2006/941/EC: Commission Decision of 8 November 2006 on State aid C 11/06 (ex N 127/05) which Italy is planning to implement for AEM Torino (notified under document number C(2006) 5276)   (Text with EEA relevance)
Date: 2006-11-08
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, energy industry, public service

L 366/62

EN

Official Journal of the European Union

21.12.2006

COMMISSION DECISION

of 8 November 2006

on State aid C 11/06 (ex N 127/05) which Italy is planning to implement for AEM Torino

(notified under document number C(2006) 5276)

(Only the Italian version is authentic)

(Text with EEA relevance)

(2006/941/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European Commu-
nity, and in particular the first subparagraph of Article 88(2)
thereof,

Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,

Having called on interested parties to submit their comments
pursuant to the provision(s) cited above (1),

Whereas:

PROCEDURE

(1)

(2)

(3)

Italy notified the
By letter dated 21 March 2005,
Commission of the aid it intended to grant to AEM Torino
for the stranded costs in the energy sector. The Commission
asked supplementary information with letters dated 4 May
2005, 19 July 2005, and 14 November 2005. Italy provided
the Commission with further information by letters dated
27 June 2005, 5 July 2005, 3 October 2005, 1st February
2006.

By letter dated 4 April 2006, the Commission informed
Italy that it had decided to initiate the procedure laid down
in Article 88(2) of the EC Treaty in respect of the aid. Italy
did not reply to the letter of the Commission and provided
no observations in the procedure.

The Commission decision to initiate the procedure was
published in the Official Journal of the European Union (2).
The Commission called on interested parties to submit their
comments.

(4)

The Commission received no comments from AEM Torino.
No other interested parties submitted observation either.

DESCRIPTION OF THE MEASURE

(5)

The measure under assessment concerns the reimburse-
ment that Italy intends to grant to AEM Torino for the
stranded costs in the energy sector. AEM Torino is one of
in
the so-called ‘aziende municipalizzate’ and is active,

(1) OJ C 116, 17.5.2006, p. 2.
(2) Cf. footnote 1.

particular, in the energy sector. The measure is based on a
similar measure approved by the Commission on 1 Decem-
ber 2004 (3).

(6)

(7)

(8)

The amount of the aid is EUR 16,338 million, to be given
in the form of grants.

Italy indicated its intention to submit an annual report on
the implementation of the measure.

Italy indicated that the measure under assessment cannot be
cumulated with any other aid.

CUMULATION AND THE DEGGENDORF JURISPRUDENCE

(9) On 5 June 2002, the Commission has taken a negative
decision on State aid granted by Italy to public utilities
owned by local public administrative bodies (hereinafter,
‘municipalizzate’)
tax exemptions and
subsidised loans to public utilities with a majority public
capital holding (4) (State aid C 27/99, ex NN 69/98).

in the form of

(10) The Commission decision declared such non-notified
schemes unlawful and incompatible and imposed to the
Italian State to recover any possible amount disbursed
under those schemes (5).

the aid granted to the municipalizzate

(11) The recovery process has been very slow. Italy has adopted
Law 18 April 2005, n. 62 whose article 27 provides for the
in
recovery of
application of the Commission decision. However, bene-
ficiaries can be allowed to repay the aid in instalments, over
a period of 24 months. Such provision has been enforced
by a decision taken by the Agenzia delle Entrate on 1 June
2005.

(12) According to its own submissions in the pending Case T-
297/02 ACEA v Commission, AEM Torino has benefited
from the aid schemes assessed in the Commission Decision
2003/193/EC, both by benefiting from the tax exemptions
in 1997, 1998 and 1999 and by receiving subsidised loans
from the Cassa Depositi e Prestiti.

(3) Commission decision of 1 December 2004, on case N 490/00, in

particular the part on the ‘stranded impianti’.

(4) OJ L 77, 24.3.2003, p. 21.
(5) Article 3 of the Commission decision stipulates that all necessary
measures must be taken by Italy in order to recover from the
beneficiaries the unlawful aid thus granted.

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(13) Further, according to information provided by Italy, AEM
Torino has
in the ordinary
submitted information,
procedures of tax assessment and collection, pursuant to
the decision of the Agenzia delle Entrate. AEM Torino should
pay the ascertained amount of illegal aid within 60 days as
from the communication of the result of the assessment
that,
information sent by Italian
authorities, should have been notified by the Agenzia delle
Entrate not later than 11 January 2006. No information has
been provided by Italy on the effective payment by AEM
Torino in the deadlines indicated.

according to the

(14) According to the information sent by the Italian authorities
in the present case, AEM Torino would not have benefited
from loans granted by the Cassa Depositi e Prestiti.

(15) Since the Commission cannot control cumulation between
the old illegal aid received in application of the Italian
scheme for the municipalizzate and the new aid under
examination, it has asked Italy to ensure that such effect
was avoided by taking the commitment to pay the aid for
the stranded costs only after the previous illegal aid had
been paid back. Italy declined to do so.

REASONS FOR OPENING THE PROCEDURE

(16) The Commission has

found that

the measure under

assessment should be considered State aid.

(17) The Commission has then analysed the compatibility of the
measure with State aid rules, in particular in light of the
Commission Communication relating to the methodology
for analysing State aid linked to stranded costs (6). It found
the
the methodology used for the calculation of
that
amount and the calculation itself did satisfy all the elements
indicated in the Communication.

(18) However, in its judgement of 15 May 1997 (7), the Court of
Justice has stated that ‘when the Commission examines the
compatibility of a State aid with the common market it
must take all the relevant factors into account, including,
where appropriate, the circumstances already considered in
a prior decision and the obligations which that decision
may have imposed on a Member State’. According to the
Court of
Justice, a new aid may not be assessed as
compatible with the common market as long as the old
unlawful aid has not been repaid, since the cumulative
effect of the aids may distort competition in the common
market to a significant extent.

(19) Therefore, pursuant to the above case-law, the Commission
assesses a new aid measure taking into account if the
beneficiary of the new aid has fully repaid any previous aid

that has to be recovered pursuant to a negative decision
taken by the Commission.

(20) By applying the principle stated in the above judgement to
the present case, the Commission realizes that: a) AEM
Torino has benefited from a previous aid, notably the aid
granted to the municipalizzate (see paragraphs 9 to 15
above), that has to be recovered pursuant to the Decision
2003/193/EC; and b)
the Italian authorities have not
complied yet with the recovery obligation contained in the
Decision 2003/193/EC. It is true that this decision concerns
a scheme, but
illegal and
incompatible aid paid out under that scheme. Moreover,
AEM Torino has expressly admitted that it had benefited
from that scheme and there are no reasons to believe that,
in its particular case, the measures at stake do not constitute
aid, or constitute existing aid, or have been declared
compatible with the common market.

it also orders recovery of

(21) After four years from the adoption of the Decision 2003/
193/EC the Italian authorities still have to recover the illegal
aids. They have informed the Commission that they are still
in the process of fulfilling their recovery obligation by
adopting and implementing the appropriate administrative
measures.

(22)

In particular Italy has indicated that AEM Torino has
submitted a declaration to the Agenzia delle Entrate
committing to pay the sums that the Agenzia will indicate.
However, they have not been able to indicate:

— The amount that AEM Torino has to pay back in the

recovery process;

— The conditions for the payment: Italy indicates that
the company should pay back as of 11 March 2006,
but failed to provide any assurance that the payment
would be complete (including interests) and immedi-
ate (not using the 24 months delay foreseen in the
Law 18 April 2005, n. 62).

(23) Further, it is unclear if AEM Torino has benefited from the
subsidised loans granted by the Cassa Depositi e Prestiti
which were declared illegal by the previous decision, and, in
case it did, if it has reimbursed them.

(6) Adopted by the Commission on 26.7.2001. Available on the
Commission's Competition Directorate General's web site at the
following address: http://europa.eu.int/comm/competition/state_aid/
legislation/stranded_costs/pt.pdf. Communicated to Member States
by letter ref. SG(2001) D/290869 of 6.8.2001.

(7) Court of Justice, 15.05.1997, TWD/Commission,C-355/93, Rec., I-

2549, par. 25-26 (the ‘Deggendorf’ judgement).

(24)

In conclusion, Italy has not clarified whether the previous
aid that in all likelihood has been received by AEM Torino
has been recovered yet. Based on the above mentioned
information, it should be inferred that AEM Torino may
have received and not yet reimbursed certain aid amounts
granted under the scheme declared incompatible by the
Decision 2003/193/EC.

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(25) The Commission is unable to determine the amount of aid
which AEM Torino had already received prior to the new
aid under examination and which still has to be reimbursed
and cannot assess the cumulative effect of both the ‘old’ and
‘new’ aid accruing to AEM Torino and its likely distor-
tionary impact on the common market.

(33)

Italy has not provided any information that would allow the
Commission to assess the potential cumulation. Further-
more, the recovery process has been particularly slow and
difficult. Therefore, the Commission decided on 19 January
2005 to refer the matter to the Court of Justice under art.
88(2) of the EC Treaty, in order to ensure an immediate and
effective execution of the Decision 2003/193/EC.

(26) The Commission, pursuant to the Deggendorf judgement,
must take into account the circumstances already con-
sidered in a prior decision and the obligations which that
decision may have imposed on a Member State and cannot
decide upon the compatibility with the common market of
a new aid as long as the old unlawful aid has not been
repaid.

(34) On 1st June 2006, the Court ruled (8) that, by failing to take
within the prescribed period all the measures necessary for
repayment of the aid found to be unlawful and incompa-
tible with the common market, Italy has failed to fulfil its
obligations under that article.

(27) Further, aid to reimbourse stranded costs cannot be

cumulated with any other aid.

(35) The Commission has to ensure that the granting of the new
aid takes place only at a time when this risk of cumulation
can be excluded, that is only after AEM Torino has fully
reimbursed the illegal and incompatible aid received.

(28) Only a commitment to ensure that the payment of the new
aid would follow after the full reimbursement of
the
previous aid would have avoided any risk of cumulative
the two aid measures and any distortion of
effect of
competition, under the principle established by the Court
in the Deggendorf judgement.

(36) As a consequence, the Commission has to follow closely
that the condition mentioned above is fully respected.

(37) Consequently, Italy should be allowed to grant the new aid
only after having submitted evidence to the Commission
about the full recovery from AEM Torino.

(29)

Italy has been asked repeatedly to take such commitment
but has refused to do so.

CONCLUSIONS

(30) Thus, the cumulative effect of the two aids was present but
could not be fully assessed by the Commission. Therefore,
at
the notified aid could not be declared
compatible with the common market.

that stage,

(38)

In light of the foregoing, the Commission confirms its
assessment that the notified measure concerning aid for
stranded costs that Italy intends to grant to AEM Torino is
to be considered an aid which is compatible with the EC
Treaty.

OBSERVATION BY THE ITALY AND AEM TORINO

(31) Neither Italy nor the beneficiary dispelled the doubts in the
decision to open the procedure. Italy did not reply to the
letter opening this procedure. AEM Torino neither
submitted any information.

ASSESSMENT OF THE MEASURE

(39) However,

the

investigation has

the
Commission is unable to control that the combined effect
of the new aid and the previous illegal and incompatible aid
brings about undue distortion of competition which could
be contrary to the EC Treaty.

confirmed that

(40) Henceforth, acting on the basis of article 7 (4) of Regulation
(EC) n. 659/1999 (9), the Commission concludes that the
notified aid shall not be granted to the beneficiary before it
will have reimbursed the previous illegal and incompatible
aid.

(32) The grounds on which the Commission opened the
procedure have not been disputed. The measure constitutes
an aid that can be declared compatible on the basis of the
methodology for the stranded costs. However, because of
the potential cumulation with a previous aid that
the
beneficiary has not reimbursed, the Commission cannot
control the combined effect of the two aids.

(41) Finally, before granting the aid under assessment, Italy has
to submit to the Commission evidence that the previous aid
has been fully reimbursed by AEM Torino,

(8) ECJ, 1.6.2006, C-207/05, Commission v. Italy, (nyr).
(9) OJ L 83, 27.3.1999, p. 1.

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HAS ADOPTED THIS DECISION:

Article 1

The aid which Italy is planning to implement for AEM Torino
amounting to EUR 16,338 million for the stranded costs is
compatible with the common market, subject to the conditions
set out in Article 2.

Article 2

The aid referred to in article 1 may not be granted before Italy
has submitted evidence to the Commission that AEM Torino
either has not benefited from previous aid granted under the
‘municipalizzate’ scheme declared illegal and incompatible by the
Decision 2003/193/EC or that it has reimbursed with interests
the previous aid received under the above-mentioned scheme.

Article 3

Italy shall
inform the Commission, within two months of
notification of this Decision, of the measures taken to comply
with it.

This Decision is addressed to Italy.

Article 4

Done at Brussels, 8 November 2006.

For the Commission
Neelie KROES
Member of the Commission