ECJ rules that Polish renewable energy support scheme does not involve state resources

• 20/09/2017
• Articles

On 13 September 2017, the Court of Justice of the European Union ( “ECJ”) issued its judgment on a request for a preliminary ruling from the Polish Supreme Court regarding the qualification of a national renewable energy support scheme as state aid (Case C-329/15, ENEA S.A. v Prezes Urzędu Regulacji Energetyki).

The case concerns a Polish support scheme for electricity produced by co-generation. For the period from 1 January 2003 to 1 July 2007, the Polish energy legislation obliged private and public undertakings selling electricity to end-users connected to the Polish electricity network to purchase a minimum amount of electricity produced by co-generation. The Polish energy regulator had the power to fix the price of electricity produced by co-generation when fixing the maximum electricity price for sales to end-users.

In 2006, ENEA S.A. (“ENEA”), an electricity producer and supplier wholly-owned by the Polish state, did not fulfil its quota obligation for that year. Consequently, the Polish energy regulator imposed a financial penalty on ENEA. ENEA brought an action against that decision claiming, inter alia, that the purchase obligation constituted unlawful state aid. The Polish Supreme Court considered that the Polish renewable energy support scheme conferred a selective advantage on producers of electricity by co-generation, distorted or threatened to distort competition, affected trade between EU member states and could be attributed to the Polish state. However, it entertained doubts as to whether the purchase obligation constituted an advantage granted directly or indirectly through state resources within the meaning of Article 107(1) TFEU. Therefore, it decided to stay the proceedings and to refer the question to the ECJ for a preliminary ruling.

In its judgment of 13 September 2017, the ECJ reiterated that the condition that there must be an advantage granted through state resources is satisfied not only where aid is granted directly by the state, but also where it is granted by public or private bodies established or designated by the state with a view to administering the aid. This includes cases in which sums corresponding to the aid measure are not permanently held by the treasury, but constantly remain under public control, and are therefore available to the national authorities. On the basis of this interpretation of Article 107(1) TFEU, the European Commission and the EU courts have applied the state aid rules to many national renewable energy support schemes.

However, the ECJ noted that the circumstances of these cases must be distinguished from those in which undertakings are not appointed by the state to manage a state resource, but are merely bound by an obligation to purchase using their own financial resources. This was the case in PreussenElektra (Case C-379/98, PreussenElektra v Schleswag), a landmark case as regards the interpretation of the condition of state intervention.

The ECJ came to the same conclusion in the case at issue. The advantage granted to producers of electricity by co-generation was not granted directly or indirectly through state resources. First, according to the ECJ, the fact that the Polish State held the majority of the capital in ENEA and some other electricity suppliers bound by the purchase obligation does not lead to the conclusion that their resources should be equated to state resources. In particular, the ECJ found that the public nature of these undertakings does not imply that the state exercised a dominant influence that enabled it to direct the use of the resources of those undertakings. By contrast, the case file indicated that ENEA’s electricity purchases stem from wholly autonomous business decisions.

Second, the Polish legislation did not contain a financing mechanism administered by the state either. Unlike many other national renewable energy support schemes, the Polish state did not organise the collection of compulsory contributions from end-users to offset the electricity suppliers’ additional costs. Rather, because of the fixed maximum electricity prices, the electricity suppliers had to fund the purchase obligation imposed on them by having recourse to their own financial resources.

The judgment of the ECJ of 13 September 2017 is interesting as it follows many decisions of the European Commission and judgments of the EU courts finding a direct or indirect involvement of state resources in a variety of support schemes. The ECJ has now confirmed its PreussenElektra case law and has shown that, under specific circumstances, support schemes may fall outside the scope of the EU state aid rules.