EN Official Journal of the European Union CE 70/101

(2004/C 70 E/102)

WRITTEN QUESTION E-2457/03

by Patricia McKenna (Verts/ALE) to the Commission

(23 July 2003)

Subject: Anti-competitive actions of the Irish State in the electricity market

On 9 July the Irish State announced the award of renewable energy Power Purchase contracts under the AER competitive tendering type support scheme, which the Commission previously cleared as State aid. The main beneficiary is a subsidiary of the national electricity utility ESB. ESB's Kish Consortium has won 100 % of the offshore wind contracts.

Would the Commission agree that such awards hinder the liberalisation process, when ESB already controls 88 % of Irish electricity generation, as well as owning the transmission network, and also undermines commitments by both the State and ESB to reduce its share to some 60 %?

Would the Commission agree that allowing ESB to allocate large amounts of equity from its balance sheet to its subsidiaries so that they can undercut commercial entities constitutes a market distortion and contradicts a true arms-length relationship between these entities, for which the Energy Regulator had produced apparently inadequate regulations?

Does the Commission consider it proper for the Irish State to provide this kind of support to companies of which it is the overwhelming majority owner, where additionally, the State proposes to place these ownerships on the market in due course?

Does this action alter the Commission's conclusion under its State aid approval that there were no State aids to ESB?

How does this action accord with the Directive on public procurement, as regards the participation of public undertakings?

Will the Commission now request the Irish State to immediately halt the implementation of the awards to ESB and partners while the Commission investigates these questions?

Answer given by Mr Monti on behalf of the Commission

(15 September 2003)

The Commission decision on state aid for the AER scheme (1) does not lay down any requirement as to the nature of tenderers. It is designed to increase the volume of electricity produced in Ireland using renewable energy sources and there is no reason why Electricity Supply Board (ESB) subsidiaries should not participate in this increase provided that they meet the requisite conditions to win tenders. It should also be noted that Article 9(1)(b) of the Utilities Directive (93/38/EEC (2)) provides for a specific derogation from the Directive even where energy purchases are concerned and that, in particular, the Directive does not apply to ‘contracts which the contracting entities (…) award for the supply of energy or of fuels for the production of energy’. One of the contracting entities listed in that Directive is ESB.

The fact that ESB is boosting its capacity to generate electricity from renewable energy sources is not incompatible with the fact that its share of total electricity production in Ireland is declining, since this decline may be due to a reduction in its production capacity from conventional sources.

The Commission takes the view that, as ESB's majority shareholder, the Irish State is free to manage the company's capital as it sees fit, provided that it acts in accordance with the market-economy investor principle. In the case in point, the Commission does not possess any information suggesting that ESB subsidiaries have received aid from their parent company in the form of, say, supplies at lower-than-market prices.

The Commission therefore has no intention of amending its above decision so as to exclude ESB subsidiaries from the AER scheme.

The aforementioned Commission decision does not exclude the possibility of selected green electricity producers, including some ESB subsidiaries, receiving state aid. It merely rules out the possibility of ESB, as the channel for aid and the recipient of state subsidies which it redistributes in full to selected green electricity producers, itself receiving aid within the meaning of Article 87(1) of the EC Treaty on that basis. As such, the Commission's conclusions are not affected by the facts as reported by the Honourable Member.

Accordingly, the Commission does not intend to intervene in the award of contracts to ESB or its partners.

(1) Commission decision in case N 553/01, OJ C 45, 19.2.2002.

(2) Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, OJ L 199, 9.8.1993.