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Brussels, 10 March 2009

State aid: Commission extends investigation into regulated electricity tariffs in France

The European Commission has extended the in-depth investigation it began in 2007 under EC Treaty state aid rules into the regulated electricity tariffs enjoyed by certain large and medium-sized companies in France (see IP/07/815). These artificially low tariffs appear to give an economic advantage to certain companies and distort competition in the EU Single Market. The investigation is being widened to look at the prolongation of the system of “return tariffs” (or “TARTAM”) until June 2010 and its extension to new beneficiaries. This system, intended as a transitional measure, has so far benefited a small group of companies that essentially comprise the country’s largest electricity users. The extended investigation does not cover the regulated tariffs applicable to households and small businesses.

Competition Commissioner Neelie Kroes said: “The Commission fears that the system of “return tariffs” gives an unfair advantage to certain large companies over their competitors. Prolonging and extending the system could exacerbate these effects and hinder the development of competition in the French electricity market.”

French electricity consumers can buy their electricity either on the free market or on the regulated market. On the regulated market, they buy the electricity at prices set by the state (“standard tariffs”). Customers who choose the free market conclude an electricity supply contract at a price negotiated with the supplier of their choice and may not return to the regulated market.

Since the beginning of 2007, customers who had left the regulated market can ask for a special state-administered “return tariff” (or TARTAM), below the market price. So far only a limited number of companies have benefited from the return tariff (essentially 3000 “large” electricity consumption sites, representing 10% of the “large” industrial and commercial consumption sites in France). Together, however, these few companies represent nearly 20% of electricity consumption in France. The advantage they enjoy through the “return tariff” system is financed by a tax levied on all electricity consumers (households and businesses) and a tax on electricity generated from nuclear and hydro power sources.

On 13 June 2007 the Commission opened an in-depth investigation into the “standard tariffs” and “return tariffs” applicable to companies classed as “large” and “middle-sized” electricity consumers. The investigation does not cover the tariffs applicable to households and non-business consumers or those applicable to small companies and small professional consumers in general (see IP/07/815).

Initially, a company could benefit from the “return tariff” system for two years only, starting from the date when it made its application, which had to be before 1 July 2007. On 6 August 2008, France decided to extend the system until 30 June 2010 and to open it up to new beneficiaries. Since then any company operating on the free market may once again apply to benefit from the “return tariff”.

The Commission is concerned by the distortion of competition arising from a system of tariffs that are set without relation to market mechanisms and that give an advantage to large companies operating in markets open to European competition.

The extension of a formal state aid investigation does not prejudge the final Commission decision. The purpose is to give interested third parties an opportunity to express their point of view. The full text of the decision on extension will be published in the EU’s Official Journal. Interested parties will then have one month in which to send their observations to the Commission.

The in-depth investigation begun in 2007, as extended, is ongoing.

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 already begun infringement proceedings against France and other Member States concerning regulated tariff arrangements applicable to businesses, that may be incompatible with the electricity liberalisation Directive 2003/54/EC (see IP/06/1768). On 25 January 2007 it also opened an in-depth investigation, under the rules on state aid, into regulated electricity tariffs in Spain (see IP/07/93).

The non-confidential version of the decision will be made available under the case number C 17/2007 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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