Opinion of the Advocate General — ECLI:EU:C:2011:511
Date: 2011-07-21
Language of the case: Italian
Subject matter: Energy;Right of establishment;Free movement of capital;Approximation of laws;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary 43. To summarise, the new Italian legislation entails a twofold State intervention in respect of all electricity generating capacity which is categorised as essential. 44. First of all, the producer is not allowed free access to the day-ahead and infra-day markets, with the result that it is not paid for the electricity concerned at the price which might have been bid and obtained on those markets (19) but rather at the average market price for the same area (which appears to be an average of the different prices of electricity throughout the day). 45. Secondly, owners of essential installations are required to participate in the dispatching services market, in which there is also a certain degree of intervention: the free operation of that market would have led to the development of a free price for the electricity needed to provide technical dispatching services, as occurs in other countries. That price would normally be higher than the average price which Terna currently pays, in view of the characteristics of those services and the time when they are usually required (logically, the calculation of the average price includes higher prices and lower prices). 46. Lastly, the amendment as a whole accords a fundamental role in the operation of the system of essential installations to Terna, which plays an important part in drawing up the list of essential installations and in setting the price which is paid for the electricity concerned. C – Preliminary remarks on the question referred for a preliminary ruling 47. The referring court asks the Court of Justice whether, in the light of the characteristics of the rules in force in Italy governing essential installations, those rules are compatible with Articles 23, 43, 49 and 56 EC and with two specific provisions of Directive 2003/54: Article 11(2) and (6) and Article 24. That question calls for a number of preliminary remarks on my part. 48. First of all, the reference to the Treaty requires clarification. To my mind, Article 56 EC (Article 63 TFEU), concerning restrictions on the free movement of capital, has absolutely no relevance to this case. The question referred does not explain how that provision of the Treaty may be relevant to the analysis of the contested measure. 49. However, in principle, there is no reason why it is not relevant to examine the Italian legislation from the point of view of Articles 23 EC (Article 28 TFEU), 43 EC (Article 49 TFEU) and 49 EC (Article 56 TFEU), which prohibit, respectively, all restrictions on the free movement of goods, freedom of establishment and freedom to provide services. 50. In accordance with recital 4 to Directive 2003/54, ‘[t]he freedoms which the Treaty guarantees European citizens – free movement of goods, freedom to provide services and freedom of establishment – are only possible in a fully open market, which enables all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers.’ Those freedoms laid down in the Treaty are not absolute; they may be restricted in some circumstances on public interest grounds, provided that certain conditions are satisfied. Articles 3(2) and 11(6) of Directive 2003/54 make provision for certain derogations from the freedoms, codifying and harmonising the specifically applicable conditions in order to ensure their lawfulness at Community level, in conformity with the provisions of the Treaty, to which specific reference is made in some cases. 51. In view of the foregoing, and in accordance with settled case-law, (20) I believe that the contested measure must be examined principally in the light of the provisions of Directive 2003/54, which must, if necessary, be interpreted in the light of the freedom of establishment and the freedom to provide services, as enshrined in the Treaty. As I pointed out above, the reference for a preliminary ruling refers only to two articles of Directive 2003/54: Article 11(2) and (6) and Article 24. 52. As regards Article 24 of Directive 2003/54, it should be noted at the outset that this refers to ‘safeguard measures’ which Member States may temporarily take ‘[i]n the event of a sudden crisis in the energy market and where the physical safety or security of persons, apparatus or installations or system integrity is threatened’. The referring court expressly discounts the possibility of including the rules governing essential installations in that category of safeguard measures because, in its opinion, those rules are of ‘indefinite duration’. To my mind, regardless of whether the contested measure is permanent or temporary, at no point was it adopted in response to the extraordinary circumstances which Article 24 so specifically requires. Accordingly, there is no doubt in my view that Article 24 is not applicable to this case. That means – to my way of thinking and regardless of the statements made below – that the examination of the rules governing essential installations must focus only on the differences between those rules and Article 11 of Directive 2003/54. 53. Lastly, on another note, it should be observed that the referring court describes the contested measure in unambiguous terms. In particular, the referring court states categorically that the rules governing essential installations are permanent and that remuneration for bids under those rules is linked to ‘criteria that have not been predetermined according to transparent, non-discriminatory and market-based procedures’, thereby directly precluding any possibility of applying Article 11, which specifically lays down those requirements for its application. Furthermore, it precludes the application of Article 3(2), which also provides that the procedure for imposing public service obligations must be transparent and non-discriminatory, in addition to requiring (implicitly) that the measure in question be temporary. (21) 54. Accordingly, strict acceptance of every premiss in the question would necessarily lead to the reply that a measure of the kind described therein is contrary to the wording of Article 11(2) and (6) of the directive. It is clear, however, that this way of presenting the situation is a circular argument. What is required is a determination of whether the Italian rules do in fact have the characteristics which the referring court attributes to them, subject always to the jurisdiction of that court to interpret the scope and meaning of what is, in short, a national measure. Only then will it be necessary to analyse those characteristics in the light of Directive 2003/54. D – The rules governing essential installations in the light of Directive 2003/54 1. The possibility of price intervention on the dispatching services market 55. Enel maintains – as does the Tribunale Administrativo Regionale per la Lombardia – that Article 11 of Directive 2003/54 extends liberalisation of the electricity market to all production activities, including the purchase and sale of electricity in the context of dispatching services, by imposing on that sector the criterion of the economic precedence of electricity (Article 11(2)) and the use of market-based procedures (Article 11(6)). As a consequence, in the opinion of Enel and the Tribunale Administrativo Regionale per la Lombardia, Article 11 of Directive 2003/54 precludes any measure which makes the relationship between electricity producers and the transmission system operator subject to rules other than those governing freedom of contract in the market. 56. In my opinion, that interpretation of Directive 2003/54 is not entirely correct. 57. The activity of dispatching generating installations satisfies a clear public interest (guaranteeing the security of the network and, in general, of the provision of electricity) and has a number of characteristics which mean that it may be categorised as a regulated activity: under Article 11 of Directive 2003/54, dispatching may be entrusted exclusively to the system operator (and usually is, because there is only one) and is governed by rules of conduct adopted by the public authorities (in the case of Italy, the ‘operational procedures’ are laid down in the system code, (22) which is drawn up by Terna and checked by the AEEG and the Italian Ministry of Productive Activities). (23) 58. Article 11 of the directive begins by providing that the ‘dispatching of generating installations’ carried out by the system operator is to be subject to the market rules. Dispatching must take into account ‘the economic precedence of electricity’ (Article 11(2)), which – as I explained earlier – is another way of saying that the order of the programme resulting from the market must be followed, by selecting the most economically advantageous bid first. 59. In this case, the application of the market rules is subject to a number of restrictions, including the need to take into consideration, in addition to the strictly economic criterion, ‘the technical constraints on the system’ (Article 11(2)). Those technical constraints and the technical security of the system explain why liberalisation cannot simply be extended outright to the procurement of electricity intended to ‘cover energy losses and reserve capacity’ (Article 11(6)) or to the balancing of the electricity system (Article 11(7)). 60. Recital 17 to Directive 2003/54 reflects the view that dispatching and balancing services may remain outside the free development of the market, provided that certain precautions are taken. According to recital 17, ‘[i]n order to ensure effective market access for all market players, including new entrants, non‑discriminatory and cost‑reflective balancing mechanisms are necessary. As soon as the electricity market is sufficiently liquid, this should be achieved through the setting up of transparent market-based mechanisms for the supply and purchase of electricity needed in the framework of balancing requirements. In the absence of such a liquid market, national regulatory authorities should play an active role to ensure that balancing tariffs are non‑discriminatory and cost‑reflective. At the same time, appropriate incentives should be provided to balance in-put and off-take of electricity and not to endanger the system.’ In my opinion, that recital is linked to Article 11 of the directive and, accordingly, the expression ‘balancing tariffs’ must be construed as a reference to the amount paid to producers to compensate or pay them for the services which they provide in order to ensure dispatching and balancing of the system and not, as Enel suggests, to the uplift paid by final consumers. 61. The wording of recital 17 could imply that the derogation from liberalisation is temporary; that it is dependent on the market lacking sufficient liquidity; and that, once that situation has been resolved, dispatching must be fully governed by market forces. Even if that were the case, it should be borne in mind that, despite the fact that the Italian electricity market as a whole appears to be highly liquid, the dispatching services market appears to have a low level of liquidity. (24) In addition, since the list of essential installations is reviewed and redrafted annually and since the measure was presented as a provision to combat a crisis situation, where there is particular concentration in the market, it could be argued that the measure is merely temporary. 62. Be that as it may, I doubt that it was the wish of the Community legislature to prohibit all forms of State intervention in relation to technical dispatching services, even in the case of a sufficiently liquid market. Article 11(6) of Directive 2003/54 provides that transmission system operators must procure the energy they use to cover energy losses and reserve capacity ‘according to transparent, non-discriminatory and market-based procedures’. Unlike the task of dispatching electricity producers – of ‘coordinating’ the supply of and demand for electricity – which, in accordance with Article 11(2) of Directive 2003/54, must follow the order of ‘economic precedence’ set by the market, Article 11(6) of the directive, concerning the procurement of electricity required for the provision of technical dispatching services, does not refer to the strict criterion of ‘economic precedence’; (25) instead, Article 11(6) simply requires, in addition to transparency and non-discrimination, that the procedure for the purchase of electricity takes into account, to a certain extent, the economic criteria by which the market is governed. In my view, the expression ‘market-based’ permits greater intervention. 63. Based on that relative derogation from the principle of the free operation of the market, recital 17 affords Member States greater latitude when it comes to dispatching electricity in a market lacking liquidity: in that situation, it is sufficient to ensure that the price of electricity is ‘cost-reflective’. 64. It is likely, as Enel claims, that the provision of dispatching services is more expensive for producers than the production of the electricity which is sold on the day-ahead market, the average price of which is taken as the reference price for the remuneration of producers; it is also likely that the product with which the dispatching services market is concerned differs from the product which is bought and sold on the day-ahead and infra-day markets (the product sold on the dispatching services market is a certain ‘availability’ or production capacity). Despite that, I believe that the Italian legislation, which fixes the price of the electricity procured by Terna on the dispatching services market by reference to the price of electricity on the day-ahead market – thereby ensuring that variable costs are covered in any event – satisfies the requirement that the criteria for such payment must be market-based. The cost recovery mechanism and the alternative contractual method laid down in Article 65bis of Decision No 111/06 also contribute to making the measure more proportionate, by increasing the connection between the payment and the total cost of electricity. 65. In addition, regardless of what I will state below, the rules governing essential installations may also satisfy the requirements of transparency and non-discrimination laid down in Article 11(6). On the one hand, the contested measure is not vitiated by the discriminatory character which Enel attributes to it: since the measure is aimed at maintaining the security of the system, it is logical that its scope extends only to undertakings and installations which are liable to endanger that system through their activities on the market. On the other hand, in principle, the system put in place by the Italian authorities is also consistent with the requirement of transparency because the list of essential installations is reviewed and redrafted annually – a process in which producers liable to be affected are allowed some participation (Article 63(4) and (5) of Decision No 111/06) – is published and may be challenged in court. 66. By way of conclusion to the foregoing considerations, I believe that Article 11(6) of Directive 2003/54, as such, provides in principle for a system of price intervention in the dispatching services market. 67. The correct interpretation of that article might be distorted if it is established that the subject-matter and aim of the rules governing essential installations stray outside the scope of dispatching services to pursue objectives that are very different in scope. Accordingly, the compatibility with Article 11(6) of the rules on essential installations is subject to that warning, in the terms set out in the next section. 2. The new rules governing essential installations may exceed the scope of dispatching services in a technical sense 68. I shall begin by pointing out that the Italian Government has repeatedly described the rules on essential installations as a measure which is strictly necessary for the operation of technical dispatching services in the electricity system and which was therefore adopted pursuant to Article 11 of Directive 2003/54. 69. However, as has been stated, since 2009, the volume of electricity subject to intervention by Terna – in principle, for the purposes of dispatching – have undergone a sharp and striking increase, which has not been satisfactorily explained. Thus, as stated above, before the amendment in question, dispatching services in the strict sense were provided using a generating capacity of 500 MW from all generating undertakings; since the amendment, more than 10 000 MW have come to be categorised as essential in relation to Enel alone. Although, in the past, there were specific, localised problems relating to the security and balancing of the system, (26) it is difficult to imagine what kind of technical problems related to dispatching services might have required such an increase in the volume of electricity regarded as essential. In any event, neither Terna nor the Italian Government has provided a coherent explanation for that change. 70. Moreover, that situation must be linked to the fact that Law No 2/09 expressly indicates, as the raison d’être for all the new legislation, that the objective is to control generally the final prices of electricity. 71. Based on those two facts, it is reasonable to ask whether, through that mechanism, the Italian amendment is designed to achieve, indirectly, a measure of general control of the prices which final consumers pay for electricity. If that were so, the amendment would have made it possible for the concept of ‘essential installations’ to cover a number of installations which clearly exceed the requirements of dispatching services, notwithstanding the fact that they might be essential from an economic point of view because the paramount position in the market of the owners of such installations enables them to control electricity prices, including the prices paid for dispatching services. (27) The inevitable consequence of this is that it may be left to the system operator to determine, in genuinely open conditions, the volume of electricity to be subject to intervention. 72. At this juncture, it should be borne in mind that, in all likelihood as a result of the matters set out above, the Commission, Terna and the Italian Government extended the scope of the proceedings to include Article 3(2) of Directive 2003/54, arguing that the contested measure may be covered by that provision. 73. Under Article 3(2) of Directive 2003/54, Member States may impose on electricity undertakings public service obligations ‘in the general economic interest’, provided that those obligations are clearly defined, transparent, non discriminatory, verifiable and guarantee equality of access for EU electricity companies to national consumers; such obligations must be notified to the Commission. In addition, the imposition of such obligations must be fully consistent with the relevant provisions of the Treaty, in particular with Article 106 TFEU. 74. Moreover, without prejudice to those strict conditions, Article 3(2) provides a relatively broad definition of the subject-matter of public service obligations, which may relate to ‘security, including security of supply, regularity, quality and price of supplies and environmental protection, including energy efficiency and climate protection’. Direct intervention in the price of electricity generation prices of the kind which appears to have occurred in the case under consideration could be aimed at controlling the price of electricity paid by final consumers and, directly or indirectly, at guaranteeing the security of the system, objectives which are both expressly referred to in Article 3(2) of Directive 2003/54. (28) 75. Lastly, there is no reason in principle not to conclude that the measure adopted by the Italian Government pursues an aim in the ‘general economic interest’, as required under Article 3(2). In a market like the electricity market, where demand is extremely inflexible and, in addition, the product concerned cannot be stored, there is always the possibility that certain operators will abuse their position. Accordingly, intervention in the sale of electricity by producers which are considered to occupy a paramount position in the market might possibly constitute an essential condition for guaranteeing the security of the network and be categorised, in short, as a measure in the ‘general economic interest’. 76. The foregoing considerations may explain why the Italian Government has argued, in reliance on an important precedent, that Article 3(2) is applicable to this case: in Federutility, the Court agreed that the fixing of reference prices for the supply of natural gas could, in certain circumstances, constitute a public service obligation for the purposes of Article 3(2) of Directive 2003/55 (provision for the gas sector which is parallel to the provision of the second electricity directive at issue in these proceedings). In that connection, the Italian Government submits that, if such intervention is lawful in a market like the energy supply market (gas in Federutility, electricity in the instant case), which is fully open to competition, then a fortiori it should be lawful in relation to dispatching, which is a public interest activity. 77. Nevertheless, for the reasons I shall set out, it is my view that the system laid down in the contested national provisions cannot become a general mechanism for the regulation of electricity prices. 78. First and foremost, the judgment in Federutility is not applicable outright to the case under consideration. In Federutility, ‘reference prices’ for the supply of natural gas were set directly by the national regulatory authority (29) – the AEEG – which, at all times, declared that the measure was designed to reduce the prices of supply. In the present case, however, it is Terna – the company which performs the role of system operator – which directly adopts intervention measures concerning energy prices, in accordance with a provision of national law which allows it to take action with regard to dispatching services. 79. It is that ‘additional function’ of the contested measure which, in my opinion, cannot fall within the scope of Article 3(2) of Directive 2003/54. 80. As I have stated, Directive 2003/54 provides for the system operator to intervene directly (in the sense of intervening to restrict the market) only in the specific sector of dispatching services (Article 11). Accordingly, granting the operator other types of regulatory responsibilities and powers to intervene in the electricity market which exceed that remit distorts prima facie the functions of dispatching and balancing, which, to that extent, subverts the internal order of the directive. It is clear that, owing to the configuration of its role, a dispatching services operator is not normally in a position to determine the degree of general intervention in the price of supply with the independence and impartiality that the situation requires, regardless of whether its decisions may be challenged in court. 81. More specifically, it is my view that such conduct leads to a high level of confusion which is incompatible with the requirement of transparency laid down in Article 3(2) of the directive and, ultimately, with the principle of legal certainty. 82. In that connection, I believe that the wording of Article 3(2) is such that it lays down a twofold requirement of transparency in relation to public service obligations. First, by providing that public service obligations must be ‘clearly defined’, it refers to transparency in the traditional procedural sense. From that perspective, as I indicated above, there can be no objection to the Italian system. However, Article 3(2) goes on to state that public service obligations must be ‘transparent’, a term which may be linked to the requirement of legal certainty. In short, in addition to being clear and accessible, public service obligations must also be defined and laid down in such a way that they do not confuse or mislead. In that connection, the contested measure could present difficulties in terms of transparency if it is shown that, although formally adopted on the basis of Article 11 of Directive 2003/54 (and, in short, on the basis that it is essential to the provision of dispatching services), in practice, it is intended to operate as though the national legislature had relied on the specific possibilities provided for under Article 3(2) of Directive 2003/54. 83. Clearly, it is for the national court to assess in each case what proportion of the total generating capacity is effectively categorised as essential on technical grounds of network security. Where appropriate, it will be for the national court to analyse whether the rules governing essential installations are being used to further an aim which is clearly inconsistent with the aim apparent from their configuration, basing that analysis on matters such as information relating to the volume of electricity actually used for the provision of those services in the past. 84. In the light of all the foregoing considerations, I believe that Article 11(6) of Directive 2003/54 does not preclude rules governing essential installations, such as the rules which form the subject-matter of the present reference for a preliminary-ruling, it being for the national court, where appropriate, to determine whether that provision has been applied in a way which is inconsistent with its aim and, in particular, whether it has been applied in pursuit of an objective which clearly goes beyond the requirements of the proper management of dispatching and balancing services. VI – Conclusion 85. In conclusion, I propose that the Court reply as follows to the question referred for a preliminary ruling by the Tribunale amministrativo regionale per la Lombardia: ‘Articles 49 and 56 TFEU and Article 11(2) and (6) of Directive 2003/54/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC do not preclude national legislation which requires certain electricity producers which, in certain circumstances, are essential for meeting the demand for dispatching services to submit bids on the energy exchange markets, in accordance with programmes determined by the network operator on the basis of external rules, and which prevents producers from freely determining the remuneration for such bids, provided that the following conditions are satisfied: 1. The remuneration for the electricity which is categorised as essential is linked to criteria which have been predetermined in accordance with transparent, non-discriminatory and market-based procedures. National legislation which fixes the price of electricity procured by the system operator for the provision of dispatching services by reference to the average price of electricity on the day-ahead market, ensuring that variable costs are covered in all cases, satisfies the requirement that payment be market-based. 2. Those compulsory rules must, in any event, refer to the electricity which is essential to the provision of technical dispatching services (covering energy losses and reserving capacity). Where appropriate, it will be for the national court to determine whether, or to what extent, the electricity generating capacity may effectively be categorised as essential on those grounds.’ 1 – Original language: Spanish. 2 – OJ 2003 L 176, p. 37. 3 – Case C‑265/08 [2010] ECR I-0000. 4 – Federutility concerns Article 3(2) of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas and repealing Directive 98/30/EC (OJ 2003 L 176, p. 57), the wording of which is very similar to that of Article 3(2) of Directive 2003/54. 5 – ‘Appel et équilibrage’ in the French-language version; ‘dispacciamento e bilanciamento’ in the Italian-language version; ‘Inanspruchnahme und Ausgleich von Kapazitäten’ in the German-language version. 6 – The legislative rules governing the Italian electrical sector are set out in a number of measures transposing Directive 2003/54 into Italian law. This Opinion will refer directly to the decisions of the Autorità per l’energia elettrica e il gas, which are relevant to the outcome of the present proceedings, and to Law No 2/2009, which serves as the general framework for the amendment in issue. 7 – ‘Decision No 168/03’ (ordinary supplement to Gazzetta Ufficiale della Repubblica Italiana (‘GURI’) No 16 of 30 January 2004). 8 – ‘Decision No 111/06’ (ordinary supplement to GURI No 153 of 4 July 2006). 9 – In accordance with Decree-Law No 79 of 6 March 1999; ‘Terna’. 10 – ‘Law No 2/09’ (GURI No 22 of 28 January 2009). This is the Law which converted into law Decree-Law No 185 of 29 November 2008 concerning urgent measures to support families, work, employment and business, and to restructure the National Strategic Framework to combat the crisis. 11 – Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (OJ 2009 L 211, p. 55). 12 – In that connection, see Isidoro, C., L’ouverture du marché de l’électricité à la concurrence communautaire et sa mise en œuvre (Allemagne, France, Italie, Royaume-Uni), Librairie Générale de Droit et de Jurisprudence, 2006, p. 224, and Cameron, P., Competition in the energy markets, Oxford University Press, 2nd edition, 2007, p. 23. 13 – Under Article 2(16) of Directive 2003/54, ‘economic precedence’ means ‘the ranking of sources of electricity supply in accordance with economic criteria’. 14 – Article 11(4) provides for another similar case. 15 – See Carbajo, A., ‘Los mercados eléctricos y los servicios de ajuste del sistema’, Economía Industrial, No 364, 2007, and de la Cruz Ferrer, La liberalización de los servicios públicos y el sector eléctrico, Marcial Pons, 1999, p. 450. 16 – See also Article 14(5) and (6) of Directive 2003/54, which reproduce the same requirements for cases where those tasks are performed by the distribution system operator. 17 – Legislative Decree No 79 of 16 March 1999. 18 – Information set out on Terna’s website: ttp://www.terna.it/default/Home/SISTEMA_ELETTRICO/dispacciamento.aspx 19 – Which are governed by what is known as the ‘marginal price’ system; the marginal price varies throughout the day and, on a highly inflexible market like the electricity market, it increases as demand rises, so that, when demand is higher, the marginal price reaches its maximum level. 20 – See, in that connection, Case C-37/92 Vanacker and Lesage [1993] ECR I-4947, paragraph 9: ‘since the question of the collection of waste oil has been regulated in a harmonised manner at Community level by the directive, any national measure relating thereto must be assessed in the light of the provisions of the directive and not of Articles 30 to 36 of the Treaty’. See also Case C-150/88 Parfümerie fabril [1989] ECR 3891, paragraph 28; Case C-257/06 Roby Profumi [2008] ECR I-189, paragraph 14; Case C-324/99 Daimler Chrysler [2001] ECR I-9897, paragraph 32; and Case C-132/08 Lidl Magyarország [2009] ECR I-3841, paragraph 42. 21 – In that connection, see Federutility, paragraph 35. 22 – Code on transmission, dispatching, development and security of the system: http://www.tera.it/default/Home/SISTEMA_ELETTRICO/codice_rete,aspx 23 – See Pajuelo Iglesias, B., ‘La gestión técnica del sistema. El operador del sistema. Los procedimientos de operación’, Derecho de la regulación económica. III. Sector energético, Muñoz Machado, S., Dir., Iustel, 2009, pp. 447 and 463. 24 – As Enel explained, the level of liquidity of a market is measured by reference to ‘whether it is possible to execute rapidly orders to buy and sell without incurring high prices and whether it is possible to send the right signals to operators by means of transparent prices which are unlikely to undergo erratic fluctuations linked to particular transactions or manipulation’. Enel and the Commission confirmed that the Italian electricity market has those characteristics but the Italian Government and Terna stated that liquidity does not extend to the dispatching services market. When Enel was questioned at the hearing about that assertion (which is, moreover, the very reason for the rules governing essential installations), it did not dispute it outright. 25 – Nor is it referred to in Article 11(7) on balancing of the system. 26 – As stated at the hearing. 27 – That is the view of the referring court, which expressly states in the order for reference that ‘essential installations include not only those which are “technically and structurally” indispensable for the purpose of resolving network congestion or maintaining adequate levels of safety for the system, but also those which form part of groups of essential installations; those groups are defined as a set of installations which make certain producers crucial if the energy demand from the network operator is to be met, with the price of that energy being determined in the absence of effective competition.’ 28 – In that connection, it is straightforward enough to conclude that the fact that intervention occurs at the electricity generation stage may be irrelevant. In my opinion, the arguments put forward on this point by Enel and the referring court appear to be based on a degree of confusion between the concepts of ‘public service obligations’ and ‘universal service’, which, however, are clearly distinguished, one from the other, in Article 3 of Directive 2003/54. Further, the lawfulness of the contested measure cannot be called into question on the ground that it was not notified to the Commission because, although Article 3(9) of Directive 2003/54 requires Member States to notify measures adopted under that provision, it is a formality which, in the event of non-compliance, may form the basis for an action for failure to fulfil obligations but does not affect the lawfulness of the national measure at issue (in contrast, for example, to the measures referred to in Article 24 of the directive, since in that case the Commission – through mandatory notification – has a degree of control over the subject-matter of a national measure). 29 – For the purposes of Article 23(1) of Directive 2003/54.