Brussels, 20th July 2006
The European Commission has opened an in-depth investigation to establish whether an extension of the regulated preferential electricity tariff granted by Italy to some energy intensive industries complies with EC Treaty state aid rules. This measure, that was not notified to the Commission, modifies the preferential tariff that was in force in 2004 and extends it until 2010. The Commission has doubts about the compatibility of the aid as many of the factories receiving the preferential tariff are located outside the areas eligible for regional aid of this type. In the case of Alcoa’s plant in Sardinia, the extension does not seem to fulfil the requirements of the regional aid guidelines (see IP/97/1137) and could create a serious distortion of competition in the European market of primary aluminium, where energy is an important part of the production costs. The opening of an in-depth investigation gives interested parties the opportunity to comment on the proposed measures. It does not prejudge the outcome of the procedure.
Commissioner Kroes has said: “I regret that Italy has not notified these measures. We are opening an investigation to make sure that measures like these are focussed on the development of Europe’s poorest regions”.
In 2005 Italy extended and modified the preferential electricity tariff that was in force in 2004 for four Italian companies Thyssen-Krupp Acciai Speciali Terni, Cementir, Nuova Terni Industria Chimica and Alcoa. These companies are currently receiving compensation from ‘Cassa Conguaglio del Mercato Elettrico’, a state fund, that is equivalent to the difference between the market price of electricity and the preferential tariff.
State compensation of production costs incurred by a company in the course of normal business constitutes operating aid, which is allowed only under very strict conditions set out in the regional aid guidelines for assisted areas (see IP/97/1137) under Article 87.3.(a) of the EC Treaty.
In the case of Alcoa’s plant in Sardinia, the Commission doubts the necessity of the aid as it seems that the general level of electricity prices in Sardinia is not higher than in other parts of Italy. Furthermore, the preferential tariff might overcompensate Alcoa for the possible regional handicap. Moreover, given the economic growth observed in the region, Sardinia is no longer likely to be entitled to operating aid in the next regional aid planning period 2007-2013. Finally, it appears that the objective of the aid is not regional development but rather to support a narrow economic sector of the island.
In the case of Thyssen-Krupp Acciai Speciali Terni, Cementir, Nuova Terni Industria Chimica and of Alcoa’s plant in Fusina the Commission has doubts that they are entitled to receive operating aid because they are not located in areas with a very low standard of living and high unemployment, eligible for regional aid under Article 87.3(a) of the EC Treaty.
Moreover, regarding Thyssen-Krupp Acciai Speciali Terni, the Commission also has doubts about the cumulation of the aid under investigation with incompatible aid that the company has previously received and not yet repaid (see IP/00/1377).
In November 2004 the Commission already opened proceedings in relation to a non-notified scheme of preferential electricity tariff in Sardinia concerning Alcoa and a different group of beneficiaries and with another legal base. In April 2006 the Commission opened proceedings concerning a notified extension of preferential electricity tariffs that was also limited to Sardinia and did not include the beneficiaries of the current measure (see IP/06/541).