security cannot be achieved through a competitive selection of suppliers. Introduction Point 19 of the 2012 SGEI Framework requires that the assignment of a public mission to an undertaking must comply with the applicable public procurement rules. It does not impose an obligation for […]
07. Sep 2021
State Aid Uncovered von Phedon Nicolaides
Assignment of Public Service Obligations - wordyannik mika GjFbKfI874o unsplash

Assignment of Public Service Obligations

The compensation for public service obligations may include reasonable profit and incentives for cost reduction. Introduction Member States have discretion to define services they consider to be in the general economic interest [SGEI]. However, they need to justify that definition. The Court of Justice has ruled on numerous occasions that an SGEI has “special characteristics” that set it apart from […]
25. Mai 2021
State Aid Uncovered von Phedon Nicolaides

Compensation for Universal Service Provision

As long as the compensation does not exceed the net extra costs of the universal service activities, it may be used to offset other costs. Introduction The rules on State aid for services of general economic interest [SGEI] are very generous because they allow both investment and operating aid. Yet, it is not easy to comply with those rules because […]
27. Okt 2020
State Aid Uncovered von Phedon Nicolaides
The Common European Interest and the Environmental Impact of State Aid: The Case of Nuclear Power - nuclear power plant 4535761 1920

The Common European Interest and the Environmental Impact of State Aid: The Case of Nuclear Power

I am grateful to Peter Staviczky for comments on an earlier version. The possible negative impact of State aid on the environmental is taken into account when the aid measure violates directly the relevant EU law. The Commission protects the interests of other Member States by ensuring that the negative effects of State aid are kept to the minimum possible. […]
15. Sep 2020
State Aid Uncovered von Phedon Nicolaides
Non-economic Activities and Services of General Economic Interest - environmental protection 683437 1280

Non-economic Activities and Services of General Economic Interest

Non-economic tasks and economic activities which are inseparable from those non-economic tasks are together, as a bundle, non-economic in nature. Public compensation for the extra costs of services of general economic interest [SGEI] may not cross-subsidise activities that fall outside the scope of the SGEI. Update on Temporary Framework: Number of approved and published covid-19 measures, as of 11 September […]
04. Feb 2020
State Aid Uncovered von Phedon Nicolaides
How to Compensate for the Extra Cost of Public Service Obligations: Step-by-Step Guidance on a Complex Calculation - StateAidHub blogpost5 SGEI

How to Compensate for the Extra Cost of Public Service Obligations: Step-by-Step Guidance on a Complex Calculation

The “net avoided cost methodology” takes into account only incremental costs. Introduction The two most difficult issues in the design of State aid measures to support services of general economic interest [SGEI] are the proper definition of the public service obligation [PSO] and the identification of the “counterfactual” on the basis of which the public service compensation [PSC] is calculated. […]
17. Dez 2019
State Aid Uncovered von Phedon Nicolaides
Can a Tax (rather than a Tax Exemption) Confer a Selective Advantage? - StateAidHub blogpost52 Stateaid Lexxion TAX Water Spain European Commission

Can a Tax (rather than a Tax Exemption) Confer a Selective Advantage?

A tax that is levied at one level of government and does not apply to products and activities at a different level of government need not be selective. Introduction A tax exemption normally confers a selective advantage, unless it is justified by the logic of the tax. Counterintuitively, a tax itself can be selectively advantageous if its scope is too […]