Executive Summary:
- For a public measure to constitute state aid, it must be funded by state resources.
- State resources are those paid from a budget of a public authority or are controlled by the state.
- The state can regulate commercial relationships between undertakings and confer in this way an advantage to certain undertakings without granting state aid. This is possible if costly obligations imposed of the regulation on undertakings are not offset by state resources.
Table of Contents:
- Introduction
- Was the surcharge compulsory?
- Is it sufficient that a surcharge is compulsory?
- The relevance of the landmark judgment in PreussenElektra
Introduction
State aid must be funded by state resources. A state resource is any resource that the state can control. In this context, control means either that the resource belongs to the state or that the state can determine the use of a specific resource, even if it does not belong to it [i.e. its owner is not free to do what it wants with it].
State control over resources must be distinguished from state regulation of commercial relationships between undertakings. This distinction is important because the state can oblige, for example, one undertaking to buy or sell something to another undertaking at a pre-determined price without identifying the resources that can be used for that purpose. In this case, one undertaking obtains an advantage which, however, is not funded by state resources. Therefore, such an advantage does not constitute state aid.
On 9 July 2026, in case C-242/24 P, Commission v Germany, the Court of Justice of the EU [CJEU] had to interpret the concept of state resources.[1] The Commission had asked the CJEU to set aside the judgment of the General Court in case T-409/21, Germany v Commission, by which the General Court annulled the Commission decision on SA.56826 concerning a German measure for the support of combined heat and power [CHP] plants. The Commission had found the measure to constitute state aid.
The German measure obliged operators of electricity networks to buy electricity from CHP plants at above market rates. The extra costs incurred by the operators could be passed on to electricity consumers through a surcharge. In addition to support for CHP plants, the operators were allowed to levy a reduced surcharge on electricity supplied to hydrogen producers. The Commission found that both CHP plants and hydrogen producers benefitted from state aid.
The General Court ruled that the Commission erred in finding that the measure in question was funded by state resources. In a nutshell, the measure did not specify the resources that could be used by the network operators to buy more expensive CHP electricity. The measure allowed but did not oblige the network operators to levy a surcharge on consumers to offset their extra costs. The judgment of the General Court was reviewed here on 13 February 2024:
https://www.lexxion.eu/stateaidpost/state-resources-control-and-imputability/
Was the surcharge compulsory?
The Commission argued that the General Court erred in law in holding that the financial burden of the CHP support measures that was borne by the distribution network operators did not constitute a compulsory levy or surcharge.
The CJEU recalled that “(51) a measure may be classified as an intervention by the State or as aid granted ‘through State resources’ if, first, the measure is granted directly or indirectly through those resources and, second, the measure is imputable to a Member State”.
“(52) As regards, more specifically, the condition that the advantage be granted ‘through State resources’, the Court has, in its case-law, identified two criteria for establishing that the funds by means of which a tariff advantage is granted under national legislation constitute ‘State resources’ within the meaning of Article 107(1) TFEU”.
“(53) Thus, in the first place, funds financed by a charge or other compulsory surcharges under national legislation and managed and apportioned in accordance with that legislation constitute ‘State resources’ within the meaning of Article 107(1) TFEU … In that regard, the fact that the financial burden of such a surcharge is borne in practice by a defined category of persons is not sufficient to establish that the funds resulting from that surcharge are in the nature of ‘State resources’ within the meaning of Article 107(1) TFEU. It is also necessary for that surcharge to be compulsory under national law”.
“(54) In the second place, the fact that sums constantly remain under public control, and therefore available to the competent national authorities, is sufficient for them to be categorised as ‘State resources’ within the meaning of that provision”.
“(55) The criteria referred to in paragraphs 53 and 54 of the present judgment constitute alternative criteria for establishing that a measure is granted ‘through State resources’ within the meaning of Article 107(1) TFEU”.
“(56) It follows that the nature of the resources as State resources, for the purposes of Article 107(1) TFEU, may be established by means of two alternative criteria, one relating to the existence of a compulsory charge on end consumers or customers and the other to public control over the administration of the scheme and, in particular, over funds or the administrators of those funds”.
Then the CJEU observed that “(57) in the decision at issue, the Commission merely applied the first of those two criteria.” In addition, “(59) the Commission also submits that the existence of a compulsory surcharge is decisive for the purposes of identifying ‘State resources’, within the meaning of Article 107(1) TFEU”.
However, the CJEU noted that “(60) in order for funds to be regarded as ‘State resources’ within the meaning of Article 107(1) TFEU, those funds must derive, in particular, from charges or from other compulsory surcharges under national legislation.”
“(61) Applying that principle to the present case, the General Court held, …, that the Commission had been wrong to conclude that the obligation on the network operators to pay … support to the beneficiaries of the CHP support measures was sufficient to establish the existence of a levy or of another compulsory surcharge such as to establish the commitment of State resources. The General Court stated that that circumstance makes it possible only to establish the allocation of funds in accordance with the law, but gives no indication of the origin of the funds used by the network operators in order to comply with their obligations. In order to support that finding, the General Court referred, …, to the criterion of the passing on, to a third party, of the financial burden arising from the allocation of the funds so as to identify the origin of the funds concerned and, consequently, the possible commitment of State resources.”
Then the CJEU recalled that “(62) it is not sufficient, in order to establish the commitment of State resources, that the network operators pass on in the electricity sale price to their end customers the additional costs caused by their obligation to purchase electricity generated from renewable energy sources at the statutory rates, where that offsetting is the result only of a practice and not of a legal obligation”. At this point the CJEU cited cases Germany v Commission, C-405/16 P, and DOBELES HES, C-702/20 and C-17/21.
“(63) Moreover, the existence of a compulsory charge borne by the end consumers of electricity at the ‘second level’ of the electricity supply chain which provides the funds used to grant support at the ‘first level’ of that chain has, …, been consistently taken into consideration in the case-law”. At this point the CJEU cites a long list of judgments.
The CJEU went on to clarify that “(64) it is necessary, in order to be able to classify the support granted to the beneficiary as State aid, that that support is borne by the State budget, which presupposes the existence of a sufficiently direct link between, on the one hand, that support and, on the other hand, a reduction of that budget, or a sufficiently concrete economic risk of burdens on it. From that perspective, the Court has also held that, in the case of entities separate from the public authority that are subject to an obligation to purchase electricity, the decisive factor, in that regard, lies in the fact that such entities are appointed by the State to manage a State resource, and not that they are merely bound by an obligation to purchase by means of their own financial resources”.
“(65) It follows that, in the absence of any compulsory passing on, to end customers, of the financial burden corresponding to an additional charge payable by the network operators on the sale price of electricity, it cannot be found that the funds financing that additional charge come from a levy or from another compulsory surcharge and that they therefore constitute State resources within the meaning of Article 107(1) TFEU.”
“(66) In the present case, it follows from the findings made by the General Court …, that the distribution network operators, while being required to pay … support to the beneficiaries of the measures at issue, are indeed entitled to pass on the financial burden resulting from that support, corresponding to the … surcharge, to their end customers, but are not legally obliged to do so. In those circumstances, the General Court did not err in law in finding that the Commission had not demonstrated that the CHP support measures involved the commitment of State resources within the meaning of Article 107(1) TFEU.”
On the basis of the above reasoning, the CJEU concluded that the Commission’s argument was unfounded.
Is it sufficient that a surcharge is compulsory?
Next, the CJEU considered the argument of the Commission that the General Court was wrong to hold that, in order for funds to constitute state resources, they had to be financed by a levy or other compulsory surcharges under national legislation and also be managed and apportioned in accordance with that legislation.
The response of the CJEU was that “(69) the criterion of the management and apportionment of the funds concerned in accordance with national legislation is in addition to the criterion that those funds must originate from a levy or from other compulsory surcharges. … That criterion was, …, established as an autonomous criterion for the characterisation of the commitment of State resources, in addition to the criterion of the origin of the funds concerned”.
“(70) The General Court did not err in law when it considered that the funds financing the measures at issue did not constitute a compulsory surcharge.” “(71) Consequently, even if the General Court had erred in law in its interpretation of the criterion that the funds financed by a compulsory surcharge must be managed and apportioned in accordance with national legislation, such an error would have no effect on the validity of the finding that there was no such surcharge in the present case.”
The relevance of the landmark judgment in PreussenElektra
First, the CJEU recalled that in “(80) PreussenElektra (C-379/98, EU:C:2001:160), the Court held that the obligation imposed on private electricity supply undertakings to purchase electricity produced from renewable energy sources at fixed minimum prices did not involve any direct or indirect transfer of State resources to undertakings producing that type of electricity. … in the absence of such a transfer of State resources, the fact that the purchase obligation is imposed by law and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of State aid within the meaning of Article 107(1) TFEU.”
“(81) Contrary to what the Commission claims, the General Court was fully entitled to hold, …, that the Court of Justice has not considered that only a price regulation imposed by the legislation of a Member State cannot be classified as State aid. In fact, the Court of Justice merely stated that the imposition, on private electricity supply undertakings, of the obligation to purchase electricity produced from renewable energy sources at fixed minimum prices does not constitute State aid where that obligation does not entail any direct or indirect transfer of State resources to undertakings producing that type of electricity.”
The CJEU clarified that in the case of PreussenElektra “(81) the payment resulting from the difference between the market price and the minimum price imposed by law was not financed by State resources, but was covered by the financial resources of the electricity supply undertakings in question, that burden being spread only between those undertakings and the upstream private electricity network operators.”
“(84) It follows that the General Court also did not err in law in finding, …, that, in order to rule out the application of the case-law resulting from the judgment of 13 March 2001, PreussenElektra (C-379/98, EU:C:2001:160), the Commission was required to establish, irrespective of whether or not the CHP support measures constituted a measure of ‘mere price regulation’, that the advantage for the beneficiaries of those measures was not granted by the network operators, which are private entities, through their own financial resources. Nor did the General Court err in concluding, …, that, since the Commission had failed to establish that one of the alternative criteria referred to in paragraphs 53 and 54 of the present judgment was satisfied, the network operators use their own financial resources to grant the sums … to the beneficiaries of the CHP support measures”.
Then the CJEU made an important statement.
“(86) In so far as the Commission considers that that interpretation would amount to allowing a Member State which introduces payment obligations on private economic operators to promote any industrial sector or any particular undertaking, it is sufficient to recall that, according to settled case-law, only advantages granted directly or indirectly through State resources are to be considered State aid within the meaning of Article 107(1) TFEU. The distinction made in that provision between ‘aid granted by a Member State’ and aid granted ‘through State resources’ does not signify that all advantages granted by a State, whether financed through State resources or not, constitute aid, but is intended merely to bring within that definition both advantages which are granted directly by the State and those granted by a public or private body designated or established by the State with a view to managing the aid”.
Therefore, the CJEU concluded that the appeal had to be dismissed in its entirety.
[1] The full text of the judgment can be accessed at:
https://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:62024CJ0242
