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Brussels, 25th January 2007

State aid: Commission opens investigation into regulated electricity tariffs in Spain

The European Commission has opened a formal investigation under EC Treaty state aid rules into potential aid to large and medium-sized companies and to the electricity incumbents in Spain in the form of artificially low regulated industrial tariffs for electricity. The regulated tariffs led to a deficit of €3.8 billion in the Spanish electricity system in 2005. This deficit will be financed by a new charge paid by all Spanish consumers in their electricity bill for the next 14 years. The Commission will assess whether the 2005 tariffs provided state aid to energy intensive, large and medium-sized industries and to the electricity incumbents and if so, whether such aid could give rise to disproportionate distortions of trade and competition within the EU's Single Market. The Commission's state aid investigation does not concern the regulated tariffs for small companies and households. The decision to open an investigation gives interested parties an opportunity to comment on the proposed measure. It does not prejudge the outcome of the investigation.

Competition Commissioner Neelie Kroes commented: “Some sectors of European industry are going through difficult times because of high energy prices. But we must avoid distortions of competition that prevent consumers from fully enjoying the benefits of a liberalised energy market and that unfairly advantage certain companies."

In 2005 Spain set artificially low regulated tariffs for energy intensive, large and medium industries. These regulated tariffs might have provided significant amounts of operating aid to these industries and, to a certain extent, to the electricity incumbents, who could have been over-compensated by the Spanish state and could have made an abnormal profit on the arrangements. The low tariffs led to a deficit of €3.8 billion in the electricity system, which will have to be paid back over 14 years by adding a new charge to the electricity bill of all Spanish consumers.

The Commission is concerned about the potential distortion of competition in the product markets of the energy intensive, large and medium industries, and also has doubts about the compatibility of the potential aid, which had the effect of providing a guaranteed profit to the electricity incumbents who offered these industrial tariffs.

Another concern is that, because only the traditional Spanish electricity incumbents were allowed to provide low regulated tariffs, potential new suppliers may have been prevented from entering the Spanish electricity market and that the scheme may have prompted some recent market entrants to discontinue their activities in Spain, thus eliminating the benefits that new entrants were bringing to consumers.

The competition problems raised by artificially low state-regulated tariffs were highlighted by the conclusions of the Commission's energy sector competition inquiry (see IP/07/26 and MEMO/07/15). The Commission has also opened an infringement case against Spain concerning the regulated tariffs arrangements which may be incompatible with the electricity liberalisation Directive 2003/54/EC (see MEMO/06/152 and IP/06/1768).

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