Opinion of Mr Advocate General Mischo delivered on 17 May 1990. - Société CdF Chimie azote et fertilisants SA and Société chimique de la Grande Paroisse SA v Commission of the European Communities. - State aid - Dutch tariff system for the supply of natural gas. - Case C-169/84.



European Court reports 1990 Page I-03083



Opinion of the Advocate-General

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Mr President,

Members of the Court,

1 . The action brought by Société CdF chimie azote et fertilisants SA and by Société chimique de la Grande Paroisse, azote et produits chimiques SA seeks the annulment of the Commission decision of 17 April 1984 terminating the procedure which it had initiated against the Netherlands Government in October 1983 under Article 93(2 ) of the EEC Treaty following a complaint by the ( French ) Syndicat professional de l' industrie des engrais azotés ( Trade Association of producers of nitrate fertilizers, hereinafter referred to as "the Syndicat "), of which the applicants are members . The applicants learned of the Commission decision from a letter sent by the Commission to the Syndicat on 24 April 1984 . The application was declared admissible by the Court' s interlocutory judgment of 28 January 1986 ( [1986] ECR 391 ).

2 . The aid conditions initially objected to in that proceeding constituted, according to the Commission, a system whereby the Netherlands Government, through Gasunie, in which the Netherlands has, either directly or indirectly, a 50% holding, granted special rebates to the Netherlands producers of ammonia by means of a two-tier tariff structure which had the effect of reducing the cost of natural gas used as a raw material by those producers . Considering that that structure constituted a State aid within the meaning of Article 92(1 ) of the EEC Treaty and that none of the derogations envisaged in Article 92(3 ) was applicable to it, the Commission addressed a reasoned opinion to the Netherlands Government on 13 March 1984 .

3 . On 14 April 1984, the Netherlands Government informed the Commission that Gasunie had abolished the contested tariff with effect from 1 November 1983 and had added to its tariff structure a new tariff ( known as "tariff F ") for very large-scale industrial users established in the Netherlands and not belonging to the energy industry .

4 . That tariff was available to any user which fulfilled the following conditions :

( a ) it consumed at least 600 million m3 of gas per year;

( b ) it operated for at least 90% of the time ( a "load factor" of at least 90% - in other words, great regularity of consumption was assured );

( c ) it agreed to total or partial interruption of supplies at the discretion of Gasunie;

( d ) it agreed to the supply of gas of varying calorific values .

5 . Tariff F is invoiced at the rate corresponding to the tariff known as "tariff E", which is applied to users whose annual consumption is between 50 million and 600 million m3, less 5 cents/m3 . However, it emerged in the course of the proceedings that at some point the consumption level required to qualify for tariff F was reduced to 500 million m3 .

6 . By letter of 24 April 1984, the Commission informed the applicants that :

"After a detailed examination of the technical elements of the new tariff, the Commission has come to the conclusion that that tariff, which forms part of the general tariff structure for users in the Netherlands and is not discriminatory as between industries, contains no element of State aid ."

7 . With respect to the latter point, the letter states as follows :

"Considerable supply savings accrue to Gasunie from the high load factor and the supply conditions accepted by very large industrial users . The present tariff F price level does not cover the total value of the supply savings which Gasunie obtains from such contracts;

the new tariff is justified from the economic and commercial points of view when compared with the prices invoiced to other large consumers;

the price difference of 5 cents/m3 between tariffs E and F is consistent with the difference in the cost of the service provided ".

8 . On the basis of all those considerations, the Commission came to the conclusion

"that the tariffs now applicable contain no element of State aid, are consistent with the Community policy on energy tariffs and are therefore compatible with the common market ".

9 . It is against that decision that the applicants brought their action . They claim that :

"the conclusion set out by the Commission in its letter of 24 April 1984 ... is based on an incorrect appraisal of the relevant facts;

tariff F constitutes a State aid which favours Netherlands ammonia producers by virtue of the difference between the price reduction, as compared with tariff E, which is objectively justified, namely 1.60 cents/m3,and the price reduction which the Commission wrongly considers justified, namely 5 cents/m3, the State aid in question thus being 3.4 cents/m3;

the Commission decision, based on the said incorrect appraisal, which treats tariff F as compatible with the common market, in so far as it involves no State aid, constitutes an infringement of Articles 92 and 93(2 ) of the EEC Treaty ".

10 . I think it is important at the outset to clarify the scope of the present action . It is apparent from the terms of Article 92 that an aid is incompatible with the common market, within the meaning of that article, only if the five conditions laid down in that provision are satisfied . It must be an aid granted by a Member State or through State resources in any form whatsoever . It must affect trade between Member States, distort or threaten to distort competition and favour certain undertakings or the production of certain goods . Moreover, it must qualify for a derogation under Article 92(3 ).

11 . Accordingly, even if the complaints made by the applicants against the Commission decision were well founded, in other words if an aid is in fact being given, that aid would not ipso facto be "incompatible with the common market ". The Commission would in fact then have to consider whether the other conditions laid down by Article 92 are fulfilled and whether the aid might qualify for a derogation under Article 92(3 ). The Treaty does not grant individuals the right to obtain directly a finding by the Court that an aid "granted by a Member State or through State resources in any form whatsoever" is an aid incompatible with the common market . Only the Commission can make such a finding .

12 . That does not mean that, if the Court should consider it appropriate to find that the Commission decision to the effect that the contested tariff contains no element of State aid was vitiated by a manifest error, the Court would necessarily consider it necessary to declare that the Commission had committed an error of appraisal in the application of Article 92 and therefore an infringement of that provision .

13 . Having made that preliminary observation, I should now like to examine the arguments put forward by the applicants concerning the various elements of the Commission' s decision .

I - 14 . They allege in the first place that the tariff cannot be regarded as forming part of the general tariff structure for users in the Netherlands since there are two significant differences between that tariff and the remainder of Gasunie' s tariff system .

15 . It is true that, unlike tariffs A to E, in which successive charge bands are applied, tariff F applies as soon as the first cubic metre is consumed .

16 . The applicants also state that the threshold for the applicability of tariff F is regarded as being reached when a customer' s total consumption - that is to say, of all its plants - exceeds 500 million tonnes per year, whereas the other tariffs are applied not to each customer but to each factory so that, by contrast with the case of tariff F, the undertakings concerned are not allowed to group several installations together in order to ensure attainment of the threshold above which a more favourable tariff applies .

17 . It must, however, be noted that Gasunie informed the experts instructed by the Court that, contrary to the applicants' allegation, tariff F is applicable to each individual factory .

18 . As regards the first difference, it is beyond dispute that it is capable of having a significant economic effect on Gasunie' s customers . However, it is not contested that tariff F, like the other tariffs, is known to all the potential beneficiaries of it and is identified by certain conditions of availability which likewise are not confidential, unlike the tariff system to which the first complaint related, which was based on contracts concluded directly between Gasunie and the Netherlands ammonia producers . Like tariffs A to E, tariff F is available to all those who can establish that they fulfil the conditions for it to be applied . In my view, it can thus be regarded as forming an integral part of Gasunie' s general tariff structure .

II - 19 . Secondly, the applicants maintain that the Commission committed a manifest error by taking the view that tariff F eliminated the sectoral specificity of the old tariff . It will be remembered that Article 92 applies only to aids which favour "certain undertakings or the production of certain goods ".

20 . According to the applicants, the conditions for the application of tariff F were chosen deliberately so that only Netherlands ammonia producers could fulfil them . In particular, the conditions relating to load factor and minimum annual consumption had the effect, they claim, of allowing only Netherlands ammonia producers to obtain the benefit of tariff F .

21 . However, it is apparent from the experts' report prepared by direction of the Court that at least one tariff F user does not belong to the ammonia industry .

22 . Is that sufficient to justify the view that the benefit in question is not an aid which favours "certain undertakings or the production of certain goods"?

23 . It is true that the industry producing ammonia which, under the old system, benefited specifically and expressly from preferential tariff conditions continues, as a whole, to enjoy the rebate of 5 cents . In the experts' report prepared by direction of the Court, it is also stated that four plants producing ammonia consume less than 500 million m3 of gas per year . Those details were expressly confirmed by Gasunie ( see p . 29 of the experts' report, French language version ). However, the Court has not been informed that those plants have lost the benefit of tariff F . This gives the impression that that tariff, like its predecessor, is intended to favour the ammonia industry, even if it is also applied to a large manufacturer of another product . On p . 78 of the report prepared by the three experts, it is also stated that, in a letter to the Netherlands ammonia producer NSM, Gasunie undertook to re-examine the level of the tariff F rebate if the new price of gas was liable to undermine its competitiveness .

24 . In my view, it is apparent from the foregoing that tariff F was created above all to promote the interests of the ammonia production industry and that, in any event, it is beneficial to "certain undertakings", namely the three large-scale users of gas established in the Netherlands which do not belong to the energy sector .

III - 25 . It is now necessary to consider whether, in the contested decision, the reduction of 5 cents/m3 below tariff E granted by Gasunie is covered by the savings accruing to Gasunie from the special tariff F conditions .

26 . It will be recalled that, in the contested decision, the Commission merely states, without giving any further details, that :

"The present tariff F price level does not cover the total value of the supply savings obtained by Gasunie as a result of these contracts . The new tariff ... is justified from the economic and commercial points of view when it is compared with the prices invoiced to other large consumers . The Commission considers that the price difference of 5 cents/m3 between tariffs E and F is compatible with the difference in cost of the service provided ".

27 . Thus, the Commission does not, in the decision challenged by the applicants, specify the magnitude of the savings on supply costs which tariff F gives to Gasunie .

28 . In reply to the questions put to it by the Court, the Commission explains why, in its opinion, the difference between tariffs E and F does not cover the total value of the savings on the cost of supply that those contracts offer Gasunie . It states that the total value of the savings is of the order of 5.5 to 7 cents/m3, as detailed below :

Objective conditions Saving ( cents/m3 )

Volume consumed and regularity of offtake 3

Interruption of supply 1-2

Variation in quality of gas 1.5-2

----

Total 5.5-7

For their part, the applicants have produced an experts' report showing that the savings in question cannot exceed 1.6 cents/m3 .

29 . I consider that the Court should analyse and settle this problem by relying on the experts' report commissioned by it .

( a ) Supply savings obtainable in respect of the volume consumed and the load factor

30 . According to the three experts, the savings available to Gasunie in respect of the volume consumed and the regularity of offtake ( load factor ) falls within the following approximate range ( in cents/m3 ):

for a volume of gas supplied ( minimum 600 x 106 m3/year ): 0.07-0.242;

for regularity ( load factor ): 0.273-0.512 .

The experts add that the total savings corresponding to volume and load factor must be lower than the sum of the highest values above ( 0.754 ) by reason of the relationship between the load factor and volume ( p . 8 of the experts' report ).

31 . If, therefore, we adopt the hypothesis that the savings deriving from those two factors are probably around 0.6 cents/m3, whilst the Commission put them at 3 cents/m3, we are prompted to conclude that the Commission overestimated them by a factor of five . That can only be regarded as a manifest error in its assessment of the facts .

( b ) Supply savings obtainable in respect of clauses allowing interruption of supply

32 . The experts draw attention in the first place to the fact that the general contractual conditions concerning interruptibility are the same for tariff E customers and tariff F customers . The contract for tariff F customers, however, includes special conditions which, according to Gasunie, give it a greater right to interrupt supplies to tariff F customers . No legal assessment of the differences between the contractual conditions for tariff E and those for tariff F was made by the experts . In their view, if a real difference is established in legal terms, a value for savings could be estimated by reference to the size of the fixed average cost .

33 . On the other hand, if such a legal assessment shows no difference as regards Gasunie' s right to interrupt supplies to the two groups of customers, the special tariff F clauses obviously do not give rise to any economic advantage for Gasunie .

34 . Let us compare the general clauses and the special clauses concerning interruptibility . The general clauses provide as follows :

"In the event of the supplier intending to take measures involving an interruption or reduction of the supply of gas, the supplier shall only put such measures into effect - except in cases of breakdown - after prior consultation with the customer as to the timing and duration of the interruption or reduction . When fixing the timing and duration thereof, the supplier must as far as possible take account of the interests of customers .

If it proves necessary to reduce or interrupt gas consumption as a result of supply difficulties, the supplier shall be authorized to issue instructions in that regard and the customer shall be obliged to comply with them ".

35 . The special clause for tariff F is as follows :

"On first request by Gasunie, the customer shall be obliged to reduce or suspend, as the case may be, his offtake in accordance with Gasunie' s directions . If Gasunie should exercise this right, the customer shall not be entitled to lodge any complaint concerning unequal treatment . Gasunie shall endeavour as far as possible to give the customer at least 12 hours' advance notice of any such request for a decrease or suspension of consumption . Any suspension of offtake pursuant to this article shall be regarded as a case of force majeure for the customer ."

36 . At first sight, the general conditions are more flexible since they provide for prior consultation with the customer and, as far as possible, consideration of his interests . However, if account is also taken of the second paragraph, it is apparent that, where supply difficulties arise, tariff E users have no greater rights than tariff F users .

37 . Moreover, it is a more delicate matter for a gas supplier to cut or reduce supplies to a customer who uses gas as a raw material than to one who uses it merely for heating purposes and "it is technically easier to interrupt a heating unit than a chemical plant using gas as a raw material" ( p . 74 of the report ).

38 . It is not, therefore, surprising that the experts found no case of interruption of supply to tariff F customers, even during the severe winter of 1985 when only power-stations changed over to oil ( p . 32 ).

39 . At the hearing, the Commission quoted a passage from p . 10 of the report according to which Gasunie would be able to grant a rebate to any customer of approximately 2 cents/m3 on the total yearly volume in order to acquire the right to interrupt that customer' s supply with the object of diverting the gas to export customers during peak hours . The experts point out, however, elsewhere in their report that, in view of the characteristics of its distribution network - a matter to which I shall return - it is doubtful whether Gasunie would even need to consider interrupting supplies to a large industrial user, even at times of peak demand .

40 . From all the foregoing considerations, I draw the conclusion that the interruptibility clause contained in the tariff F conditions is not of such importance that it can justify a rebate of between 1.5 and 2 cents/m3, as indicated by the Commission . Thus, a manifest error has been made in this regard as well .

( c ) Supply savings available in respect of the substitutability clause

41 . The exports again did not make a legal assessment of the differences between the contractual conditions for tariff E users and those for tariff F users .

42 . The standard contract contains the following clause :

"If the gas-supply situation and operating conditions within Gasunie sufficiently justify such action, the supplier will be authorized to supply gas not conforming to the contractual specifications . In any such case, the parties must consult as soon as possible in order to agree on a reasonable solution which takes account of the interests of both parties ."

43 . Tariff F provides as follows :

"Moreover, Gasunie is authorized - without consulting the customer in advance - to switch to gas qualities not conforming to the specifications laid down in the gas-supply agreement . In the event that Gasunie switches to a quality of gas also supplied to other Gasunie customers in the Netherlands, that quality shall be deemed to satisfy the specifications laid down in the gas-supply agreement . Gasunie must use its best endeavours to give the customer adequate advance notice of any such changes of quality ."

44 . The standard contract thus provides for consultations with a view to agreeing on a reasonable solution which takes account of the interests of both parties . Tariff E customers thus have some room for negotiation, enabling them to influence the time and the duration of the substitution but not, it would appear, the actual principle of substitution . The tariff F contract is more laconic and provides only for advance notice .

45 . However, it is stated in the experts' report that a number of tariff E and F customers are supplied from the same delivery point and must therefore experience substitution at the same time and for the same period ( p . 17 of the report ).

46 . Above all, the experts state that tariff F customers cannot all be supplied alternatively with G gas or H gas because the connection system does not allow it . In particular, a specific plant which uses an annual volume of gas accounting for about 30% of the total offtake of F customers cannot be supplied with H gas ( report, p . 57 ).

47 . It has not been disputed in the course of the proceedings that all Netherlands ammonia producers are granted tariff F .

48 . Moreover, "there is no evidence for the Experts Group that F tariff customers have equipment or alternative fuel in order to operate as dual-fuel customers" ( report, p . 73 ).

49 . It can only be concluded, therefore, that the possibility of substitution limited to tariff F customers is very remote and, in certain cases, even non-existent . Accordingly the grant of a rebate of 1.5 to 2 cents/m3 to all such customers is not justified . On this matter as well the Commission has made a manifest error .

( d ) Total value of savings attributable to the various factors

50 . After deciding that they could not "present an economic assessment due to the interruptibility and substitutability", the experts express the view that, in the final analysis :

"It does not seem unreasonable to conclude that based on the information made available by Gasunie to the Expert Group, it has been difficult to identify total savings for Gasunie of a value above 0.5 cents/m3, especially when also looking at other factors which have not been taken into account such as :

the operating flexibility of the Groningen field ...

the extremely favourable characteristics of the Dutch gas grid, in particular the looping and the large diameter of the pipelines ( up to 48 inches ) carrying 45% of the throughput to export, with a high in-pipe storage capacity .

The above considerations lead to the conclusion that the savings on the expenses of Gasunie due to the conditions of F tariff customers as compared to E tariff customers have much lower values than price differences between these two categories of customers . ( 1 )

It can then be concluded that the rebates for F tariff customers must be caused by other considerations" ( pp . 59 and 60 ).

51 . Finally, in its contested decision, the Commission not only based its reasoning on the fact that the price difference of 5 cents/m3 between tariffs E and F did not even cover the total value of the supply savings that those contracts offered to Gasunie but also relied on the fact that :

"Tariff E and the new tariff F are indexed to the price of heavy fuel oil; the same applies to the export tariff . Changes in those tariffs are linked to the same reference price for heavy fuel oil and will therefore change in parallel . The difference between the three tariffs will therefore remain stable ." ( 1 )

However, subsequent developments belied that statement since the rebate granted to tariff F customers was lowered to 2.5 cents/m3 from 1 July 1986 to 31 December 1987 and to 0.5 cents/m3 as from 1 January 1988 . Since then, it seems to have been raised again . However, it is inconceivable that the supply savings achieved for Gasunie from tariff F should have been capable of fluctuating in that way over a range of which the maximum figure was 10 times greater than the lower figure . The rebates granted were necessarily based on other considerations .

52 . As regards the applicants' third complaint, I am therefore of the opinion that it must be concluded - as it was by the three experts - "that the savings on the expenses of Gasunie due to the conditions of F tariff customers as compared to E tariff customers have much lower values than price differences between these two categories of customers" and that the Commission committed a manifest error in considering, by contrast, that that difference did not even cover the total value of the savings in question .

Conclusion

53 . Since I consider that it is appropriate to uphold most of the complaints made by the applicants, I must propose that the Court annul the Commission decision of 17 April 1984, as set out in the letter of 24 April 1984 . It is therefore incumbent on the Commission to reopen the procedure provided for in Article 93 of the Treaty .

54 . The costs, including those of the interlocutory procedure and of the experts' report ordered by the Court, must be paid by the Commission . A problem arises, however, with regard to Compagnie française de l' azote ( Cofaz ) SA - it withdrew from the proceedings by letter received at the Court Registry on 29 December 1987, that is to say after the interlocutory judgment ( of 28 January 1986 ) and after the lodgment of the experts' report ( 23 December 1987 ). For that reason, I suggest that Cofaz be ordered to bear the costs incurred by it after the interlocutory judgment .

( *) Original language : French .

( 1 ) Emphasis added .