CELEX: 62010CC0242
Language: en
Date: 2011-07-21
Title: Opinion of Mr Advocate General Cruz Villalón delivered on 21 July 2011.#Enel Produzione SpA v Autorità per l'energia elettrica e il gas.#Reference for a preliminary ruling: Tribunale amministrativo regionale per la Lombardia - Italy.#Directive 2003/54/EC - Internal market in electricity - Electricity generating installations essential to the operation of the electricity system - Obligation to submit tenders on the national electricity exchange market in accordance with the limits and criteria laid down by the electricity transmission and distribution system operator - Dispatching and balancing service - Public service obligations.#Case C-242/10.

OPINION OF ADVOCATE GENERAL
      CRUZ VILLALÓN
      delivered on 21 July 2011 (1)
      
      Case C‑242/10
      ENEL Produzione SpA
      v
      Autorità per l’energia elettrica e il gas
      (Reference for a preliminary ruling from the Tribunale amministrativo regionale per la Lombardia, Italy)
      (Directive 2003/54/EC– Internal market in electricity – Dispatching and balancing service – Installations essential to the operation and security of the electricity system – Public service obligations imposed on certain electricity producers)
      I –  Introduction
      1.        By the present reference for a preliminary ruling, the Tribunale amministrativo regionale per la Lombardia (Regional Administrative
         Court, Lombardy) essentially asks the Court of Justice whether certain obligations imposed, in respect of ‘dispatching and
         balancing’ services, on electricity companies which own installations categorised as ‘essential’ to the operation of the Italian
         electricity system are compatible with European Union (‘EU’) law.
      
      2.        The rules governing ‘essential installations’ are intended to meet the requirements of dispatching and balancing services,
         which – as is well known – are intimately connected to the security of the network and the regularity of supply. Viewed in
         that light, therefore, the case clearly falls within the scope of Article 11 of Directive 2003/54/EC of the European Parliament
         and of the Council of 26 June 2003 concerning common rules for the internal market in electricity and repealing Directive
         96/92/EC. (2) However, the Italian legislature and the regulatory authorities indicate that the contested measure also pursues the wider
         aim of controlling the prices which final customers pay for electricity. That aspect, in combination with the particular features
         of the Italian rules, mean that the analysis must be supplemented by a reference to Article 3(2) of Directive 2003/54, which
         has been invoked by a number of the parties to these proceedings, in so far as it allows Member States, in specific circumstances
         and subject to certain conditions, to impose public service obligations on electricity undertakings. The judgment in Federutility (3) – the first case-law concerning those rules on public service obligations in the energy sector (4) – provides a direct precedent for the interpretation of Article 3(2) of Directive 2003/54. In those terms, the present case
         will enable the Court to give a ruling on the application of that provision to a situation which clearly differs from the
         circumstances examined in Federutility.
      
      II –  Legal framework
      A –    EU law
      3.        Article 3 of Directive 2003/54 governs public service obligations and customer protection. Article 3(2) provides: 
      
      4.        ‘Having full regard to the relevant provisions of the Treaty, in particular Article 86 thereof, Member States may impose on
         undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate
         to security, including security of supply, regularity, quality and price of supplies and environmental protection, including
         energy efficiency and climate protection. Such obligations shall be clearly defined, transparent, non- discriminatory, verifiable
         and shall guarantee equality of access for [EU] electricity companies to national consumers. In relation to security of supply,
         energy efficiency/demand-side management and for the fulfilment of environmental goals, as referred to in this paragraph,
         Member States may introduce the implementation of long term planning, taking into account the possibility of third parties
         seeking access to the system.’
      
      5.        Under Article 3(9) of Directive 2003/54, ‘Member States shall, upon implementation of this Directive, inform the Commission
         of all measures adopted to fulfil universal service and public service obligations’.
      
      6.        Paragraph 2 of Article 11, on dispatching and balancing, (5) provides that ‘[t]he dispatching of generating installations and the use of interconnectors shall be determined on the basis
         of criteria which may be approved by the Member State and which must be objective, published and applied in a non-discriminatory
         manner which ensures the proper functioning of the internal market in electricity. They shall take into account the economic
         precedence of electricity from available generating installations or interconnector transfers and the technical constraints
         on the system.’ In addition, Article 11(6) provides: ‘Distribution system operators shall procure the energy they use to cover
         energy losses and reserve capacity in their system according to transparent, non-discriminatory and market based procedures,
         whenever they have this function.’
      
      B –    National legislation (6)
      
      1.      AEEG Decisions No 168/03 and No 111/06 
      7.        On 30 December 2003, the Autorità per l’energia elettrica e il gas (the Regulatory Authority for Electricity and Gas; ‘AEEG’)
         adopted Decision No 168/03, (7) which lays down the conditions for the operation of the public service of dispatching in order to ensure that the demand
         for electricity is satisfied in conditions of adequate security.
      
      8.        Decision ERG/alt No 111/06, adopted by the AEEG on 9 June 2009, (8) amended Decision No 168/03, authorising Terna Rete Elettrica Nazionale SpA – the electricity system operator in Italy with
         responsibility for dispatching throughout the national territory (9) – to determine the installations essential to the security of the electricity system, a mechanism which makes it possible
         to identify the resources needed for performance of the dispatching service.
      
      2.      Law No 2/09
      9.        Law No 2 of 28 January 2009 (10) introduced a number of amendments to the rules on essential installations laid down in Decision No 111/06. Article 3(10)(d)
         of Law No 2/09 refers to the reform of the dispatching services market, the management of which is entrusted ‘to the operator
         of the transmission and dispatching service in order to make it possible for the resources needed to ensure the security of
         the electricity system to be selected on the basis of the various services provided by each resource to the system, by means
         of an evaluation which is transparent and, in economic terms, efficient. Dispatching services shall be provided through the
         purchase of the necessary resources by the authorised operators. On the dispatching services market, the price of energy shall
         be determined by reference to the various prices which each authorised user bids on a binding basis and which are accepted
         by the dispatching services operator, preference being given to bids offering the lowest prices until all requirements are
         met in full …’
      
      10.      Article 3(11) of Law No 2/09 provides that, in the light of the exceptional international economic crisis and its effects
         on the prices of raw materials, and ‘in order to guarantee lower costs for families and businesses and to reduce the price
         of electricity’, the AEEG must ensure that its decisions, including those relating to electricity dispatching, are consistent
         with the following principles and criteria:
      
      ‘(a)      entities which have at their individual disposal installations or groups of installations essential for the purposes of meeting
         dispatching service requirements, as identified on the basis of the criteria laid down by the [AEEG] in accordance with the
         principles set out in this point, shall be required to submit tenders on the markets under the conditions laid down by the
         [AEEG], which shall implement specific mechanisms designed to minimise the costs for the electricity system and to secure
         fair remuneration for producers: in particular, installations shall be regarded as essential for the purpose of meeting dispatching
         service requirements, solely during periods in which the conditions set out below are satisfied, where they are technically
         and structurally vital for resolving network congestion or for maintaining adequate security levels for the national electricity
         system for significant periods of time;
      
      …’
      3.      AEEG Decision No 52/09
      11.      On 29 April 2009, the AEEG adopted, pursuant to Law No 2/09, Decision ARG/elt No 52/09 ‘Decision No 52/09’), which amends
         Decision No 111/06, introducing new rules governing ‘installations essential to the operation of the electricity system’.
      
      12.      In accordance with Article 63(9) of Decision No 111/06, amended by Article 1(c) of Decision No 52/09, the electricity transmission
         system and dispatching services operator (Terna) is required to draw up and publish annually a list of installations and groups
         of installations which are regarded as essential to the operation and security of the electricity system, indicating in each
         case, among other information, the reasons justifying the entry of that installation on the list and the periods during which
         it is considered to be essential.
      
      13.      Under Article 63(2) of Decision No 111/06, Terna is to regard as essential:
      
      ‘(a) all installations without which it would not be possible to ensure adequate standards of security management for the
         electricity system during the following calendar year, particularly as a result of the planned maintenance of other generating
         installations and network components;
      
      (b) any other installation which forms part of an essential group of installations determined in accordance with Article 63(6),
         regardless of the installations referred to in point (a)’.
      
      14.      When installations are identified as essential or as forming part of a group of essential installations, the owners of such
         installations are required to submit bids to the Italian Power Exchange – as subdivided into the day-ahead market, the adjustment
         market and the ancillary services market – ‘in accordance with the requirements and criteria laid down by Terna with reference
         to each market’ (Article 64(2)). Bids submitted on the day-ahead and adjustment markets must be ‘zero equivalent’ (Article 64(5)).
         The price of the bids submitted on the dispatching services market, which corresponds to the volumes in respect of which the
         installation concerned is regarded as essential to the security of the network, must be equivalent, for each period concerned,
         to the selling price of electricity on the day-ahead market in the area where the generating installation is located (Article 64(7)).
         If the payment for the energy supplied under the mandatory rules is not sufficient to cover the recognised variable costs
         of each production facility, Terna is required to reimburse the difference to the operators (Article 64(8)).
      
      15.      Decision No 52/09 provides for two alternatives to the ordinary regime applicable to essential installations.
      
      16.      On the one hand, under Article 63(11) of Decision No 111/06 (the wording of which was provided by Decision No 52/09), owners
         of essential installations may ask the AEEG for application of the ‘cost recovery rules’, which make it possible to obtain
         a special payment, determined by the AEEG, equivalent to the difference between the eligible production costs incurred by
         the essential installation and its income in the period during which it is on the list of essential installations (Article 63(13)).
         In order to have those rules applied to them, operators must comply with the obligations laid down in Article 65.
      
      17.      On the other hand, under Article 65 bis (inserted by Decision No 52/09), owners of essential installations or groups of such
         installations can avoid the ordinary regime applicable to them by entering into a contract with Terna under which predetermined
         volumes of energy (generated by all the installations, not just by essential installations) is made available to Terna at
         prices which remain, in any event, subject to adjustment (sale bids at a zero-equivalent price and purchase bids equal to
         the area price on the day-ahead market) or to maximum and minimum thresholds. 
      
      III –  The main proceedings and the question referred for a preliminary ruling
      18.      In its capacity as a company which produces electricity and owns installations categorised as essential, Enel Produzione SpA
         (‘Enel’) challenged AEEG Decision No 52/09 before the Tribunale amministrativo regionale per la Lombardia, claiming that it
         is contrary to Article 11(2) and (6) of Directive 2003/54.
      
      19.      The referring court considers that the national legislation concerned may be incompatible with the rules of the Treaty on
         freedom of establishment, freedom to provide services and the free movement of goods and capital, and that it cannot be justified
         under Article 86(2) EC (now Article 106(2) TFEU) or under Article 3(2) of Directive 2003/54. It has accordingly referred the
         following question to the Court of Justice for a preliminary ruling:
      
      ‘Do Articles 23, 43, 49 and 56 of the EC Treaty and Article 11(2) and (6) and Article 24 of Directive 2003/54 preclude national
         legislation which, without the European Commission having been notified of it, requires on a permanent basis certain electricity
         producers which are, in certain circumstances, essential for the purpose of meeting the requirements of the demand for dispatching
         services, to submit bids on the energy exchange markets according to programmes determined by the system operator in accordance
         with external rules, and which prevents producers from freely determining the remuneration for such bids by linking the remuneration
         to criteria which have not been pre-determined in accordance with transparent, non-discriminatory and market-based procedures?’
      
      IV –  The procedure before the Court
      20.      The reference for a preliminary ruling was lodged at the Registry of the Court on 17 May 2010.
      
      21.      Written observations were submitted by Enel, Terna, the Austrian and Italian Governments and by the Commission.
      
      22.      At the hearing, held on 11 May 2011, the representatives of Enel, Terna, the Italian Republic and the Commission presented
         oral argument.
      
      V –  Analysis of the question referred for a preliminary ruling
      A –    The tasks of balancing and dispatching in the electricity system under Directive 2003/54
      23.      The rules governing dispatching and balancing services laid down in Article 11 of Directive 2003/54 constitute, together with
         Article 3(2) of that directive and recitals 17 and 24 in the preamble thereto, a concrete expression of the compromise between
         liberalisation and public service which that measure enshrines. While not excluding the possibility that dispatching and balancing
         services may be handled on the free market, recital 17 and Article 11 of Directive 2003/54 (which are reproduced virtually
         verbatim in recital 35 and Article 15 of Directive 2009/72/EC) (11) open the door to partial, properly localised control by the public authorities in this field.
      
      24.      Article 11 of Directive 2003/54 makes it possible to identify separately, in very general terms, the different tasks which
         the services of dispatching and balancing entail. The first task consists in dispatching or ‘directing electricity traffic’
         in the system: when the system operator undertakes this task, it will dispatch generating installations located in its area
         according to the requirements of demand. (12) Under Article 11(2) of the directive, dispatching must be carried out in accordance with the order of ‘economic precedence’
         of the bids from the various installations, which is equivalent to applying the programmes resulting from the day-ahead and
         the infra-day markets. (13) The order of economic precedence reflected in the programmes may be altered specifically by two different factors: (i) where
         the Member State in question has decided ‘to give priority to generating installations using renewable energy sources or waste
         or producing combined heat and power’ (a possibility provided for in Article 11(3) of Directive 2003/54); (14) and (ii) where ‘technical constraints on the system’ mean that it cannot be applied strictly (Article 11(2) of the directive).
      
      25.      Secondly, in connection with those technical constraints on the system, dispatching also encompasses a number of tasks aimed
         at resolving the technical constraints identified in the programmes or liable to occur in real time, regulating voltage, managing
         differences between generation and consumption and reserving capacity. Strictly speaking, those are technical dispatching
         services. (15) They are specifically referred to in Article 11(6) of the directive and, so far as tasks designed to ensure balance in the
         system are concerned, in Article 11(7), which is not in issue in these proceedings. Under Article 11(6), the procurement of
         the energy which system operators use ‘to cover energy losses and reserve capacity’ must be carried out in accordance with
         ‘transparent, non-discriminatory and market based procedures’. (16)
      
      B –    The Italian electricity sector and its regulation. The contested measure
      26.      The first measures on the opening-up of the Italian electricity sector, which were required under Directive 96/92, were adopted
         in Italy by means of the ‘Bersani Decree’. (17) A large number of subsequent legislative provisions supplemented that legislation, bringing the Italian electricity market
         into line with Directive 2003/54. 
      
      27.      In general terms, pursuant to those provisions, electricity may be sold in Italy either in the context of bilateral, free
         negotiation prior to the time of supply or through participation in the electricity market or power exchange, which takes
         place closer to the time of supply. In turn, the electricity market comprises two stages or successive markets – known as
         the day-ahead market and the infra-day market – in which all electricity producers may participate. Once that first stage
         closes, the dispatching services market opens.
      
      1.      The day-ahead and infra-day markets
      28.      First of all, the day-ahead market is the trading centre for bids to buy and sell electricity for each hour of the day of
         supply. In reality, it opens nine days before the day of supply and closes the day before at 09.00 hours, the time when, on
         the basis of that trading, preliminary programmes for in-put and off-take of electricity (who will generate the electricity
         and who will consume it) are established for each point in the network and for each hour of the following day.
      
      29.      The infra-day market (formerly called ‘the adjustment market’) takes place next, still on the day before the day of supply,
         and it is the centre of new trading which enables operators to make adjustments or changes to the preliminary programmes resulting
         from the day-ahead market.
      
      2.      The tasks of dispatching and balancing: the dispatching services market
      30.      It is practically impossible, however, for the programmes resulting from those two markets to adjust exactly to the fluctuations
         in electricity supply and demand which actually occur, in real time, on the day of supply. Since electricity is not a storable
         product, it is necessary, at all times on the day of supply, for demand to match precisely the corresponding generation of
         electricity.
      
      31.      In its capacity as transmission system operator, Terna carries out dispatching and balancing of generating installations,
         a service intended to ensure at all times that the supply of electricity matches demand in the national transmission system
         and thereby to guarantee the security and continuity of the provision of electricity. (18)
      
      32.      For the provision of what I have described as technical dispatching services, the Italian electricity system operator – Terna
         – uses the dispatching services market. On that market, therefore, demand originates from Terna and supply from the owners
         of installations which have been categorised as essential.
      
      33.      On the dispatching services market, entities which own essential installations offer to make their installations available
         to Terna at a specified time, and Terna will inform them whether, at that time, they need to feed into the system more or
         less electricity than the planned volume. There seems to be agreement that this type of service is considerably more expensive
         for electricity producers, in view of the unpredictable, almost random, nature of demand and the need to satisfy it immediately
         with a high reaction capacity. The costs which Terna incurs in procuring electricity for the provision of that service is
         offset by the ‘uplift’, for which all consumers are billed.
      
      34.      In consequence, the dispatching services market is dependent on the identification of a number of installations which are
         categorised as ‘essential’ to the operation and security of the electricity system. As a result of that categorisation, owners
         of the installations concerned are subject to special rules on participation in the electricity markets, which were significantly
         amended in 2009.
      
      3.      The 2009 amendment: the new rules governing essential installations
      35.      The list of essential installations is drawn up each year by Terna in accordance with the criteria and the procedure laid
         down for those purposes in Article 63 of AEEG Decision No 111/06, as amended by Article 1(c) of Decision No 52/09. 
      
      36.      According to the order for reference, the system in force before the 2009 amendment ‘did not prove to be particularly effective’
         because of the small number of power stations declared to be essential and because the status of ‘essential’ applied exclusively
         to individual installations and not to the undertakings that owned them. Consequently, ‘the situation could arise in which
         making an individual installation subject to the mandatory rules was not enough to prevent the market being dominated by certain
         operators which, since they owned other installations that were, as a whole, vital for the purpose of meeting the requirements
         of dispatching, could, in any event, unilaterally determine the selling price for the marginal amount of electricity needed
         under certain network operating conditions.’
      
      37.      In terms of the electricity subject to intervention, the significance of the amendment is beyond question. According to information
         provided by Enel (which the other parties to the proceedings have not disputed), prior to Law No 2/09 and Decision No 52/09,
         categorisation as essential affected a generating capacity of approximately 500 MW in total, whereas, after the amendment,
         10 413 MW of the electricity generated by Enel came to be regarded as essential; that is to say, in all likelihood, in addition
         to other volumes produced by other electricity generating undertakings about which the Court has no information. 
      
      38.      Accordingly, Terna is responsible for determining, in relation to each owner of essential installations, the number of hours
         and the demand which are considered to be essential. The remaining hours and demand are ‘free’ for the producer, which may
         offer on the market the volume it wishes at the price of its choosing. On the other hand, bids must be made for the hours
         and demand categorised as essential on the day-ahead market, the infra-day market and the dispatching services market ‘in
         accordance with the requirements and criteria laid down by Terna … with reference to each market’ (Article 64(2) of Decision
         No 111/06).
      
      39.      That means, first, that Terna SpA must inform the owner of an essential installation of the volume (hours/demand) of electricity
         which it must offer on the day-ahead and infra-day markets. That electricity must be offered at ‘zero price’, with the effects
         which I shall describe. In parallel, purchase bids are made at an unspecified price (Article 64(5) and (6) of Decision No 111/06).
         As the Italian Government has explained, this ensures that Terna selects bids relating to essential installations on those
         markets (in accordance with the criterion of ‘economic precedence’). The mechanism of ‘zero-price bids’ also appears to reflect
         the fact that all the essential generating capacity will be paid for at a price that is different from the price which could
         have been obtained on the free market.
      
      40.      Secondly, owners of essential installations must also offer on the dispatching services market a volume of electricity pre-determined
         by Terna, which pays for it at the selling price of electricity on the day-ahead market for the same area. If that average
         price is lower than the variable costs, the difference will be reimbursed to the producer (Article 64(7) and (8) of Decision
         No 111/06). 
      
      41.      Alternatively, owners of essential installations may request that the AEEG apply what is known as the ‘cost recovery system’,
         which makes it possible to obtain a specific payment equivalent to the difference between the eligible generating costs incurred
         by the essential installation (fixed and variable) and the income obtained during the period in which it is on the list of
         essential installations (Article 63(13) of Decision No 111/06). That system makes it possible, therefore, to guarantee that
         both the fixed and variable costs of essential installations are covered. However, the installation concerned is not only
         subject to the ordinary rules on bids applicable to essential installations for the periods and the generating capacity declared
         to be essential: it is also subject to additional restrictions in relation to non-essential or ‘free’ volumes and periods.
         More specifically, such volumes and periods must be offered on all the markets at a price which does not exceed the variable
         costs or, as the case may be, the zero-equivalent price (Article 65(3) of Decision No 111/06).
      
      42.      Lastly, owners of essential installations have the right to avoid the inclusion of their installations on the list by concluding
         with Terna one of the two types of contract provided for under Article 65 bis of Decision No 111/06. In both cases, the operator
         makes available to Terna a pre-determined volume of electricity (generated by all its installations, and not just the ones
         which could have been classified as essential) for a fixed price which is equivalent to the uplift (Article 65 bis (1)) or
         to the fixed annual price per MW of an installation with cutting-edge technology. Enel (like the other companies which have
         lodged appeals in parallel proceedings) opted for that alternative mechanism under Article 65 bis.
      
      4.      Summary
      43.      To summarise, the new Italian legislation entails a twofold State intervention in respect of all electricity generating capacity
         which is categorised as essential.
      
      44.      First of all, the producer is not allowed free access to the day-ahead and infra-day markets, with the result that it is not
         paid for the electricity concerned at the price which might have been bid and obtained on those markets (19) but rather at the average market price for the same area (which appears to be an average of the different prices of electricity
         throughout the day). 
      
      45.      Secondly, owners of essential installations are required to participate in the dispatching services market, in which there
         is also a certain degree of intervention: the free operation of that market would have led to the development of a free price
         for the electricity needed to provide technical dispatching services, as occurs in other countries. That price would normally
         be higher than the average price which Terna currently pays, in view of the characteristics of those services and the time
         when they are usually required (logically, the calculation of the average price includes higher prices and lower prices).
         
      
      46.      Lastly, the amendment as a whole accords a fundamental role in the operation of the system of essential installations to Terna,
         which plays an important part in drawing up the list of essential installations and in setting the price which is paid for
         the electricity concerned.
      
      C –    Preliminary remarks on the question referred for a preliminary ruling
      47.      The referring court asks the Court of Justice whether, in the light of the characteristics of the rules in force in Italy
         governing essential installations, those rules are compatible with Articles 23, 43, 49 and 56 EC and with two specific provisions
         of Directive 2003/54: Article 11(2) and (6) and Article 24. That question calls for a number of preliminary remarks on my
         part.
      
      48.      First of all, the reference to the Treaty requires clarification. To my mind, Article 56 EC (Article 63 TFEU), concerning
         restrictions on the free movement of capital, has absolutely no relevance to this case. The question referred does not explain
         how that provision of the Treaty may be relevant to the analysis of the contested measure.
      
      49.      However, in principle, there is no reason why it is not relevant to examine the Italian legislation from the point of view
         of Articles 23 EC (Article 28 TFEU), 43 EC ­(Article 49 TFEU) and 49 EC (Article 56 TFEU), which prohibit, respectively, all
         restrictions on the free movement of goods, freedom of establishment and freedom to provide services. 
      
      50.      In accordance with recital 4 to Directive 2003/54, ‘[t]he freedoms which the Treaty guarantees European citizens – free movement
         of goods, freedom to provide services and freedom of establishment – are only possible in a fully open market, which enables
         all consumers freely to choose their suppliers and all suppliers freely to deliver to their customers.’ Those freedoms laid
         down in the Treaty are not absolute; they may be restricted in some circumstances on public interest grounds, provided that
         certain conditions are satisfied. Articles 3(2) and 11(6) of Directive 2003/54 make provision for certain derogations from
         the freedoms, codifying and harmonising the specifically applicable conditions in order to ensure their lawfulness at Community
         level, in conformity with the provisions of the Treaty, to which specific reference is made in some cases. 
      
      51.      In view of the foregoing, and in accordance with settled case-law, (20) I believe that the contested measure must be examined principally in the light of the provisions of Directive 2003/54, which
         must, if necessary, be interpreted in the light of the freedom of establishment and the freedom to provide services, as enshrined
         in the Treaty. As I pointed out above, the reference for a preliminary ruling refers only to two articles of Directive 2003/54:
         Article 11(2) and (6) and Article 24.
      
      52.      As regards Article 24 of Directive 2003/54, it should be noted at the outset that this refers to ‘safeguard measures’ which
         Member States may temporarily take ‘[i]n the event of a sudden crisis in the energy market and where the physical safety or
         security of persons, apparatus or installations or system integrity is threatened’. The referring court expressly discounts
         the possibility of including the rules governing essential installations in that category of safeguard measures because, in
         its opinion, those rules are of ‘indefinite duration’. To my mind, regardless of whether the contested measure is permanent
         or temporary, at no point was it adopted in response to the extraordinary circumstances which Article 24 so specifically requires.
         Accordingly, there is no doubt in my view that Article 24 is not applicable to this case. That means – to my way of thinking
         and regardless of the statements made below – that the examination of the rules governing essential installations must focus
         only on the differences between those rules and Article 11 of Directive 2003/54.
      
      53.      Lastly, on another note, it should be observed that the referring court describes the contested measure in unambiguous terms.
         In particular, the referring court states categorically that the rules governing essential installations are permanent and
         that remuneration for bids under those rules is linked to ‘criteria that have not been predetermined according to transparent,
         non-discriminatory and market-based procedures’, thereby directly precluding any possibility of applying Article 11, which
         specifically lays down those requirements for its application. Furthermore, it precludes the application of Article 3(2),
         which also provides that the procedure for imposing public service obligations must be transparent and non-discriminatory,
         in addition to requiring (implicitly) that the measure in question be temporary. (21)
      
      54.      Accordingly, strict acceptance of every premiss in the question would necessarily lead to the reply that a measure of the
         kind described therein is contrary to the wording of Article 11(2) and (6) of the directive. It is clear, however, that this
         way of presenting the situation is a circular argument. What is required is a determination of whether the Italian rules do
         in fact have the characteristics which the referring court attributes to them, subject always to the jurisdiction of that
         court to interpret the scope and meaning of what is, in short, a national measure. Only then will it be necessary to analyse
         those characteristics in the light of Directive 2003/54. 
      
      D –    The rules governing essential installations in the light of Directive 2003/54
      1.      The possibility of price intervention on the dispatching services market
      55.      Enel maintains – as does the Tribunale Administrativo Regionale per la Lombardia – that Article 11 of Directive 2003/54 extends
         liberalisation of the electricity market to all production activities, including the purchase and sale of electricity in the
         context of dispatching services, by imposing on that sector the criterion of the economic precedence of electricity (Article
         11(2)) and the use of market-based procedures (Article 11(6)). As a consequence, in the opinion of Enel and the Tribunale
         Administrativo Regionale per la Lombardia, Article 11 of Directive 2003/54 precludes any measure which makes the relationship
         between electricity producers and the transmission system operator subject to rules other than those governing freedom of
         contract in the market. 
      
      56.      In my opinion, that interpretation of Directive 2003/54 is not entirely correct. 
      
      57.      The activity of dispatching generating installations satisfies a clear public interest (guaranteeing the security of the network
         and, in general, of the provision of electricity) and has a number of characteristics which mean that it may be categorised
         as a regulated activity: under Article 11 of Directive 2003/54, dispatching may be entrusted exclusively to the system operator
         (and usually is, because there is only one) and is governed by rules of conduct adopted by the public authorities (in the
         case of Italy, the ‘operational procedures’ are laid down in the system code, (22) which is drawn up by Terna and checked by the AEEG and the Italian Ministry of Productive Activities). (23)
      
      58.      Article 11 of the directive begins by providing that the ‘dispatching of generating installations’ carried out by the system
         operator is to be subject to the market rules. Dispatching must take into account ‘the economic precedence of electricity’
         (Article 11(2)), which – as I explained earlier – is another way of saying that the order of the programme resulting from
         the market must be followed, by selecting the most economically advantageous bid first.
      
      59.      In this case, the application of the market rules is subject to a number of restrictions, including the need to take into
         consideration, in addition to the strictly economic criterion, ‘the technical constraints on the system’ (Article 11(2)).
         Those technical constraints and the technical security of the system explain why liberalisation cannot simply be extended
         outright to the procurement of electricity intended to ‘cover energy losses and reserve capacity’ (Article 11(6)) or to the
         balancing of the electricity system (Article 11(7)). 
      
      60.      Recital 17 to Directive 2003/54 reflects the view that dispatching and balancing services may remain outside the free development
         of the market, provided that certain precautions are taken. According to recital 17, ‘[i]n order to ensure effective market
         access for all market players, including new entrants, non‑discriminatory and cost‑reflective balancing mechanisms are necessary.
         As soon as the electricity market is sufficiently liquid, this should be achieved through the setting up of transparent market-based
         mechanisms for the supply and purchase of electricity needed in the framework of balancing requirements. In the absence of
         such a liquid market, national regulatory authorities should play an active role to ensure that balancing tariffs are non‑discriminatory
         and cost‑reflective. At the same time, appropriate incentives should be provided to balance in-put and off-take of electricity
         and not to endanger the system.’ In my opinion, that recital is linked to Article 11 of the directive and, accordingly, the
         expression ‘balancing tariffs’ must be construed as a reference to the amount paid to producers to compensate or pay them
         for the services which they provide in order to ensure dispatching and balancing of the system and not, as Enel suggests,
         to the uplift paid by final consumers.
      
      61.      The wording of recital 17 could imply that the derogation from liberalisation is temporary; that it is dependent on the market
         lacking sufficient liquidity; and that, once that situation has been resolved, dispatching must be fully governed by market
         forces. Even if that were the case, it should be borne in mind that, despite the fact that the Italian electricity market
         as a whole appears to be highly liquid, the dispatching services market appears to have a low level of liquidity. (24) In addition, since the list of essential installations is reviewed and redrafted annually and since the measure was presented
         as a provision to combat a crisis situation, where there is particular concentration in the market, it could be argued that
         the measure is merely temporary.
      
      62.      Be that as it may, I doubt that it was the wish of the Community legislature to prohibit all forms of State intervention in
         relation to technical dispatching services, even in the case of a sufficiently liquid market. Article 11(6) of Directive 2003/54
         provides that transmission system operators must procure the energy they use to cover energy losses and reserve capacity ‘according
         to transparent, non-discriminatory and market-based procedures’. Unlike the task of dispatching electricity producers – of
         ‘coordinating’ the supply of and demand for electricity – which, in accordance with Article 11(2) of Directive 2003/54, must
         follow the order of ‘economic precedence’ set by the market, Article 11(6) of the directive, concerning the procurement of
         electricity required for the provision of technical dispatching services, does not refer to the strict criterion of ‘economic
         precedence’; (25) instead, Article 11(6) simply requires, in addition to transparency and non-discrimination, that the procedure for the purchase
         of electricity takes into account, to a certain extent, the economic criteria by which the market is governed. In my view,
         the expression ‘market-based’ permits greater intervention.
      
      63.      Based on that relative derogation from the principle of the free operation of the market, recital 17 affords Member States
         greater latitude when it comes to dispatching electricity in a market lacking liquidity: in that situation, it is sufficient
         to ensure that the price of electricity is ‘cost-reflective’. 
      
      64.      It is likely, as Enel claims, that the provision of dispatching services is more expensive for producers than the production
         of the electricity which is sold on the day-ahead market, the average price of which is taken as the reference price for the
         remuneration of producers; it is also likely that the product with which the dispatching services market is concerned differs
         from the product which is bought and sold on the day-ahead and infra-day markets (the product sold on the dispatching services
         market is a certain ‘availability’ or production capacity). Despite that, I believe that the Italian legislation, which fixes
         the price of the electricity procured by Terna on the dispatching services market by reference to the price of electricity
         on the day-ahead market – thereby ensuring that variable costs are covered in any event – satisfies the requirement that the
         criteria for such payment must be market-based. The cost recovery mechanism and the alternative contractual method laid down
         in Article 65bis of Decision No 111/06 also contribute to making the measure more proportionate, by increasing the connection
         between the payment and the total cost of electricity.
      
      65.      In addition, regardless of what I will state below, the rules governing essential installations may also satisfy the requirements
         of transparency and non-discrimination laid down in Article 11(6). On the one hand, the contested measure is not vitiated
         by the discriminatory character which Enel attributes to it: since the measure is aimed at maintaining the security of the
         system, it is logical that its scope extends only to undertakings and installations which are liable to endanger that system
         through their activities on the market. On the other hand, in principle, the system put in place by the Italian authorities
         is also consistent with the requirement of transparency because the list of essential installations is reviewed and redrafted
         annually – a process in which producers liable to be affected are allowed some participation (Article 63(4) and (5) of Decision
         No 111/06) – is published and may be challenged in court.
      
      66.      By way of conclusion to the foregoing considerations, I believe that Article 11(6) of Directive 2003/54, as such, provides
         in principle for a system of price intervention in the dispatching services market.
      
      67.      The correct interpretation of that article might be distorted if it is established that the subject-matter and aim of the
         rules governing essential installations stray outside the scope of dispatching services to pursue objectives that are very
         different in scope. Accordingly, the compatibility with Article 11(6) of the rules on essential installations is subject to
         that warning, in the terms set out in the next section.
      
      2.      The new rules governing essential installations may exceed the scope of dispatching services in a technical sense
      68.      I shall begin by pointing out that the Italian Government has repeatedly described the rules on essential installations as
         a measure which is strictly necessary for the operation of technical dispatching services in the electricity system and which
         was therefore adopted pursuant to Article 11 of Directive 2003/54. 
      
      69.      However, as has been stated, since 2009, the volume of electricity subject to intervention by Terna – in principle, for the
         purposes of dispatching – have undergone a sharp and striking increase, which has not been satisfactorily explained. Thus,
         as stated above, before the amendment in question, dispatching services in the strict sense were provided using a generating
         capacity of 500 MW from all generating undertakings; since the amendment, more than 10 000 MW have come to be categorised
         as essential in relation to Enel alone. Although, in the past, there were specific, localised problems relating to the security
         and balancing of the system, (26) it is difficult to imagine what kind of technical problems related to dispatching services might have required such an increase
         in the volume of electricity regarded as essential. In any event, neither Terna nor the Italian Government has provided a
         coherent explanation for that change. 
      
      70.      Moreover, that situation must be linked to the fact that Law No 2/09 expressly indicates, as the raison d’être for all the
         new legislation, that the objective is to control generally the final prices of electricity.
      
      71.      Based on those two facts, it is reasonable to ask whether, through that mechanism, the Italian amendment is designed to achieve,
         indirectly, a measure of general control of the prices which final consumers pay for electricity. If that were so, the amendment
         would have made it possible for the concept of ‘essential installations’ to cover a number of installations which clearly
         exceed the requirements of dispatching services, notwithstanding the fact that they might be essential from an economic point
         of view because the paramount position in the market of the owners of such installations enables them to control electricity
         prices, including the prices paid for dispatching services. (27) The inevitable consequence of this is that it may be left to the system operator to determine, in genuinely open conditions,
         the volume of electricity to be subject to intervention.
      
      72.      At this juncture, it should be borne in mind that, in all likelihood as a result of the matters set out above, the Commission,
         Terna and the Italian Government extended the scope of the proceedings to include Article 3(2) of Directive 2003/54, arguing
         that the contested measure may be covered by that provision. 
      
      73.      Under Article 3(2) of Directive 2003/54, Member States may impose on electricity undertakings public service obligations ‘in
         the general economic interest’, provided that those obligations are clearly defined, transparent, non discriminatory, verifiable
         and guarantee equality of access for EU electricity companies to national consumers; such obligations must be notified to
         the Commission. In addition, the imposition of such obligations must be fully consistent with the relevant provisions of the
         Treaty, in particular with Article 106 TFEU.
      
      74.      Moreover, without prejudice to those strict conditions, Article 3(2) provides a relatively broad definition of the subject-matter
         of public service obligations, which may relate to ‘security, including security of supply, regularity, quality and price
         of supplies and environmental protection, including energy efficiency and climate protection’. Direct intervention in the
         price of electricity generation prices of the kind which appears to have occurred in the case under consideration could be
         aimed at controlling the price of electricity paid by final consumers and, directly or indirectly, at guaranteeing the security
         of the system, objectives which are both expressly referred to in Article 3(2) of Directive 2003/54. (28)
      
      75.      Lastly, there is no reason in principle not to conclude that the measure adopted by the Italian Government pursues an aim
         in the ‘general economic interest’, as required under Article 3(2). In a market like the electricity market, where demand
         is extremely inflexible and, in addition, the product concerned cannot be stored, there is always the possibility that certain
         operators will abuse their position. Accordingly, intervention in the sale of electricity by producers which are considered
         to occupy a paramount position in the market might possibly constitute an essential condition for guaranteeing the security
         of the network and be categorised, in short, as a measure in the ‘general economic interest’. 
      
      76.      The foregoing considerations may explain why the Italian Government has argued, in reliance on an important precedent, that
         Article 3(2) is applicable to this case: in Federutility, the Court agreed that the fixing of reference prices for the supply of natural gas could, in certain circumstances, constitute
         a public service obligation for the purposes of Article 3(2) of Directive 2003/55 (provision for the gas sector which is parallel
         to the provision of the second electricity directive at issue in these proceedings). In that connection, the Italian Government
         submits that, if such intervention is lawful in a market like the energy supply market (gas in Federutility, electricity in the instant case), which is fully open to competition, then a fortiori it should be lawful in relation to dispatching, which is a public interest activity.
      
      77.      Nevertheless, for the reasons I shall set out, it is my view that the system laid down in the contested national provisions
         cannot become a general mechanism for the regulation of electricity prices. 
      
      78.      First and foremost, the judgment in Federutility is not applicable outright to the case under consideration. In Federutility, ‘reference prices’ for the supply of natural gas were set directly by the national regulatory authority (29) – the AEEG – which, at all times, declared that the measure was designed to reduce the prices of supply. In the present case,
         however, it is Terna – the company which performs the role of system operator – which directly adopts intervention measures
         concerning energy prices, in accordance with a provision of national law which allows it to take action with regard to dispatching
         services.
      
      79.      It is that ‘additional function’ of the contested measure which, in my opinion, cannot fall within the scope of Article 3(2)
         of Directive 2003/54.
      
      80.      As I have stated, Directive 2003/54 provides for the system operator to intervene directly (in the sense of intervening to
         restrict the market) only in the specific sector of dispatching services (Article 11). Accordingly, granting the operator
         other types of regulatory responsibilities and powers to intervene in the electricity market which exceed that remit distorts
         prima facie the functions of dispatching and balancing, which, to that extent, subverts the internal order of the directive.
         It is clear that, owing to the configuration of its role, a dispatching services operator is not normally in a position to
         determine the degree of general intervention in the price of supply with the independence and impartiality that the situation
         requires, regardless of whether its decisions may be challenged in court. 
      
      81.      More specifically, it is my view that such conduct leads to a high level of confusion which is incompatible with the requirement
         of transparency laid down in Article 3(2) of the directive and, ultimately, with the principle of legal certainty.
      
      82.      In that connection, I believe that the wording of Article 3(2) is such that it lays down a twofold requirement of transparency
         in relation to public service obligations. First, by providing that public service obligations must be ‘clearly defined’,
         it refers to transparency in the traditional procedural sense. From that perspective, as I indicated above, there can be no
         objection to the Italian system. However, Article 3(2) goes on to state that public service obligations must be ‘transparent’,
         a term which may be linked to the requirement of legal certainty. In short, in addition to being clear and accessible, public
         service obligations must also be defined and laid down in such a way that they do not confuse or mislead. In that connection,
         the contested measure could present difficulties in terms of transparency if it is shown that, although formally adopted on
         the basis of Article 11 of Directive 2003/54 (and, in short, on the basis that it is essential to the provision of dispatching
         services), in practice, it is intended to operate as though the national legislature had relied on the specific possibilities
         provided for under Article 3(2) of Directive 2003/54.
      
      83.      Clearly, it is for the national court to assess in each case what proportion of the total generating capacity is effectively
         categorised as essential on technical grounds of network security. Where appropriate, it will be for the national court to
         analyse whether the rules governing essential installations are being used to further an aim which is clearly inconsistent
         with the aim apparent from their configuration, basing that analysis on matters such as information relating to the volume
         of electricity actually used for the provision of those services in the past. 
      
      84.      In the light of all the foregoing considerations, I believe that Article 11(6) of Directive 2003/54 does not preclude rules
         governing essential installations, such as the rules which form the subject-matter of the present reference for a preliminary-ruling,
         it being for the national court, where appropriate, to determine whether that provision has been applied in a way which is
         inconsistent with its aim and, in particular, whether it has been applied in pursuit of an objective which clearly goes beyond
         the requirements of the proper management of dispatching and balancing services.
      
      VI –  Conclusion
      85.      In conclusion, I propose that the Court reply as follows to the question referred for a preliminary ruling by the Tribunale
         amministrativo regionale per la Lombardia:
      
      ‘Articles 49 and 56 TFEU and Article 11(2) and (6) of Directive 2003/54/EC of the European Parliament and of the Council of
         26 June 2003 concerning common rules for the internal market in electricity and repealing Directive 96/92/EC do not preclude
         national legislation which requires certain electricity producers which, in certain circumstances, are essential for meeting
         the demand for dispatching services to submit bids on the energy exchange markets, in accordance with programmes determined
         by the network operator on the basis of external rules, and which prevents producers from freely determining the remuneration
         for such bids, provided that the following conditions are satisfied:
      
      1.      The remuneration for the electricity which is categorised as essential is linked to criteria which have been predetermined
         in accordance with transparent, non-discriminatory and market-based procedures. National legislation which fixes the price
         of electricity procured by the system operator for the provision of dispatching services by reference to the average price
         of electricity on the day-ahead market, ensuring that variable costs are covered in all cases, satisfies the requirement that
         payment be market-based.
      
      2.      Those compulsory rules must, in any event, refer to the electricity which is essential to the provision of technical dispatching
         services (covering energy losses and reserving capacity). Where appropriate, it will be for the national court to determine
         whether, or to what extent, the electricity generating capacity may effectively be categorised as essential on those grounds.’
      
      1 –	Original language: Spanish.
      
      2 –	OJ 2003 L 176, p. 37.
      
      3 –	Case C‑265/08 [2010] ECR I-0000.
      
      4 –	Federutility concerns Article 3(2) of Directive 2003/55/EC of the European Parliament and of the Council of 26 June 2003 concerning common rules for the internal market in natural gas
            and repealing Directive 98/30/EC (OJ 2003 L 176, p. 57), the wording of which is very similar to that of Article 3(2) of Directive 2003/54.
      
      5 –	‘Appel et équilibrage’ in the French-language version; ‘dispacciamento e bilanciamento’ in the Italian-language version;
         ‘Inanspruchnahme und Ausgleich von Kapazitäten’ in the German-language version.
      
      6 –	The legislative rules governing the Italian electrical sector are set out in a number of measures transposing Directive
         2003/54 into Italian law. This Opinion will refer directly to the decisions of the Autorità per l’energia elettrica e il gas,
         which are relevant to the outcome of the present proceedings, and to Law No 2/2009, which serves as the general framework
         for the amendment in issue.
      
      7 –	‘Decision No 168/03’ (ordinary supplement to Gazzetta Ufficiale della Repubblica Italiana (‘GURI’) No 16 of 30 January
         2004).
      
      8 –	‘Decision No 111/06’ (ordinary supplement to GURI No 153 of 4 July 2006).
      
      9 –	In accordance with Decree-Law No 79 of 6 March 1999; ‘Terna’.
      
      10 –	‘Law No 2/09’ (GURI No 22 of 28 January 2009). This is the Law which converted into law Decree-Law No 185 of 29 November
         2008 concerning urgent measures to support families, work, employment and business, and to restructure the National Strategic
         Framework to combat the crisis.
      
      11 –	Directive 2009/72/EC of the European Parliament and of the Council of 13 July 2009 concerning common rules for the internal market in electricity
            and repealing Directive 2003/54/EC (OJ 2009 L 211, p. 55).
      
      12 –	In that connection, see Isidoro, C., L’ouverture du marché de l’électricité à la concurrence communautaire et sa mise en œuvre (Allemagne, France, Italie, Royaume-Uni),
            Librairie Générale de Droit et de Jurisprudence, 2006, p. 224, and Cameron, P., Competition in the energy markets, Oxford University Press, 2nd edition, 2007, p. 23.
      
      13 –	Under Article 2(16) of Directive 2003/54, ‘economic precedence’ means ‘the ranking of sources of electricity supply in
         accordance with economic criteria’.
      
      14 –	Article 11(4) provides for another similar case.
      
      15 –	See Carbajo, A., ‘Los mercados eléctricos y los servicios de ajuste del sistema’, Economía Industrial, No 364, 2007, and de la Cruz Ferrer, La liberalización de los servicios públicos y el sector eléctrico, Marcial Pons, 1999, p. 450.
      
      16 –	See also Article 14(5) and (6) of Directive 2003/54, which reproduce the same requirements for cases where those tasks
         are performed by the distribution system operator.
      
      17 –	Legislative Decree No 79 of 16 March 1999.
      
      18 –	Information set out on Terna’s website: ttp://www.terna.it/default/Home/SISTEMA_ELETTRICO/dispacciamento.aspx 
      
      19 –	Which are governed by what is known as the ‘marginal price’ system; the marginal price varies throughout the day and, on
         a highly inflexible market like the electricity market, it increases as demand rises, so that, when demand is higher, the
         marginal price reaches its maximum level.
      
      20 –	See, in that connection, Case C-37/92 Vanacker and Lesage [1993] ECR I-4947, paragraph 9: ‘since the question of the collection of waste oil has been regulated in a harmonised manner
         at Community level by the directive, any national measure relating thereto must be assessed in the light of the provisions
         of the directive and not of Articles 30 to 36 of the Treaty’. See also Case C-150/88 Parfümerie fabril [1989] ECR 3891, paragraph 28; Case C-257/06 Roby Profumi [2008] ECR I-189, paragraph 14; Case C-324/99 Daimler Chrysler [2001] ECR I-9897, paragraph 32; and Case C-132/08 Lidl Magyarország [2009] ECR I-3841, paragraph 42.
      
      21 –	In that connection, see Federutility, paragraph 35.
      
      22 –	Code on transmission, dispatching, development and security of the system: http://www.tera.it/default/Home/SISTEMA_ELETTRICO/codice_rete,aspx
         
      
      23 –	See Pajuelo Iglesias, B., ‘La gestión técnica del sistema. El operador del sistema. Los procedimientos de operación’, Derecho de la regulación económica. III. Sector energético, Muñoz Machado, S., Dir., Iustel, 2009, pp. 447 and 463.
      
      24 –	As Enel explained, the level of liquidity of a market is measured by reference to ‘whether it is possible to execute rapidly
         orders to buy and sell without incurring high prices and whether it is possible to send the right signals to operators by
         means of transparent prices which are unlikely to undergo erratic fluctuations linked to particular transactions or manipulation’.
         Enel and the Commission confirmed that the Italian electricity market has those characteristics but the Italian Government
         and Terna stated that liquidity does not extend to the dispatching services market. When Enel was questioned at the hearing
         about that assertion (which is, moreover, the very reason for the rules governing essential installations), it did not dispute
         it outright.
      
      25 –	Nor is it referred to in Article 11(7) on balancing of the system.
      
      26 –	As stated at the hearing.
      
      27 –	That is the view of the referring court, which expressly states in the order for reference that ‘essential installations
         include not only those which are “technically and structurally” indispensable for the purpose of resolving network congestion
         or maintaining adequate levels of safety for the system, but also those which form part of groups of essential installations;
         those groups are defined as a set of installations which make certain producers crucial if the energy demand from the network
         operator is to be met, with the price of that energy being determined in the absence of effective competition.’
      
      28 –	In that connection, it is straightforward enough to conclude that the fact that intervention occurs at the electricity
         generation stage may be irrelevant. In my opinion, the arguments put forward on this point by Enel and the referring court
         appear to be based on a degree of confusion between the concepts of ‘public service obligations’ and ‘universal service’,
         which, however, are clearly distinguished, one from the other, in Article 3 of Directive 2003/54. Further, the lawfulness
         of the contested measure cannot be called into question on the ground that it was not notified to the Commission because,
         although Article 3(9) of Directive 2003/54 requires Member States to notify measures adopted under that provision, it is a
         formality which, in the event of non-compliance, may form the basis for an action for failure to fulfil obligations but does
         not affect the lawfulness of the national measure at issue (in contrast, for example, to the measures referred to in Article 24
         of the directive, since in that case the Commission – through mandatory notification – has a degree of control over the subject-matter
         of a national measure).
      
      29 –	For the purposes of Article 23(1) of Directive 2003/54.