OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 3 June 2021 ( 1 )

Case C‑57/19 P

European Commission

v

Tempus Energy Ltd and

Tempus Energy Technology Ltd

(Appeal — State Aid — Great Britain electricity capacity market — Decision not to raise objections — Concept of serious difficulties — Standard of proof — Commission’s obligation to carry out a diligent and impartial examination of the information provided by the Member State concerned — Commission’s obligation to investigate a case of its own motion — Pre-notification contacts)

Table of contents

I. Legal framework II. Background to the proceedings III. Judgment under appeal IV. Proceedings before the Court of Justice and forms of order sought V. Analysis A. The appeal 1. Arguments of the parties 2. Assessment (a) The Commission’s request that the Court set aside the judgment under appeal in so far as it did not declare inadmissible Tempus’ allegation concerning the 2 MW de minimis participation threshold (b) Admissibility of the appeal (c) Substance (1) Preliminary observations (2) The first part of the single ground of appeal (i) Whether, in order to show that serious difficulties existed, Tempus may rely on all the relevant information that was or could have been available to the Commission on the date of adoption of the decision at issue (ii) Whether the number and origin of observations spontaneously made by third parties may be taken into account as an indication of the existence of serious difficulties (iii) Whether the length of the pre-notification phase may be taken into account as an indication of the existence of serious difficulties (iv) Whether the complexity and novelty of the measure at issue may be taken into account as an indication of the existence of serious difficulties (3) The second part of the single ground of appeal (i) Whether the Commission should have investigated the potential role of DSR operators within the capacity market (ii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the length of capacity contracts (iii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the cost recovery method adopted (iv) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the interplay between the T‑4 and the T‑1 auctions and of some conditions of participation in the capacity market B. The action before the General Court VI. Costs VII. Conclusion

1. By this appeal, the European Commission requests the Court of Justice to set aside the judgment of 15 November 2018, Tempus Energy and Tempus Energy Technology v Commission (‘the judgment under appeal’), ( 2 ) by which the General Court annulled the Commission decision not to raise objections to an aid scheme adopted by the United Kingdom to support capacity providers in the electricity market in Great Britain (‘the decision at issue’). ( 3 )

2. Because the United Kingdom estimated that around the years 2017/2018 the electricity capacity generation in Great Britain would no longer be sufficient to meet demand, it decided to establish, through the aid scheme referred to in the preceding point, a capacity market where auctions organised by the national authorities would allow procuring the level of capacity required to ensure generation adequacy. Under that scheme, successful participants in those auctions were to receive a steady payment in return for their commitment to deliver electricity at times of system stress. That payment was to be financed through a levy on electricity suppliers.

3. In the decision at issue, the Commission considered the aid scheme described above to be compatible with the internal market pursuant to Article 107(3)(c) TFEU, as it satisfied the criteria set out in the Guidelines on State aid for environmental protection and energy 2014-2020 (‘the Guidelines’) ( 4 ).

4. By the judgment under appeal, the General Court upheld the action for the annulment of the decision at issue brought by Tempus Energy Ltd and Tempus Energy Technology Ltd (together, ‘Tempus’), on the ground that the Commission could not adopt that decision on completion of a mere preliminary examination, and that it should have initiated the formal investigation procedure provided for in Article 108(2) TFEU. In the view of the General Court, a body of objective and consistent indications consisting in, first, the length and the characteristics of the pre-notification phase, and, second, the lack of appropriate investigation by the Commission with regard to certain aspects of the capacity market, demonstrated that the serious difficulties that arose from the assessment of the compatibility of the scheme with the internal market had not been overcome during the preliminary examination.

5. This case presents the Court with an opportunity to rule on the concept of ‘serious difficulties’, the existence of which on completion of a preliminary examination triggers the obligation for the Commission to initiate the second stage of the procedure for reviewing State aid, namely the formal investigation procedure.

I. Legal framework

6. Article 4 of Council Regulation (EC) No 659/1999, ( 5 ) entitled ‘Preliminary examination of the notification and decisions of the Commission’, provides: ‘… 3. Where the Commission, after a preliminary examination, finds that no doubts are raised as to the compatibility with the [internal] market of a notified measure, in so far as it falls within the scope of [Article 107(1) TFEU], it shall decide that the measure is compatible with the [internal] market (hereinafter referred to as a “decision not to raise objections”). The decision shall specify which exception under the Treaty has been applied. 4. Where the Commission, after a preliminary examination, finds that doubts are raised as to the compatibility with the [internal] market of a notified measure, it shall decide to initiate proceedings pursuant to [Article 108(2) TFEU] (hereinafter referred to as a “decision to initiate the formal investigation procedure”). ...’

II. Background to the proceedings

7. Tempus holds a licence to operate as an electricity supply business in the United Kingdom and sells electricity consumption management technology, also known as ‘demand-side response’ (‘DSR’), to individuals and professionals.

8. Tempus helps its customers to move their non-critical electricity usage to periods when wholesale prices are low, either because demand is low or because power from renewable sources is plentiful and therefore cheaper. For that purpose, like other demand-side response operators (‘DSR operators’), Tempus enters into contracts with energy customers, which are often industrial and commercial customers or small- to medium-sized enterprises, under which the customer agrees to be flexible in the consumption of their electricity at a particular time period. The DSR operator then calculates the total capacity available from all of the flexible customers at any one time and offers that capacity to the electricity network operator — National Grid (‘NG’) in the present case — in exchange for a payment, which it passes back to the flexible customer, whilst retaining a small profit margin for itself.

9. By relying on the United Kingdom Energy Act 2013 and the regulatory acts adopted on the basis of that Act, in particular the Electricity Capacity Regulations 2014 and the Capacity Market Rules 2014, the United Kingdom adopted an aid scheme to support capacity providers in the electricity market in Great Britain (‘the measure at issue’). Through that measure, the United Kingdom establishes an electricity capacity market involving centrally-managed auctions to procure the level of capacity required to ensure capacity adequacy. Capacity providers are remunerated in exchange for their commitment, otherwise penalties apply, to provide electricity or reduce or delay their electricity consumption during times of system stress.

10. The capacity market works as follows.

11. The amount of capacity required is decided centrally by the United Kingdom Government on NG’s recommendation. The decision on how much capacity to contract in each capacity auction is based on a reliability standard. A reliability standard is an objective level of security of electricity supply. The United Kingdom Government has set a reliability standard equal to a loss of load expectation of 3 hours/year, which translates as a system security level of 99.97%. The loss of load expectation is the number of hours/periods per annum in which, over the long term, it is statistically expected that supply will not meet demand.

12. Each year, the capacity to be delivered four years later is auctioned (‘the T‑4 auction’). The capacity that was auctioned in 2014, for example, was to be delivered in 2018/2019, the delivery period running from 1 October 2018 to 30 September 2019. However, another auction takes place during the year prior to the delivery year of the main auction (‘the T‑1 auction’). The T‑1 auction ensures that the right amount of capacity is procured when more accurate demand forecasts are available and is important for enabling DSR capacity to actively participate in the mechanism (as DSR operators find it difficult to participate in an auction four years ahead of delivery).

13. Some capacity is held back from the T‑4 auction and ‘reserved’ for the T‑1 auction. The amount of reserved capacity is to be based on an estimate of the ‘cost-effective’ DSR that could participate in the T‑1 auction. If demand falls between the T‑4 auction and the T‑1 auction, the amount of capacity auctioned in the T‑1 auction will be reduced. According to the decision at issue, the United Kingdom Government committed to procure in the T‑1 auctions at least 50% of the capacity ‘reserved’ four years earlier. T‑4 and T‑1 auctions form the enduring regime. In addition to that regime, there is a transitional regime (as, prior to the delivery period 2018/2019, ‘transitional’ auctions are scheduled, principally aimed at DSR operators).

14. Existing and new generators, DSR operators and storage operators are allowed to participate in the enduring auctions (with the temporary exception of interconnectors and foreign capacity providers). Generators and DSR operators participating in the capacity market are called ‘Capacity Market Units’ (‘CMUs’). They have to undergo a pre-qualification process, the purpose of which is to ensure that participants in the auction can deliver the capacity they offer. DSR CMUs are defined with reference to a commitment to reduce demand, which should result in their customers reducing the import of electricity and/or exporting electricity generated by on-site generating units.

15. Each auction is a descending-clock, pay-as-clear auction in which all successful participants are paid the last-accepted bid. A high price is announced at the beginning of the auction, and participants submit bids to indicate how much capacity they are willing to supply at that price. This process is repeated in successive rounds according to a predetermined schedule until the auction establishes the lowest price at which demand equals supply, being the clearing price. All successful participants are paid the same clearing price.

16. If successful at the auction, capacity providers are awarded a capacity agreement at the clearing price. Capacity agreements differ in terms of their length. Most existing capacity providers are to have access to one year agreements. However, capacity providers undertaking capital expenditure above 125 pounds sterling (GBP) per kilowatt (kW) (around EUR 141) — which is the case where a plant is refurbished — are eligible for capacity agreements of up to a maximum of 3 years. Capacity providers undertaking capital expenditure above GBP 250 per kW (around EUR 282) — which is the case where a new plant is built — are eligible for capacity agreements of up to a maximum of 15 years. Agreements longer than one year will only be available to participants in the T‑4 auctions.

17. Capacity payments to capacity providers equal the amount of capacity that those providers have bid, multiplied by the clearing price. The costs incurred to fund capacity payments are paid by all licensed electricity suppliers (‘the cost recovery method’) by means of a charge imposed on those suppliers (‘the suppliers’ charge’). The suppliers’ charges are determined based on their forecast market share and calculated based on demand measured between 16.00 and 19.00 on all weekdays from November to February, in order to incentivise suppliers to reduce their customers’ electricity demand at those times when demand is typically the highest. According to the decision at issue, this should reduce the amount of capacity that is needed, thereby also reducing the costs of the capacity market.

18. By the decision at issue, the Commission decided not to raise objections to the measure at issue and authorised it for a maximum period of 10 years. According to that decision, that measure constituted State aid, but it was compatible with the internal market pursuant to Article 107(3)(c) TFEU as it was consistent with the criteria set out in Section 3.9 of the Guidelines, entitled ‘Aid for generation adequacy’.

III. Judgment under appeal

19. As mentioned in point 1 above, by the judgment under appeal, the General Court annulled the decision at issue on the ground that the Commission had failed to initiate the formal investigation procedure provided for in Article 108(2) TFEU.

20. First, the General Court held that the Commission cannot restrict itself to the preliminary stage of the procedure for reviewing State aid, but is under an obligation to initiate the formal investigation procedure, where the preliminary examination does not permit all doubts as to the compatibility of the planned measure with the internal market to be eliminated. According to the General Court, Tempus bore the burden of establishing the existence of such doubts. To that end, it was not necessary that Tempus adduced sufficient evidence that the measure at issue was incompatible with the internal market. Rather, it was sufficient that it set out its reasons for considering that the Commission should have had doubts as to that measure’s compatibility. Further, in the view of the General Court, Tempus could rely not only on all relevant information that was available to the Commission on the date when it adopted the decision at issue, but also on all relevant information that could have been available to it on that date. This was because the Commission could and, where necessary, had to seek relevant information from other sources, rather than limit its analysis to the information contained in the notification.

21. Secondly, the General Court recalled that, according to case-law, the scale of the area covered by the preliminary examination and the complexity of the matter may indicate the existence of doubts. It noted that, in the present case, the measure at issue was significant, complex and novel. Further, it considered that the fact that the preliminary examination had lasted only a month, which was less than the two-month period provided for in Article 4(5) of Regulation No 659/1999, was not a reliable indication that no doubts arose at the end of that examination, as account had to be taken of the pre-notification phase, which had lasted around 18 months and thus exceeded the two-month period envisaged, as a general rule, by the Best Practices Code on the conduct of State aid control proceedings, adopted by the Commission on 16 June 2009 (‘the Best Practices Code’). ( 6 ) Moreover, at the end of that long pre-notification phase, the Commission still had doubts as to the compatibility with the internal market of the measure at issue, since it requested additional information from the United Kingdom on some key aspects. The General Court concluded that the length of the pre-notification phase, as well as the fact that three different types of operators had submitted observations in respect of the measure at issue, were an indication that doubts existed. Then, it found it appropriate to examine whether factors relating to the content of the decision at issue could also indicate that the Commission should have had doubts.

22. Thirdly, the General Court took the view that the Commission’s insufficient examination of the potential role of DSR within the capacity market was an indication that doubts arose as to the compatibility of the measure at issue with the internal market. Given that the decision at issue referred to the report compiled on 30 June 2014 by a panel of technical experts (‘the PTE’), which pointed at the lack of existing comprehensive data on DSR potential (‘the PTE’s Report’), the Commission was aware of the difficulties regarding the appreciation of DSR potential, and, therefore, of the risk that the measure at issue would fail to sufficiently take into account that potential. Nevertheless, far from carrying out its own appreciation of DSR potential, the Commission accepted the modalities envisaged by the United Kingdom (namely, inter alia, that information would be revealed in the first T‑4 auction, and that NG would launch a study concerning DSR potential).

23. Fourthly, the General Court considered that the Commission had failed to sufficiently examine whether DSR operators were discriminated against as compared with generators.

24. As regards, in the first place, the length of capacity contracts, the General Court noted that DSR operators could be offered solely one-year contracts, whereas certain generators (those building new plants or refurbishing existing plants) could be offered contracts of up to 3 or 15 years. The General Court further noted that the reason why certain capacity providers (namely, those building new plants or refurbishing existing plants) were offered contracts of longer than one year was their level of capital expenditure and the difficulties encountered in securing financing for their investment. In the view of the General Court, given that the information provided to the Commission by the United Kingdom concerned only the financial needs of generators building new plants, the Commission should have gathered more information itself on the financial needs of DSR operators. As it had failed to do so, it had not succeeded in dispelling the doubts that arose from the difference in treatment of generators and DSR operators in respect of the length of capacity contracts.

25. In the second place, as regards the cost recovery method, the General Court stressed that that method had to be taken into account when assessing whether the measure at issue was proportionate, as it influenced the volume of capacity that had to be procured on the capacity market and, thereby, the amount of aid. The General Court noted that the United Kingdom had amended that method during the administrative procedure, ( 7 ) and that the Commission should have examined whether that method, as amended, provided an incentive equivalent to that provided for by the method initially proposed to reduce electricity consumption during demand peaks by, inter alia, resorting to DSR. The Commission’s failure to do so was another indication of the existence of doubts.

26. In the third place, as regards the conditions of participation in the capacity market, the General Court noted that the Commission should have determined whether the measure at issue provided DSR operators with an adequate incentive to participate in the T‑1 auctions, which were a better route to market for those operators, given that: the volume of capacity reserved in the T‑1 auctions was limited when compared with the volume of capacity auctioned during the T‑4 auctions; the T‑1 auctions were not reserved for DSR operators; and there was no guarantee that the United Kingdom would organise a T‑1 auction if a T‑4 auction was organised. According to the General Court, the Commission should also have examined whether DSR operators had an appropriate incentive to participate in the T‑4 auctions, as (i) the measure at issue required all participants in the T‑4 auctions to be capable of responding to open-ended capacity events; (ii) that measure aligned the amount of the bid bond required from unproven DSR CMUs with that of new generating CMUs; and (iii) it set a 2 megawatt (MW) de minimis threshold for participating in the enduring auctions.

27. Fifthly, the General Court held that the fact that the measure at issue did not remunerate DSR operators for the savings of the amount of electricity lost during transmission and distribution was no indication of the existence of doubts, as paragraph 225 of the Guidelines required the aid to remunerate ‘solely the service of pure availability provided’, and not the sale of electricity.

28. The General Court concluded that there was a body of objective and consistent indications, based on (i) the length and circumstances of the pre-notification phase, and (ii) the incomplete and insufficient content of the decision at issue owing to the lack of appropriate investigation by the Commission at the preliminary examination stage, which demonstrated that the Commission had adopted that decision despite the existence of doubts. Consequently, the General Court annulled the decision at issue, without examining the second plea put forward by Tempus, alleging a failure to state reasons.

IV. Proceedings before the Court of Justice and forms of order sought

29. By the present appeal, the Commission requests the Court of Justice to set aside the judgment under appeal; dismiss the action brought at first instance for the annulment of the decision at issue or, in the alternative, refer the case back to the General Court for it to rule on the second plea raised before it; and, in any event, order Tempus to pay the costs.

30. The United Kingdom Government supports the main form of order sought by the Commission and that sought in the alternative.

31. The Polish Government, which was granted leave to intervene in support of the Commission, takes the same position.

32. Tempus contends that the Court should, by way of reasoned order, dismiss as inadmissible the single ground of appeal to the extent that the Commission challenges, first, the General Court’s assessment of the characteristics of the measure at issue, of the duration of both the preliminary examination and the pre-notification phase, and of the multiplicity and origin of the so-called ‘complaints’, and, second, the General Court’s assessment of the cost recovery method. Tempus further contends that the Court should, in any event, dismiss the appeal. In the alternative, should the Court set aside the judgment under appeal, Tempus requests it to give final judgment on the second plea raised at first instance and annul the decision at issue. Finally, Tempus requests the Court to order the Commission to bear its own costs and pay those of Tempus, and order the United Kingdom to bear its own costs.

33. By way of measures of organisation of procedure, the Court invited all parties which had submitted written observations to answer a question in writing. The Commission, Tempus, the United Kingdom Government and the Polish Government replied within the time limit set by the Court.

V. Analysis

34. I have come to the conclusion that, for the reasons set out below, the judgment under appeal should be set aside, and the Court should give final judgment in the matter and dismiss the action brought at first instance. Thus, I will examine below, first, the appeal (Section A), and, second, the action before the General Court (Section B).

A. The appeal

1. Arguments of the parties

35. The Commission puts forward a single ground of appeal, whereby it submits that the General Court misinterpreted Article 108(2) and (3) TFEU and Article 4(2) and (3) of Regulation No 659/1999 in finding that, on completion of the preliminary examination, serious difficulties existed as to the compatibility with the internal market of the measure at issue, and that, therefore, the Commission should have initiated the formal investigation procedure.

36. That ground of appeal is divided into two parts.

37. In the first part of its single ground of appeal, which challenges paragraphs 68 to 72, 79 to 83, 85, 90 to 92, 101 to 109, and 111 of the judgment under appeal, the Commission submits that the General Court erred in defining the standard for establishing that serious difficulties exist and in taking into account certain factors as indications of such difficulties.

38. More precisely, the Commission contends that the General Court applied the wrong legal standard in holding that Tempus may establish the existence of serious difficulties simply by setting out its reasons for considering that such difficulties existed, rather than effectively prove their existence; and that, to that end, Tempus may rely on all relevant information that was or could have been available to the Commission on the date of adoption of the decision at issue. In the Commission’s view, in the context of a preliminary examination, it may rely on the information provided by the Member State concerned, rather than investigate of its own motion the circumstances of the case. Moreover, the Commission takes the view that the General Court erred in taking into account, as indications of the existence of serious difficulties, the following factors: (i) the characteristics of the measure at issue, such as its technical complexity and novelty and the amount of aid — given that those factors have in themselves no bearing on the compatibility assessment; (ii) the length of the pre-notification phase — as, under Article 4(5) of Regulation No 659/1999, the two-month period for taking a decision not to raise objections runs from the date of a complete notification, and any period that elapsed before the formal notification must be disregarded; and (iii) the number and origin of the observations submitted spontaneously by third parties — since, in the context of a preliminary examination, the Commission has an obligation to examine complaints, not spontaneous observations. Finally, the Commission challenges the General Court’s finding that, particularly in the case of a complex measure, the purpose of the pre-notification phase is not to assess the compatibility of that measure with the internal market.

39. In the second part of its single ground of appeal, the Commission submits that the General Court erred in faulting it for failing to investigate appropriately certain aspects of the UK capacity market.

40. First, the Commission challenges the General Court’s finding, in paragraphs 146, 152 and 154 to 156 of the judgment under appeal, that serious difficulties arose from the assessment of the potential role of DSR within the capacity market. The Commission argues, in particular, that, when the decision at issue was adopted, DSR technology was still immature, and that, therefore, it was not in a position to fully estimate the long-term potential of DSR operators. The Commission also argues that the United Kingdom Demand Response Association (‘UKDRA’), ( 8 ) which filed observations with it on 9 June 2014 (‘UKDRA’s submission of 9 June 2014’), criticised the measure at issue for placing DSR operators at a disadvantage vis-à-vis other capacity providers, and not for failing to accurately assess DSR potential. Furthermore, the Commission notes that the auction mechanism will provide actual data on DSR potential. Secondly, the Commission challenges the General Court’s finding that serious difficulties arose from the assessment of the discriminatory or disadvantageous treatment of DSR operators in respect of the length of the capacity contracts, the cost recovery method and the conditions of participation in the capacity market. As regards the shorter contracts granted to DSR operators, the Commission contends that, contrary to the General Court’s findings in paragraphs 181, 182, 184, 192 and 193 of the judgment under appeal, it does not need to examine the precise capital expenditure and financing of DSR operators because it is common ground that the financing needs of such operators are significantly lower than those of new capacity generators. As regards the cost recovery method, the Commission submits that the General Court erred in finding, in paragraphs 194 to 213 of the judgment under appeal, that it should have examined whether the amendment to the cost recovery method had an effect on the amount of aid. In the Commission’s view, the cost recovery method could not be taken into account for the purposes of the compatibility assessment as, according to case-law, the method of financing an aid measure is only relevant when it forms an integral part of that measure, which was not the case here. Further, the United Kingdom had explained convincingly why the method adopted was preferable to that initially proposed. As regards the conditions of participation of DSR operators in the capacity market, the Commission contends that the General Court erred in finding that there was no guarantee that the United Kingdom would procure through the T‑1 auction at least 50% of the volume reserved — as the United Kingdom had undertaken a commitment to that effect. The Commission also asks the Court to hold that the General Court should have declared inadmissible Tempus’ allegation concerning the 2 MW participation threshold because that allegation was raised not in Tempus’ application before the General Court, but in its reply. That allegation is, in any event, unfounded since, during the administrative procedure, no third party disputed the characterisation of the 2 MW threshold as low.

41. Tempus contends that the single ground of appeal is inadmissible in part and unfounded in whole.

42. Tempus submits that the first part of the first ground of appeal is unfounded in so far as it alleges an error of the General Court in the definition of the legal standard for proving the existence of serious difficulties. According to Tempus, it follows from the case-law and from the objective nature of the concept of serious difficulties that, rather than rely on the information provided in the notification, the Commission must determine the accuracy and completeness of that information. It also follows from the case-law that the Commission must, where necessary, extend its review beyond the information provided by the Member State concerned.

43. Tempus further submits that the first part of the single ground of appeal is inadmissible and, in the alternative, unfounded in so far as it alleges an error of the General Court in regarding as indications of the existence of serious difficulties the characteristics of the measure at issue, the length of the pre-notification phase, the number and origin of the observations submitted spontaneously by third parties, and the complexity of the measure at issue. It is inadmissible because, first, it raises questions of fact, and, second, it does not identify precisely the paragraphs of the judgment under appeal which are challenged. It is unfounded because the content of the observations made by third parties (rather than their number or origin), the significant length of the pre-notification phase (during which it was not possible to solve the important issues raised by the Commission), and the artificial brevity of the preliminary examination procedure (which lasted only one month, that is, half its usual duration) are indications of the existence of serious difficulties.

44. Turning to the second part of the single ground of appeal, Tempus submits that the Commission’s line of argument concerning DSR potential is unfounded. Given that the Commission was aware of the great potential of DSR, it could not rely on the immature nature of DSR technology to refrain from assessing DSR potential.

45. Moreover, Tempus contends that the Commission’s line of argument concerning the discriminatory or disadvantageous treatment of DSR operators in respect of the length of the capacity contracts, the cost recovery method and the conditions of participation of DSR operators in the capacity market, is inadmissible in part and unfounded in whole. First, as regards the length of the capacity contracts, Tempus argues that the appeal is unfounded as it challenges solely the General Court’s finding that the Commission should have examined in detail the financing needs of DSR operators, and not the other grounds on which the General Court relied in order to conclude that serous difficulties arose from the assessment of the discriminatory treatment of DSR operators in respect of the length of capacity contracts. Secondly, as regards the cost recovery method, Tempus raises the inadmissibility of the Commission’s contention that it was not required to investigate how the amendment to the cost recovery method would affect the total amount of aid, as this is a question of fact. In the alternative and in any event, Tempus submits that that contention is unfounded, given that the amended cost recovery method barely left any incentive at all for consumers to reduce their electricity consumption. Thirdly, as regards the conditions of participation of DSR operators in the capacity market, Tempus emphasises that the Commission does not challenge the General Court’s finding that the volume reserved for T‑1 auctions is limited, and that it is difficult for DSR operators to provide the significant volumes auctioned during the T‑4 auctions. Tempus also notes that the Commission should have determined that the United Kingdom’s commitment to procure at least 50% of the volume reserved for T‑1 auctions had been laid down in domestic law. Finally, Tempus points out that the 2 MW threshold for participation in the enduring auctions cannot be regarded as low.

46. The United Kingdom Government endorses the main form of order sought by the Commission and that sought in the alternative. It considers the single ground of appeal to be well founded. In particular, it agrees with the Commission that, in the present case, the length of the pre-notification phase is no indication of the existence of serious difficulties; that the Commission could rely on the information provided in the notification without carrying out its own investigation; and that the standard set by the General Court for establishing the existence of serious difficulties is manifestly too low and disregards the Commission’s margin of discretion. Moreover, the United Kingdom Government takes the view that the General Court erred in regarding as indications of the existence of serious difficulties the lack of appropriate investigation by the Commission of DSR potential, the length of the capacity contracts, the amendment to the cost recovery method, and the conditions of participation of DSR operators in the capacity market.

47. The Polish Government supports the forms of order sought by the Commission. In particular, it argues that the General Court erroneously shifted the burden of proof to the Commission in requiring it to show that there were no serious difficulties, rather than require the applicant to show that such difficulties existed. It alleges that the General Court misapplied the Guidelines in respect of the assessment of DSR potential, and erred in finding that the Commission should have investigated whether the new cost recovery method had an impact on the access to the capacity market of DSR operators. Moreover, the Polish Government supports the Commission’s request that the Court rule that Tempus’ allegation concerning the 2 MW participation threshold should have been declared inadmissible by the General Court. That allegation is, in any event, unfounded since a 2 MW threshold is, by European standards, a low one.

2. Assessment

48. Before I examine the substance of the single ground of appeal (Section (c)), I will assess below, first, the Commission’s request that the Court set aside the judgment under appeal in so far as it did not declare inadmissible Tempus’ allegation concerning the 2 MW de minimis participation threshold (Section (a)), and, second, the pleas of inadmissibility raised by Tempus in respect of the appeal (Section (b)).

(a) The Commission’s request that the Court set aside the judgment under appeal in so far as it did not declare inadmissible Tempus’ allegation concerning the 2 MW de minimis participation threshold

49. The Commission, supported by the Polish Government, asks the Court to hold that the General Court should have dismissed as inadmissible Tempus’ allegation that the 2 MW de minimis participation threshold was high and a barrier to entry for DSR operators. ( 9 ) According to the Commission, that allegation was put forward not in Tempus’ application for the annulment of the decision at issue, but only in its reply.

50. In my opinion, that request should be dismissed.

51. Under Article 84(1) of the Rules of Procedure of the General Court, no new plea in law may be introduced in the course of proceedings unless it is based on matters of law or of fact which come to light in the course of the procedure. However, a plea or an argument which may be regarded as amplifying a plea put forward previously, whether directly or by implication, in the original application and which is closely connected therewith must be declared admissible. ( 10 ) In the present case, as the General Court held in paragraph 254 of the judgment under appeal, Tempus’ contention summarised in point 49 above was the mere amplification of the line of argument raised in its application at first instance concerning the discriminatory treatment of DSR operators, which should have led the Commission to initiate the formal investigation of procedure.

52. Thus, the Commission’s request summarised in point 49 above should be dismissed.

(b) Admissibility of the appeal

53. Tempus raises the inadmissibility of certain arguments put forward by the Commission in support of the first and the second parts of the single ground of appeal.

54. First, Tempus contends that the first part of the single ground of appeal is inadmissible in so far as it alleges that the General Court erred in taking into account the following factors as indications of the existence of serious difficulties: the characteristics of the measure at issue, the length of the pre-notification phase, the number and origin of the observations by third parties, and the complexity of the measure at issue. According to Tempus, first, those are questions of fact, and, second, the appeal fails to identify the paragraphs of the judgment under appeal which are challenged.

55. In my opinion, that plea of inadmissibility cannot succeed.

56. In the first place, the line of argument summarised in point 54 above raises questions of law, not questions of fact.

57. The Commission’s line of argument is that certain factors cannot, in themselves and by their nature only, constitute indications of the existence of serious difficulties. According to the Commission, this is true of the characteristics of an aid measure and, in particular, of that measure’s complexity (as, according to case-law, the complexity of a measure may precisely justify a longer preliminary examination procedure, rather than automatically trigger the obligation to initiate the formal investigation procedure); of the length of the pre-notification phase (as only the duration of the preliminary examination procedure may be considered an indication of the existence of serious difficulties); and of the number and origin of third party observations (as, in the context of a preliminary examination, the Commission is obliged to examine complaints, not spontaneous observations by third parties). The question whether, in itself and by its nature only, each of those factors is relevant for the purposes of determining whether serious difficulties exist, is clearly a question of law.

58. In the second place, contrary to what Tempus argues, the appeal identifies the paragraphs of the judgment under appeal against which the line of argument summarised in point 54 above is directed.

59. The appeal refers to: ‘paragraphs 79 et seq.’, in relation to the argument that the characteristics of an aid measure cannot be considered an indication of the existence of serious difficulties; paragraphs 85, 92, 106, 109 and 111, in relation to the relevance of length of the pre-notification phase; and ‘paragraphs 101 to 109 (… in particular, paragraphs 108, 109 and 111)’, in relation to the relevance of the number and origin of observations by third parties. Therefore, the appeal meets the requirements of Article 169(2) of the Rules of Procedure of the Court of Justice, pursuant to which the pleas in law and legal arguments relied on shall identify precisely those points in the grounds of the decision of the General Court which are contested.

60. Even if it were considered, in particular as regards the argument concerning the characteristics of an aid measure, that the appeal does not identify precisely the paragraphs of the judgment under appeal which are being challenged, the Commission’s line of argument appears overall to be sufficiently clear for the purposes of identifying the passages of the judgment under appeal which are being challenged (namely, paragraphs 79 and 111 to 115, in which the General Court found that the measure at issue is significant, complex and novel, and that those characteristics are capable of establishing the existence of serious difficulties). ( 11 )

61. Secondly, Tempus raises the inadmissibility of the second part of the first ground of appeal in so far as it is directed against paragraphs 208 to 212 of the judgment under appeal – that is, in so far as it alleges that the General Court erred in finding that the Commission should have investigated whether the amendment to the cost recovery method maintained an equivalent incentive to reduce electricity consumption, and whether it affected the amount of aid. In Tempus’ view, the Commission thereby requests the Court of Justice to conduct a new assessment of the facts.

62. In my opinion, that plea of admissibility must be rejected. Should the amended cost recovery method not sufficiently incentivise consumers to reduce their electricity consumption during demand peaks by, inter alia, resorting to DSR, this would call in question the proportionality of the measure at issue. That is a question of law.

63. I conclude that the single ground of appeal is wholly admissible.

(c) Substance

64. The Commission puts forward a single ground of appeal, whereby it submits that the General Court misinterpreted Article 108(2) and (3) TFEU and Article 4(2) and (3) of Regulation No 659/1999 in finding that the Commission could not declare the measure at issue compatible with the internal market without initiating the formal investigation procedure. Before I turn to the assessment of the two parts of that single ground of appeal, I would like to make some preliminary observations.

(1) Preliminary observations

65. I would recall that, according to the Court’s case-law, in the context of the procedure for reviewing State aid provided for in Article 108 TFEU, the preliminary stage of the procedure for reviewing aid under Article 108(3) TFEU, which is intended merely to allow the Commission to form a prima facie opinion on the partial or complete conformity of the aid in question, must be distinguished from the examination stage under Article 108(2) TFEU, which is designed to enable the Commission to be fully informed of all the facts of the case. ( 12 )

66. That second stage is optional. However, according to case-law, the Commission may confine itself to the preliminary investigation under Article 108(3) TFEU when taking a decision in favour of aid only if it is able to satisfy itself, after an initial examination, that that aid is compatible with the internal market. If, by contrast, the initial examination leads the Commission to the opposite conclusion or even if it does not enable it to resolve all the difficulties involved in determining whether the aid is compatible with the internal market, the Commission is under a duty to initiate the procedure under Article 108(2) TFEU. ( 13 )

67. As mentioned in points 3 and 4 above, in the present case, the Commission, having conducted a preliminary examination of the compatibility with the internal market of the measure at issue, decided, on the basis of Article 4(3) of Regulation No 659/1999, not to raise objections to that measure, as the assessment of its compatibility with the internal market did not give rise to serious difficulties. By the judgment under appeal, the General Court set aside the decision at issue, on the ground that such difficulties existed and that, therefore, the Commission could not declare the measure at issue compatible with the internal market without initiating the formal investigation procedure under Article 108(2) TFEU. Before the Court, the Commission contends that it was not confronted with serious difficulties, while Tempus submits that it was.

68. It is settled case-law that, as the criterion of serious difficulties is objective in nature, the existence of such difficulties must be looked for not only in the circumstances in which the Commission’s decision was adopted after the preliminary investigation but also in the assessments upon which the Commission relied. It follows that the lawfulness of a decision not to raise objections, based on Article 4(3) of Regulation No 659/1999, depends on the question of whether the assessment of the information and evidence which the Commission had at its disposal during the preliminary investigation phase of the measure notified should objectively have raised doubts as to the compatibility of that measure with the internal market. ( 14 )

69. Further, where an applicant seeks the annulment of a decision not to raise objections, he must prove the existence of doubts as to the aid’s compatibility. That proof may be furnished by reference to a body of consistent evidence: the question whether or not a doubt exists requires investigation of both the circumstances in which the decision not to raise objections was adopted and its content, comparing the assessments upon which the Commission relied in that decision with the information available to it when it ruled on the compatibility of the aid in question with the internal market. ( 15 )

70. In the present case, the General Court considered the following factors to be indications of the existence of serious difficulties: first, the length of the discussions between the United Kingdom and the Commission (including the pre-notification phase), and the circumstances surrounding the adoption of the decision at issue (requests for information sent to the United Kingdom, national public consultation organised in relation to the measure at issue, and observations filed by three different types of operators); and, second, the lack of appropriate investigation, by the Commission, of, inter alia, the role of DSR within the capacity market, the length of the capacity contracts offered to DSR operators, the amendment to the cost recovery method, and certain conditions of participation of DSR operators in the capacity market. In accordance with the case-law cited in point 69 above, the first set of factors relates to the circumstances in which the decision at issue was adopted, ( 16 ) while the second set concerns the content of that decision. ( 17 )

71. The question before the Court is whether or not those factors are sufficient to establish the existence of serious difficulties. The first part of the single ground of appeal challenges, in essence, the factors relating to the circumstances in which the decision at issue was adopted, while the second part of that ground of appeal challenges the factors relating to the content of that decision.

72. I should point out, in that regard, that, while the Commission may, during the preliminary examination, engage in a dialogue with the Member State concerned or with third parties in an endeavour to overcome any difficulties encountered, ( 18 ) it is, however, only in connection with the formal investigation procedure that the FEU Treaty imposes on the Commission an obligation to give interested parties notice to submit comments. ( 19 ) Thus, Tempus’ line of argument is that, had the Commission initiated the formal investigation procedure, it would have been given the opportunity to submit comments and thereby cause the Commission to alter its assessment of the capacity market by giving due consideration to the role played by DSR operators.

73. Finally, I note that the case-law refers either to the existence of ‘doubts’ ( 20 ) – the term used by Regulation No 659/1999 and Council Regulation (EU) 2015/1589 ( 21 ) – or to that of ‘serious difficulties’ ( 22 ) – the term initially used by the Court. ( 23 ) The Court appears to use those two terms without distinction and to give them the same meaning. In particular, no indication may be inferred from the use of the former or the latter term as to the standard of proof that applies for establishing that the formal investigation procedure must be initiated (as the same case-law is cited in all judgments, irrespective of the term used in the particular case). I propose to use the term ‘serious difficulties’ as that term is used somewhat more frequently by the Court.

(2) The first part of the single ground of appeal

74. In the first part of its single ground of appeal, the Commission contends that the General Court set an erroneously low standard for establishing that serious difficulties arise from the assessment of the compatibility with the internal market of an aid measure, and that it was wrong to rely on certain factors as indications of the existence of such difficulties. The first part of the single ground of appeal is divided into five complaints. By the first complaint, the Commission submits that the General Court erred in holding that, in the context of a preliminary examination, the Commission must take into account not only the information that was made available by the Member State concerned, but also all the relevant information that could be available upon investigation, and that, consequently, Tempus may rely also on the latter type of information for the purposes of showing that serious difficulties existed on completion of the preliminary examination. In so doing, the General Court applied, in the Commission’s view, an erroneously low standard (‘the first complaint’). By the second, third and fourth complaints, the Commission contends that the General Court erred in taking into account, as indications of the existence of serious difficulties: the characteristics of the measure at issue, such as the novelty and complexity of that measure (‘the second complaint’); the length of the pre-notification phase (‘the third complaint’); and the number and origin of the observations made by third parties (‘the fourth complaint’). Finally, the Commission challenges the General Court’s finding that, in particular in the case of a complex aid measure, the purpose of the pre-notification phase is not to assess the compatibility of that measure with the internal market (such compatibility assessment justifying, in the Commission’s view, a longer pre-notification phase) (‘the fifth complaint’).

75. I will examine below, first, the first complaint; then, the fourth complaint (as it is related to the first complaint); then, the third complaint; and, finally, the second and the fifth complaints, taken together (as they both concern the complexity of the measure at issue, and they must be examined in the light of factors put forward for the assessment of the third complaint). All those complaints should, in my opinion, be upheld.

(i) Whether, in order to show that serious difficulties existed, Tempus may rely on all the relevant information that was or could have been available to the Commission on the date of adoption of the decision at issue

76. By the first complaint, which is directed at paragraphs 68 to 72 of the judgment under appeal, the Commission submits, in essence, that, in the context of a preliminary examination, it may generally confine itself to taking into account the information provided by the Member State concerned, without being required to investigate of its own motion the circumstances of the case. In particular, where third parties (such as UKDRA) ( 24 ) submit spontaneous observations, it is not required to investigate the matters put forward, without substantiation, by those parties. Thus, in the Commission’s view, the General Court erred in holding that, in the context of a preliminary investigation, the Commission must take into account not only the information that was made available to it by the Member State concerned, but also the information that (upon investigation) could have been available to it on the date when it adopted the decision at issue. According to the Commission, it follows that, for the purposes of establishing that the formal investigation procedure should have been initiated, Tempus cannot rely on any information that could have been available to the Commission on the date when it adopted the decision at issue. In particular, the fact that third parties submitted observations critical of the measure at issue does not prove that, on completion of the preliminary examination, serious difficulties arose from the assessment of the compatibility with the internal market of the measure at issue. Thus, the Commission is of the opinion that the standard thereby set by the General Court for proving that serious difficulties exist is too low.

77. The United Kingdom Government and the Polish Government concur with the Commission, while Tempus takes the opposite view.

78. I propose to uphold the first complaint.

79. In a nutshell, I consider that the General Court erred in finding, in paragraphs 68 to 72 of the judgment under appeal, that, in order to show that serious difficulties existed on completion of the preliminary examination, Tempus could rely not only on the information provided by the United Kingdom, but also on all relevant information that could have been available to the Commission upon investigation. The General Court’s approach amounts to imposing on the Commission an obligation to investigate, of its own motion, unsubstantiated matters raised by UKDRA. In my view, the Commission is under no such obligation. I will set out in detail below the reasons why I have come to that conclusion.

80. According to case-law, the Commission is required, in the interests of sound administration of the fundamental rules of the FEU Treaty relating to State aid, to conduct a diligent and impartial examination of the contested measures, so that it has at its disposal, when adopting the final decision, the most complete and reliable information possible for that purpose. ( 25 ) While that finding was made in relation to decisions taken at the end of a formal investigation procedure, it should, in my view, also apply to decisions not to raise objections to an aid measure, such as the decision at issue. Although the examination of a measure may not be as thorough in the context of a preliminary examination as it is under the formal investigation procedure, I fail to see how the Commission could not be required to conduct a diligent and impartial examination also in the former case. ( 26 )

81. It seems to me that, in the context of a preliminary examination, the Commission fulfils its obligation to carry out a diligent and impartial examination of a measure by examining all the facts and points of law brought to its attention by the Member State concerned, without being required to investigate of its own motion the circumstances of the case. I will set out below the reasons for my position.

82. First, this follows from the nature of the preliminary examination, which, as mentioned in point 65 above, is intended not to enable the Commission to be fully informed of all the facts of the case, but merely to allow it to form a prima facie opinion. This is also consistent with the case-law of the General Court, according to which, under the preliminary examination procedure, the Commission may generally confine itself to taking into account the information provided by the Member State at issue — if necessary, following an additional request from the Commission. ( 27 )

83. It is true that, as Tempus argues, it cannot be excluded that the Member State concerned provides incomplete, inaccurate or misleading information. However, in that case, the Commission must exercise its power under Article 5 of Regulation No 659/1999 to request additional information from that Member State. I should note that, according to the judgment cited in point 82 above, it is ‘if necessary, following an additional request from the Commission’ that the latter may confine itself to examining the information provided by the Member State concerned. In that regard, the General Court has also ruled that, even though a Member State must, in accordance with the duty of sincere cooperation laid down in Article 4(3) TEU, cooperate with the Commission by providing it with the information that will allow the Commission to take a decision on whether the measure at issue involves State aid, the fact remains that the Commission is required to carry out a careful examination of the information which the Member State provides to the Commission. ( 28 )

84. Secondly, I should emphasise that, although the Commission is required to carry out a diligent and impartial examination of any complaint, ( 29 ) it is not, in the context of a preliminary examination, required to conduct a similar examination of any observations spontaneously made by third parties. As mentioned in point 72 above and as follows from Article 6(1) and Article 20(1) of Regulation No 659/1999, it is only in connection with the formal investigation procedure that interested parties ( 30 ) have a right to submit comments (also framed as a right to be involved in the administrative procedure). ( 31 )

85. Thirdly, according to the case-law of the General Court, acomplaint is not to be made that the Commission failed to take into account matters of fact or of law which could have been submitted to it during the administrative procedure but which were not, since the Commission is under no obligation to consider, of its own motion and on the basis of prediction, what information might have been submitted to it. ( 32 ) While that finding was made almost exclusively ( 33 ) in cases concerning decisions taken at the end of a formal investigation procedure, it should, in my opinion, apply all the more to decisions not to raise objections, such as the decision at issue. If the Commission is not required to investigate a case of its own motion under the formal investigation procedure, there is no reason why it should be required to do so in the context of a preliminary examination, which, again, is intended merely to allow it to form a prima facie opinion.

86. Further, in the judgment cited in point 82 above, the General Court held not only that, in the context of a preliminary examination procedure, the Commission may generally confine itself to taking into account the information provided by the Member State concerned, but also that it is not required to conduct on its own initiative preparatory inquiries into all the circumstances of the case if the information provided by the notifying Member State enables it to satisfy itself that the measure in question either does not constitute aid or, if it is classified as aid, is compatible with the internal market.

87. However, I should note that the limits placed by the case-law of the General Court cited in point 86 above on the Commission’s obligation to carry out a diligent and impartial examination of an aid measure are at odds with the judgment of 2 April 1998, Commission v Sytraval and Brink’s France (‘the judgment in Sytraval’), ( 34 ) which concerns the Commission’s obligation to examine not an aid measure, but a complaint. In that judgment, the Court held, in paragraph 62, that the Commission was obliged, where necessary, to extend its investigation of a complaint beyond a mere examination of the facts and points of law brought to its notice by the complainant and to examine matters not expressly raised by the complainant. The question thus arises as to whether paragraph 62 of the judgment in Sytraval should be extended to the present case.

88. I consider that it should not.

89. This is because recognition of an obligation on the Commission to go beyond the mere examination of the facts and points of law spontaneously brought to its attention by a third party would imply recognition of an obligation on the Commission to examine the observations made by interested parties. However, as mentioned in point 84 above, it is only in connection with the formal investigation procedure that the Commission is under such an obligation. Therefore, as the Commission contends, were the Court’s finding in paragraph 62 in the judgment in Sytraval to be extended to the examination of observations spontaneously submitted under a preliminary examination, this would blur the distinction between the two phases of the procedure for reviewing State aid.

90. This is also because the rationale for the Commission’s obligation to examine complaints and, where necessary, go beyond the examination of the facts and points of law put forward by the complainant is that, in the case of unlawful aid, it has little information at its disposal, given that it receives none from the Member State concerned, and that complainants typically have limited access to relevant information. That rationale is, however, lacking in the case of notified aid. While, as mentioned in point 83 above, the information submitted by the Member State concerned may be incomplete or incorrect, this cannot be compared to the situation in which that Member State fails to notify an aid measure.

91. Finally, this is because Regulation No 734/2013 amended Article 20(2) of Regulation No 659/1999 to the effect that complaints must now comply with a compulsory form, ( 35 ) which requires complainants to provide information concerning, inter alia, the features of the alleged aid measure, the grounds of complaint and the compatibility with the internal market of that measure. It follows from the second subparagraph of Article 10(1) of Regulation No 659/1999, as amended by Regulation No 734/2013, that the Commission is only obliged to examine complaints that are submitted by using the complaint form (and that are made by an interested party). ( 36 ) Pursuant to recital 14 of Regulation No 734/2013, ‘[s]ubmissions not meeting [those two conditions] should be treated as general market information, and should not necessarily lead to ex officio investigations.’ Thus, recognition of an obligation on the Commission to go beyond the examination of the facts and points of law brought to its attention by a third party by means of the spontaneous submission of observations would allow interested parties to circumvent the obligation to comply with the complaint form, and thereby undermine the amendments introduced by Regulation No 734/2013.

92. Consequently, in my view, paragraph 62 of the judgment in Sytraval should not be extended to the present case. It follows that, in the context of a preliminary investigation, the Commission may generally rely solely on the information provided by the Member State concerned, without being required to investigate the case of its own motion.

93. I should, however, mention that it follows from the case-law cited in point 80 above that the Commission’s final decision must, to the extent possible, be based on complete and reliable information. Therefore, the Commission may rely solely on the information provided by the Member State concerned only where that information is complete and reliable. Thus, it seems to me that, where, in the context of a preliminary examination, a third party adduces evidence that calls into question the completeness and reliability of the information provided by the Member State concerned, the Commission should not be permitted to ignore that evidence. Rather, as the United Kingdom Government argues, the Commission must take that evidence into account. ( 37 ) I should note that, in the present case, the Commission examined ( 38 ) the observations spontaneously submitted by UKDRA, a provider of balancing services and the acquirer of existing power plants, gave the United Kingdom the opportunity to submit comments on those observations, ( 39 ) and addressed the content of those observations in the decision at issue. ( 40 )

94. My proposal in point 93 above does not amount to conferring on third parties a right to submit observations in the context of a preliminary examination procedure, given that the Commission should not be considered to be required to take into account the evidence provided by third parties in all cases, but only where it takes the view that that evidence calls into question the completeness and reliability of the information provided by the Member State concerned.

95. I should also emphasise that, in my view, it is only where a third party adduces sound evidence in support of its allegations that the Commission must take those allegations into account – and that, consequently, it is under no obligation to go beyond the facts and points of law brought to its attention by that party.

96. I conclude that, in the context of a preliminary investigation, the Commission may generally confine itself to relying on the information provided by the Member State concerned, unless a third party adduces evidence that, in the Commission’s view, calls into question that information. ( 41 ) However, in the latter case, the Commission is simply obliged to take that evidence into account, not to go beyond the examination of the facts and points of law brought to its attention by the third party.

97. In the present case, in paragraphs 70 to 72 of the judgment under appeal, the General Court held, in essence, that the Commission is required to research and examine, thoroughly and impartially, all relevant information that was or could have been available to it on the date when it adopted the decision at issue.

98. I agree with the General Court that the Commission is required to examine, thoroughly and impartially, all relevant information that was available to it on that date, that is, all relevant information that was provided to it during the administrative procedure by the Member State concerned or by any complainants. However, it seems to me that the General Court erred in holding that the Commission was required to research, thoroughly and impartially, all relevant information that could have been available to it on the date when it adopted the decision at issue. This is because it follows from point 96 above that (apart from the case of a complaint brought in accordance with Article 20(2) of Regulation No 659/1999, as amended by Regulation No 734/2013) the Commission is obliged to investigate a case of its own motion only where a third party adduces evidence that the Commission considers calls into question the information provided by the Member State concerned. It follows that the General Court erred in finding that, in order to establish the existence of serious difficulties, Tempus could rely on all relevant information that could have been available to the Commission on the date when it adopted the decision at issue.

99. It also follows that the General Court erred in holding, in paragraph 68 of the judgment under appeal, that it is sufficient that Tempus sets out its reasons for concluding that serious difficulties existed on completion of the preliminary examination. For the reason set out in point 95 above, Tempus must also provide sound evidence that calls into question the information provided by the United Kingdom.

100. I therefore conclude that the first complaint should be upheld.

(ii) Whether the number and origin of observations spontaneously made by third parties may be taken into account as an indication of the existence of serious difficulties

101. By the fourth complaint, which is directed at paragraphs 101 to 109 and 111 of the judgment under appeal, the Commission contends that the General Court erred in taking into account the number and origin of the observations spontaneously submitted by third parties as an indication that serious difficulties existed.

102. It is apparent from paragraph 109 of the judgment under appeal that the General Court regarded the number and origin of third party observations as a factor to be balanced against the brevity of the preliminary examination procedure, such brevity being, in the General Court’s view, an indication that no serious difficulties existed. I should emphasise that, in that paragraph, the General Court made no reference whatsoever to the substance of those observations. It is their number (their ‘multiplicity’) and their origin (the fact that they were submitted ‘by three different types of operators’, namely UKDRA, a provider of balancing services, and the acquirer of existing power plants) that caused the General Court to consider them to be indications of the existence of serious difficulties.

103. However, it does not follow from the provisions of Regulation No 659/1999 that the formal investigation procedure must automatically be initiated upon the submission of observations by third parties, given that interested parties do not have a right to submit observations at the preliminary examination stage. Nor does this follow from the case-law cited in point 86 above, according to which, at that stage, the Commission may generally confine itself to taking into account the information provided by the Member State concerned; or from point 96 of this Opinion, according to which it is only if evidence is adduced in support of third party observations that the Commission must take them into account and, as the case may be, initiate the formal investigation procedure.

104. Thus, in my view, the fourth complaint must be upheld.

(iii) Whether the length of the pre-notification phase may be taken into account as an indication of the existence of serious difficulties

105. According to case-law, the length of the preliminary examination procedure can constitute an indication that the Commission may have had doubts regarding the compatibility of the aid at issue with the internal market. ( 42 ) Pursuant to Article 4(5) of Regulation No 659/1999, a decision not to raise objections shall be taken within two months of the receipt of a complete notification. In the present case, the preliminary examination lasted exactly a month, as the measure at issue was notified on 23 June 2014 ( 43 ) and the decision at issue was adopted on 23 July 2014. Thus, the time period set out in Article 4(5) of Regulation No 659/1999 was respected.

106. However, pre-notification contacts took place between the United Kingdom and the Commission and lasted approximately 18 months, as the United Kingdom informed the Commission of the content of the planned measure in December 2012 ( 44 ) and the measure at issue was notified on 23 June 2014.

107. Therefore, in paragraph 85 of the judgment under appeal, the General Court held that the fact that the preliminary examination lasted only a month was not a reliable indication that serious difficulties had not arisen on completion of that examination, and that the length of the pre-notification phase had also to be taken into account. It then found, in paragraphs 92 and 106, that that phase had been significantly longer than the two-month period envisaged in paragraph 14 of the Best Practices Code. It concluded, in paragraphs 109 and 111, that the length of the ‘discussions between the Member State and the Commission’ (that is, the length of the preliminary examination procedure and of the pre-notification phase, taken together) was an indication of the existence of serious difficulties.

108. By the third complaint, which is directed at paragraphs 85, 92, 106, 109 and 111 of the judgment under appeal, the Commission contends that the General Court erred in holding that, in the circumstances of the present case, the length of the pre-notification phase was to be taken into account. The United Kingdom Government and the Polish Government agree with the Commission. Tempus takes the opposite view, and argues that the Commission committed an abuse of process by forming a prima facie opinion on the conformity of the measure at issue at the end of the pre-notification phase, although, first, it did not yet have all the necessary information at its disposal, ( 45 ) and, second, particularly in complex cases such as the present one, the Commission’s prima facie opinion should be formed at the end of the preliminary examination procedure, not at the end of the pre-notification phase.

109. I consider that the third complaint must be upheld.

110. I note that Article 4(5) of Regulation No 659/1999 states that the two-month period for adoption of a decision not to raise objections runs from the receipt of a complete notification. According to the same provision, a notification is considered complete if, within two months of its receipt, or from the receipt of any additional information requested, the Commission does not request any further information. Thus, the General Court has held that, where the Commission requests additional information, the two-month period provided for in that provision runs not from the receipt of the (incomplete) notification, but from the receipt of the response to the last information requested. ( 46 ) The General Court has also held that, in the case of pre-notifications contacts between the Member State concerned and the Commission, that two-month period runs not from such contacts, but from the receipt of the formal notification. ( 47 )

111. This is because the purpose of the pre-notification phase is precisely to allow the Member State concerned to complete its notification by providing additional information upon request by the Commission (or on its own initiative), and, as the case may be, to make amendments to the notification.

112. Thus, I take the view that no account may be taken, for the purposes of determining whether the length of the review procedure is an indication of the existence of serious difficulties, of the pre-notification phase. It follows that the General Court erred in holding, in paragraph 109 of the judgment under appeal, that, notwithstanding the brevity of the preliminary examination procedure, the length of the pre-notification phase was an indication of the existence of serious difficulties.

113. Therefore, the third complaint must be upheld.

(iv) Whether the complexity and novelty of the measure at issue may be taken into account as an indication of the existence of serious difficulties

114. By the second complaint, which challenges paragraphs 79 to 83 of the judgment under appeal, the Commission submits that the General Court erred in taking into account, as indications of the existence of serious difficulties, the characteristics of the measure at issue, such as the complexity and the novelty of that measure and the amount of aid granted. In the Commission’s view, those factors have, in themselves, no bearing on the compatibility assessment. Rather, the complexity and novelty of an aid measure justify a longer preliminary examination.

115. In my view, the second complaint should be upheld.

116. According to case-law, although the length of the preliminary examination procedure can constitute an indication of the existence of serious difficulties, it cannot of itself lead to the conclusion that the Commission should have initiated the formal investigation procedure. Whether or not the duration of a procedure for the preliminary examination is reasonable must be determined in relation to the particular circumstances of each case, especially its context, the various procedural stages to be followed by the Commission, the complexity of the case and its importance for the various parties involved. ( 48 ) Thus, as the Commission argues, the complexity of a case may justify a longer preliminary examination.

117. I would add that the General Court has held that the complexity of a case does not necessarily require the initiation of a formal investigation procedure (as it is conceivable that, during the preliminary examination, the Commission overcomes the difficulties encountered). ( 49 )

118. Therefore, in my opinion, the General Court erred in considering, in paragraphs 78 and 81 of the judgment under appeal, the complexity of the measure at issue to be an indication of the existence of serious difficulties.

119. By the fifth complaint, which is directed at paragraphs 86 to 91 of the judgment under appeal, the Commission contends, in essence, that the General Court erred in finding that, particularly in the case of a complex measure, the purpose of the pre-notification phase is not to assess the compatibility of that measure, but to reduce the risk that the notification is found to be incomplete when formally submitted. In the Commission’s view, such a compatibility assessment justifies a longer pre-notification phase.

120. In my opinion, while there can be no dispute that, at the end of the pre-notification phase, the Commission should not have formed a prima facie opinion on the compatibility with the internal market of the measure in question (as that is the purpose of the preliminary examination), it cannot, however, be expected to refrain from any assessment of that compatibility, albeit provisional and superficial, during the pre-notification phase. This is because, should it not conduct such preliminary assessment during that phase, it would not be able to determine which information is still needed for the notification to be considered complete, or whether amendments should be made to the notified measure.

121. This applies also in the case of a complex measure. The reasons set out in points 116 and 117 above justify not only a longer preliminary examination, but also a longer pre-notification phase. I should also note that it does not follow from paragraph 16 of the Best Practices Code that, unlike in other cases, in novel and complex cases, the Commission does not conduct a preliminary assessment of the measure in question during the pre-notification phase. Rather, that provision merely states that, in novel and complex cases, the Commission does not ‘provide the Member State concerned with [such an] assessment’.

122. I conclude that the second and the fifth complaints must be upheld. Thus, the first part of the single ground of appeal must be upheld in its entirety.

(3) The second part of the single ground of appeal

123. As mentioned in point 71 above, in the second part of its single ground of appeal, the Commission contends that the General Court erred in finding that serious difficulties arose from the lack of appropriate investigation of, first, the potential role of DSR within the capacity market and, second, the alleged discriminatory treatment of DSR operators vis-à-vis other capacity providers in respect of the length of capacity contracts, the amendment to the cost recovery method, and certain conditions of participation in the capacity market. I will examine in turn each of these complaints, all of which are, in my opinion, well founded.

(i) Whether the Commission should have investigated the potential role of DSR operators within the capacity market

124. The decision at issue does not contain any estimates for the role that DSR operators could play in the capacity market. In particular, that decision makes no reference to NG’s estimate, which the United Kingdom quoted in its notification, according to which DSR could provide around 3 gigawatt (GW) of capacity in 2018/2019. There is no indication that the Commission, though being aware of the lack of comprehensive data on DSR potential, ( 50 ) carried out its own examination of such potential. Rather, it accepted the modalities envisaged by the United Kingdom for assessing such potential, namely: that information would be revealed through the first T‑4 auction in December 2014; that a joint study would be conducted by NG and another entity concerning the current and potential DSR capacity; and that transitional auctions would be held in 2015 and 2016 to support the growth of DSR. ( 51 )

125. As mentioned in point 22 above, in paragraph 158 of the judgment under appeal, the General Court found that the Commission’s lack of examination of the potential role of DSR within the capacity market was an indication of the existence of serious difficulties.

126. Before the Court, the Commission, supported by the United Kingdom Government and the Polish Government, contends that it was not required to investigate the potential role of DSR, while Tempus takes the opposite view.

127. In my view, the General Court erred in considering the Commission’s lack of investigation of DSR potential to be an indication of the existence of serious difficulties.

128. In that regard, I note that the Commission did not rely on the information contained in the notification (given that, as mentioned in point 124 above, the decision at issue makes no reference to NG’s estimate for DSR potential). It did, however, accept the United Kingdom Government’s view that it was sufficient that such potential be assessed after the adoption of the decision at issue, through the first T‑4 auction and future studies. The question is whether the Commission could accept those modalities, or whether it was required to carry out its own assessment of DSR potential.

129. No obligation to investigate may arise, in that respect, from the submission of a complaint – ( 52 ) as none was lodged – or from the observations of third parties – ( 53 ) as UKDRA’s submission of 9 June 2014 does not address the matter of the amount of DSR potential, let alone provide any evidence, such as alternative estimates. Thus, it is only if the information provided in the notification and in response to the Commission’s requests is to be considered incomplete that the Commission may be under an obligation to investigate. ( 54 )

130. It seems to me that, in the present case, the Commission was under no such obligation.

131. Reference should be made to the Commission’s assertion that, because DSR technology was still immature at the time the decision at issue was adopted, it was not in a position to estimate DSR potential– whose long-term importance it does not dispute in its written pleadings. ( 55 ) Reference should also be made to the PTE’s Report, which points at the lack of information on DSR potential and at the difficulty of gathering such information. According to the PTE, this is due, inter alia, to the variety of the resources that should be taken into account when appreciating the demand side, and to the lack of an over-arching organisation collecting and analysing demand side data. ( 56 ) Further, I note that Tempus does not appear to dispute the Commission’s assertion that it is difficult to gather reliable information on DSR potential.

132. I should also mention that ‘very different estimates’ for DSR potential were provided by interested parties and the United Kingdom in the context of the formal investigation procedure which the Commission initiated for the implementation of the judgment under appeal. ( 57 ) While the lawfulness of the decision at issue cannot be assessed in the light of such estimates as there is no indication that they were available to the Commission when it adopted that decision, I should nonetheless note that the discrepancy between those estimates is further evidence of the difficulty of gathering reliable information on DSR potential.

133. It seems to me that, given the difficulty of gathering reliable information, the Commission cannot be faulted for failing to carry out its own investigation of DSR potential.

134. This is all the more true given that, as the Commission contends, the corrective mechanism embodied in T‑1 auctions should ensure that DSR capacity be granted a role that reflects its full potential. Should generation capacity be granted a larger role than is strictly necessary in the first T‑4 auction, the T‑1 auction, which is a better route for DSR operators to access the capacity market, should allow those operators to increase their participation in that market.

135. I therefore conclude that the General Court erred in holding, in paragraph 158 of the judgment under appeal, that the Commission’s lack of examination of the potential role of DSR within the capacity market was an indication of the existence of serious difficulties.

(ii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the length of capacity contracts

136. As the General Court held in paragraphs 165 to 168 of the judgment under appeal, DSR operators cannot be granted contracts of longer than a year, whereas generators may be granted contracts of up to 3 years (if they undertake capital expenditure above GB 125/kW, that is, where they refurbish a plant) or up to 15 years (if they undertake capital expenditure above GBP 250/kW, that is, where they build a new plant). It is indeed apparent from Regulation 11(3) of the Electricity Capacity Regulations 2014 that those thresholds apply only to generators (and that DSR operators are ineligible to be issued contracts of up to 3 or 15 years even if they undertake capital expenditure in excess of said thresholds).

137. As mentioned in point 24 above, in paragraph 193 of the judgment under appeal, the General Court held that, given that the reason for granting capacity contracts of longer than a year was to mitigate the financing difficulties of new and refurbishing generators, due to the size of their capital expenditure, by guaranteeing them an income over a number of years, the Commission should have examined whether the capital expenditure and financial needs of DSR operators required that they also obtained contracts of longer than a year. UKDRA’s submission of 9 June 2014 had drawn the Commission’s attention to that matter. It was not for UKDRA to provide more detailed information in that regard, but for the Commission to inform itself further on the matter. Thus, according to the General Court, the Commission’s lack of investigation of the financial needs of DSR operators was an indication of the existence of serious difficulties.

138. The Commission, supported by the United Kingdom Government, ( 58 ) contends that it was not required to examine the capital expenditure and financial needs of DSR operators before it could rule out any infringement of the principle of equal treatment between DSR operators and generators in relation to the length of capacity contracts. This was because, in particular, it was not disputed that DSR operators have significantly lower financial needs than capacity providers engaged in refurbishing existing plants or in building new ones. Tempus submits that the Commission’s plea should be dismissed.

139. I consider that the General Court erred in finding, in paragraph 193 of the judgment under appeal, that the Commission’s lack of examination of the capital expenditure and financial needs of DSR operators was an indication of the existence of serious difficulties.

140. I note that Tempus does not dispute that DSR operators have lower capital expenditure and financial needs than new or refurbishing generators.

141. I also note that UKDRA simply stated, in its submission of 9 June 2014, that DSR operators were offered one-year contracts while generators could be granted contracts of up to 15 years; and that such a limitation on the length of the contracts offered to DSR operators placed those operators at a competitive disadvantage, failed to provide them with adequate incentives to participate in the capacity market, and ran counter to the Guidelines’ objective of phasing out environmentally-harmful subsidies. UKDRA’s submission of 9 June 2014 makes no reference to the financial needs of either DSR operators or new or refurbishing generators, let alone compares the respective needs of those two types of capacity providers. Most importantly, during the administrative procedure, UKDRA did not put forward any evidence to support its allegations. This is all the more surprising given that, as a group of aggregators, UKDRA could likely obtain relevant information on the matter from its members, such as Tempus.

142. Thus, in the light of point 95 of this Opinion, it cannot be considered that the Commission was under an obligation to take UKDRA’s allegations into account, let alone to examine of its own motion whether the financial needs of DSR operators required that they be granted contracts of longer than a year.

143. Therefore, the General Court erred in finding, in paragraph 193 of the judgment under appeal, that the Commission’s lack of examination of the capital expenditure and financial needs of DSR operators was an indication of the existence of serious difficulties.

(iii) Whether there was sufficient examination of the discriminatory or disadvantageous treatment of DSR operators in respect of the cost recovery method adopted

144. I recall that, as mentioned in point 17 above, the capacity payments made to capacity providers are financed through a charge levied on all licensed electricity suppliers. Under the measure at issue, suppliers’ charges are calculated on the basis of their market share of electricity demand registered between 16.00 and 19.00 on winter weekdays from November until February (‘the cost recovery method adopted’ or ‘the method adopted’). ( 59 )

145. However, it was initially envisaged that the amount of the charges would be calculated on the basis of the suppliers’ market share registered during the so-called ‘triad’ periods, that is to say, the three half-hour periods registering the highest annual electricity consumption during the period from November to February (‘the method initially proposed’). Following the national public consultation organised from October to December 2013, the United Kingdom decided to amend the method initially proposed to adopt one based on consumption between 16.00 and 19.00 during winter weekdays, as described in point 144 above. According to the notification, the reason why the cost recovery method was amended is that triad peaks are identified after the event, and that, therefore, using them as a reference period for calculating the suppliers’ charge creates uncertainty for suppliers. It follows, according to the notification, that, under the method initially proposed, suppliers have an incentive to charge consumers with risk premiums that are higher than those charged under the method adopted. ( 60 )

146. In the decision at issue, the Commission did not object to the cost recovery method adopted. It accepted the United Kingdom Government’s position that the method adopted ‘retains an incentive to reduce demand at peak times, while being predictable for suppliers’. ( 61 )

147. However, the General Court considered, in paragraph 213 of the judgment under appeal, that the Commission should have examined whether the change to the cost recovery method had an effect on the proportionality of the measure at issue and, therefore, on that measure’s compatibility with the internal market. According to the General Court, the fact that the Commission failed to conduct such an examination and that, therefore, it did not have all the information with regard to the method adopted was an indication that serious difficulties existed on completion of the preliminary examination.

148. Before the Court, the Commission contends that it was not required to conduct that examination. The United Kingdom Government and the Polish Government concur with the Commission, while Tempus takes the opposite view.

149. I consider that the General Court erred in finding, in paragraph 213 of the judgment under appeal, that the Commission must examine whether the change to the cost recovery method described in points 144 and 145 above had an effect on the proportionality of the measure at issue.

150. According to paragraph 69 of the Guidelines, energy aid is considered to be proportionate if the aid amount per beneficiary is limited to the minimum needed to achieve the energy objective sought. ( 62 ) According to paragraphs 228 to 231 of the Guidelines, which concern the proportionality of aid for generation adequacy, the amount of aid should be calculated so as to allow beneficiaries to earn a reasonable rate of return, which is considered to be the case where a competitive bidding process is held on the basis of clear, transparent and non-discriminatory criteria, effectively targeting the defined objective. The aid measure must also have built-in mechanisms to ensure that windfall profits cannot arise, and be constructed so as to ensure that the price paid for availability automatically tends to zero when the level of capacity supplied is expected to meet the level of capacity demanded.

151. At the outset, I note that the Commission questions whether the cost recovery method – which is the method of financing the capacity payments – may be taken into account for determining whether the measure at issue is compatible with the internal market.

152. According to case-law, taxes do not fall within the scope of the provisions of the FEU Treaty relating to State aid, unless they constitute the method of financing an aid measure so that they form an integral part of that measure. For a tax to be regarded as forming an integral part of an aid measure, it must be hypothecated to the aid under the relevant national rules, in the sense that the revenue from the tax is necessarily allocated to the financing of the aid and has a direct impact on the amount of the aid and, consequently, on the assessment of the compatibility of that aid with the internal market. ( 63 )

153. For instance, a tax on pay-television operators was considered to not form an integral part of the aid granted to RTVE, the Spanish radio and television broadcasting organisation which had been entrusted with a public service mandate in those fields, given that the amount of aid was determined on the basis of the net costs relating to the fulfilment of RTVE’s public service mandate. The revenue from the tax had no direct impact on the amount of aid as: (i) any tax revenues that exceeded the costs of fulfilling RTVE’s public service mandate were reassigned, as appropriate, to a reserve fund or the treasury; and (ii) conversely, where the tax revenue was insufficient to cover those costs, the Spanish State was required to make up the difference. ( 64 )

154. By contrast, a charge on advertising companies was considered to form an integral part of the French radio broadcasting aid scheme which it was intended to finance, because: (i) the net revenue from that charge was used wholly and exclusively to finance the radio broadcasting aid, given that the body responsible for allocating the aid did not have the power to allocate the funds available for purposes other than that of such aid; and (ii) the amount of aid had to be determined essentially within the limits of the anticipated revenue from the charge on advertising companies. ( 65 )

155. I recall that, in the present case, the capacity payments are financed by the suppliers’ charge. ( 66 ) That charge is paid by all licensed suppliers of electricity to a body owned and set up by the United Kingdom Government to, inter alia, control the payments disbursed under capacity agreements, namely the Settlement Body, which in turn pays capacity payments to providers. ( 67 )

156. On the one hand, I note that the Commission argues, in support of its position that the suppliers’ charge does not form an integral part of the measure at issue, that it is the amount of aid that determines the amount of the suppliers’ charge, and not vice-versa. In its view, this is because the amount of the suppliers’ charge is calculated once the amount of the capacity payments is known, so as to meet the costs incurred by those payments.

157. On the other hand, I should mention, in support of Tempus’ view that the suppliers’ charge forms an integral part of the measure at issue, that it has not been alleged before the Court that the Settlement Body has the power to allocate the revenue from the suppliers’ charge to purposes other than those of the aid, as was the case in the judgment mentioned in point 153 above – and as was not the case in the judgment mentioned in point 154 above, leading to the finding that the charge in question formed an integral part of the aid measure. I should, however, emphasise that limited information has been provided to the Court in that respect.

158. I should also mention that, according to Tempus, the United Kingdom Government itself has admitted that the cost recovery method affects the amount of aid.

159. It is true, and this was noted by the General Court in paragraph 205 of the judgment under appeal, that the United Kingdom Government acknowledged, in the notification, that the cost recovery method influences the volume of capacity auctioned. The United Kingdom Government’s line of argument, in that regard, is that the method of calculating the suppliers’ charge on the basis of the demand registered during demand peaks gives consumers a clear incentive to reduce their consumption during such peaks, which reduces the amount of capacity needing to be purchased in order to reach the desired reliability standard. As the amount of capacity purchased influences in turn the amount of aid, ( 68 ) this suggests that the cost recovery method has an impact on the amount of aid.

160. However, the United Kingdom Government’s argument holds true only if the method adopted provides adequate incentives for consumers to reduce peak demand. While the United Kingdom Government and the Commission consider that that is the case, Tempus takes the opposite view. Tempus is of the view that, by using as the reference period for calculating the suppliers’ charge the periods between 16.00 and 19.00 on all winter weekdays, rather than the sole three half-hour periods registering the highest demand peaks in winter, the method adopted blunts the price signal that should be sent to consumers to reduce demand during critical demand peaks.

161. Thus, it is uncertain whether the revenue from the suppliers’ charge has a direct impact on the amount of the aid, as the case-law cited in point 152 above requires. Were it not to have such an impact, it would follow: that the cost recovery method does not form part of the measure at issue; that the Commission was under no obligation to take that method into account for the purposes of assessing that measure’s compatibility with the internal market; and that the General Court erred in finding, in paragraph 213 of the judgment under appeal, that the Commission’s failure to examine the effect of the method adopted on the proportionality of the measure at issue was an indication of the existence of serious difficult