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Brussels, 16 th July 2009

State aid: Commission authorises support of up to €170 million for two investment projects in Polish energy sector

The European Commission has authorised under EC Treaty state aid rules two support schemes proposed by Poland in the energy sector. One measure is aimed at modernising electricity distribution networks by diminishing energy losses and the second at extending distribution and transmission networks to connect renewable energy sources. The beneficiaries of the aid will be network operators that ensure unrestricted access for competitors to the networks. The measures are in line with Article 87(3)c of the EC Treaty, which allows aid for developing certain economic activities, because the positive effects of the scheme on the environment clearly outweigh potential distortions of competition. The project is financed with the participation of the European Structural Funds and the aid will amount up to €170 million in total.

Competition Commissioner Neelie Kroes said: "The Commission welcomes investments in energy infrastructure which will allow energy saving and better market access for renewable electricity. The Polish measures strengthen the climate change and energy policies of the EU, without unduly distorting competition. The regulatory framework applicable to the electricity market in Poland will ensure that the aid primarily benefits electricity consumers."

On 03 February 2009 Poland notified its intention to support two investment projects. One project is aimed at the construction of electricity networks that would enable several areas which are suitable for the production of renewable electricity to connect with existing distribution and transmission networks The second investment would be for the modernisation and replacement of electricity distribution networks with the aim of reducing energy losses , which in Poland swallow almost 10% of gross energy production.

The proposed state aid consists of direct grants to operators of electricity networks. The Commission's investigation concluded that the aid was compatible with Article 87(3)c of the EC Treaty because it clearly targets the reduction of energy consumption and is well designed to deliver this objective of common EU interest. Moreover, the measure is proportional and limited to what is necessary and creates incentives for operators to invest in energy saving measures. Finally, the distortions of competition resulting from the introduction of the scheme are low, because the planned subsidies, in so far as they contribute to an upgrading of existing networks, will not deter operators from investing themselves in new electricity distribution networks. In cases where it can cause distortions of competition i.e. on markets where companies distributing and producing or trading electricity are active, the method of calculating the aid should ensure that distortions of competition will be limited.

The aid amount is calculated on the basis of a method which ensures that only those investment costs that will not be covered by profits generated by the operation of the improved network will be financed by the aid. This approach aims to keep the tariffs for distribution and the operator's profits at the same level as before the investment. The aid will therefore off-set the costs of the environment-friendly investments and enable operators to continue to provide electricity distribution and transmission services at affordable prices to residential users and businesses

In line with the requirements of the EU Directive on the internal market for electricity, the distribution and transmission network operators in Poland are required to ensure non-discriminatory access to the distribution and transmission networks for all companies allowed to produce or supply electricity in Poland. Operators within the structure of a vertically-integrated undertaking, should, in terms of legal and organisational form and decision-making, remain independent of other activities not linked to electricity transmission or distribution. The prices for distribution and transmission of electricity are set in tariffs entirely regulated by the Energy Regulator Office adjusted by it every year.

The non-confidential version of the decision will be made available under the case number N 55/2009 and N 56/2009 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. New publications of state aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News .

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