WRITTEN QUESTION E-0368/00 by Benedetto Della Vedova (TDI) to the Commission. Transfer of part of the electricity generation capacity of ENEL S.p.A., the former Italian state monopoly in this sector.
Date: 2000-02-14
Institutions: European Parliament, Provisional data
Subjects: Italy, electrical industry, energy production, free movement of capital, liberalisation of the market, negotiated contract, privatisation, production capacity, restriction on competition, right of establishment

21.11.2000

EN

Official Journal of the European Communities

C 330 E/141

(2000/C 330 E/158)

WRITTEN QUESTION E-0367/00

by Marie-Noºlle Lienemann (PSE) to the Commission

Subject: Reduced VAT rates for district heating systems(cid:146) customers

(14 February 2000)

To date, the supply of gas and electricity appears in the Community list of projects to which the Member
States of the European Union may apply a reduced VAT rate. On the other hand, this is not the case for
customers of district heating networks.

However, these urban networks often help in a reprocessing of domestic waste and in energy diversifica-
tion, which is a European Union objective; finally, with regard to the social requirements which determine
the reduced rate, whether the consumer uses gas, electricity or a district heating system, the tax burden
should be the same, especially since the consumer often hardly has any choice (people living in blocks of
flats, etc.).

Can the Commission please explain what could have justified such an imbalance between the different
types of energy supply? Does it intend to correct this imbalance by proposing the inclusion of agreements
concluded with district heating networks in the list of projects which may benefit from reduced VAT rates?

Answer given by Mr Bolkestein on behalf of the Commission

(22 March 2000)

Current Community legislation does not allow Member States to apply a reduced VAT rate to district
heating systems(cid:146) customers.

The current rules were adopted after negotiations within the Council which led to the amendment of the
Commission(cid:146)s original proposal (1) dropping the possibility of applying a reduced VAT rate to natural gas
and electricity.

In its proposal on the harmonisation of rates the Commission stated that the obligatory reduced rate
should apply to energy products for heating and lighting in order to avoid distortions.

The Commission will examine this matter at the next meeting on the contents of Annex H to the Sixth
VAT Directive (77/388/EEC) (2) to which the reduced rate applies. It cannot, however, at this stage predict
the outcome of the Council(cid:146)s discussions on any new proposals.

(1) OJ C 250, 18.9.1987, amended by OJ C 44, 19.2.1992.
(2) OJ L 262, 15.10.1977.

(2000/C 330 E/159)

WRITTEN QUESTION E-0368/00

by Benedetto Della Vedova (TDI) to the Commission

(14 February 2000)

Subject: Transfer of part of the electricity generation capacity of ENEL S.p.A., the former Italian state

monopoly in this sector

As part of the process of privatising and liberalising the electrical energy production sector, the Italian
Government recently decided in its capacity as controlling shareholder, and in accordance with the
relevant legal provisions, to remove 21 plants with a total capacity of 15 thousand megawatts from the
former state monopoly ENEL S.p.A (equal to about a quarter of its production capacity) and hand them
over to three separate and newly established companies: Eurogen S.p.A., Elettrogen S.p.A. and Interpower
S.p.A.

On 25 January 2000 the Italian Cabinet passed a decree laying down the procedures for the transfer
involving the three private companies, stipulating that it should be done through private negotiation,
under the control of ENEL S.p.A. and under the supervision of the Treasury Minister and the Minister for
Industry, as well as with the assistance of the advisory committee for privatisations.

C 330 E/142

Official Journal of the European Communities

EN

21.11.2000

In order to ensure greater transparency and efficiency, the Italian Government could have opted for an
international tendering procedure or a public share offer, which would have ensured that the companies
were acquired by Italian or foreign purchasers with better knowledge of how to manage privatised
companies and who would have been prepared to pay a higher price.

In the light of the above, does the Commission not think that the procedure followed by the Italian
Government betrays its desire to control the ownership structure among operators on the national
electricity market and that this is in breach of Community rules which protect competition and the free
movement of capital, as well as consumer rights in the European Union?

Does the Commission not think that the Italian Government(cid:146)s attitude is designed to allow ENEL S.p.A. to
abuse the dominant position which it enjoys, in violation of Article 82 of the EC Treaty, point (b) of which
prohibits practices consisting of (cid:145)limiting production, markets or technical development to the prejudice of
consumers(cid:146), in other words practices designed to create barriers to market entry by (cid:145)unwanted(cid:146) competi-
tors?

Answer given by Mr Monti on behalf of the Commission

(31 March 2000)

The Commission has examined the decree issued by the Italian Treasury Minister on 25 January 2000
specifying the conditions for the sale of production plants operated by ENEL, the Italian state electric
power company.

In so far as the free movement of capital and establishment is concerned, the position of the Commission
was set out in detail in its communication on certain legal aspects concerning intra-Community invest-
ment (1). The Commission has had concerns on certain aspects of the legal regime in Italy governing
privatisation, as well as in certain other Member States. These concerns are reflected in several cases
currently before the Court of justice (C-58/99 in the case of Italy). It might be noted that the issues in
contention have generally concerned the reservation of special powers to the state in companies that have
been, or are being, privatised, or explicit restrictions on foreign participation. With the guarantee that
Community(cid:146)s rules on free movement of capital and establishment and the principles settled by the Court(cid:146)s
case-law and set out in the Communication are respected, the Commission would not feel that the freedom
of capital movements and establishment would extend to prescriptions on how exactly a privatisation
should be organised or, should this not be by way of a public offering, on the Member State(cid:146)s freedom of
choice as to which interested party a particular company is sold. Nevertheless, the implementation of such
a decision,
if restrictive of free movement of capital, must be based on measures which fulfil four
conditions settled down in the above-mentioned case-law: they must be applied in a non-discriminatory
manner; they must be justified by imperative requirements in the general interest; they must be suitable for
securing the attainment of the objective that they pursue; and they must not go beyond what is necessary
in order to attain it.

Having studied the ministerial decree in the light of Community competition rules, the Commission notes
above all that whatever procedure is followed, the sale will enable new operators to acquire production
capacity hitherto in the hands of ENEL. The ultimate objective of the decree is to allow new competitors to
enter the electricity production market. Thus, the measure in itself pursues an objective favourable to
competition.

The Honourable Member underlined the risk that the sale procedures followed by the Government might
enable ENEL to abuse its dominant position. The Commission considers there is no evidence for the time
being that the procedure selected will enable ENEL to abuse its dominant position.

(1) OJ C 220, 19.7.1997.