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European Commission

Press release

Brussels, 18 September 2013

State aid: Commission opens in-depth inquiry into water resources concessions to EDP for electricity generation and inquires about situation in other Member States

The European Commission has opened an in-depth investigation to verify whether the price paid by the Portuguese electricity incumbent EDP in 2007 for the extension of its right to use public water resources for electricity generation was in line with EU state aid rules. The Commission will assess in particular whether the measure provided an undue economic advantage to EDP over its competitors and stifled entry onto the Portuguese electricity market. The opening of an in-depth investigation gives interested third parties an opportunity to submit comments on the measure; it does not prejudge the outcome of the investigation.

In 2007, Portugal extended concessions granted to EDP for using public water resources for the generation of electricity against the payment of €759 million (of which €56 million for related taxes). This measure, which was never notified to the Commission for state aid approval, has the effect of maintaining 27 power plants accounting for 27% of Portugal's generation capacity under the control of EDP for a very long period, ending in some cases only in 2052.

Based on the information available at this stage, the Commission has doubts that EDP paid an adequate price for the concessions. This may have given EDP a selective advantage that its competitors did not have and therefore involve state aid within the meaning of the EU rules (Article 107(1) of the Treaty on the Functioning of the European Union (TFEU)).

At this stage, the Commission doubts that such aid would be compatible with the EU internal market. Moreover, the long duration of the concession may have had in itself an anticompetitive effect of preventing the entry of interested competitors in the Portuguese electricity market.

The investigation will allow the Commission to obtain necessary information for the assessment of the measure.

The Commission has also requested preliminary information from other Member States about the rules and practice governing the granting or extension of concessions for use of water for hydro-power generation.

Background

In September 2012, several citizens filed a complaint with the Commission against alleged illegal state aid granted by Portugal to EDP through two distinct measures: firstly, the extension of concessions to use public water resources at allegedly favourable conditions and secondly, allegedly excessive compensations for past investments said to burden EDP in the liberalised market environment ("stranded costs").

The stranded costs compensation mechanism had been assessed and cleared under EU state aid rules by the Commission (see IP/04/1123). Based on the information available at this stage, there is no evidence that the aid approved for the compensation of stranded costs has been misused or otherwise ceased to be compatible with the internal market.

The Commission has today opened an in-depth investigation, to verify the allegations regarding the allegedly too low price paid by EDP for the 2007 extension of concessions for the use of public water resources.

The non-confidential version of the decision will be published in the Official Journal of the EU and made available under the case SA.35429 in the State Aid Register on the Commission's competition website once any confidential issues have been resolved. New publications of State aid decisions in the internet and in the Official Journal are listed in the State Aid Weekly e-News.

Contacts :

Antoine Colombani (+32 2 297 45 13, Twitter: @ECspokesAntoine )

Maria Madrid Pina (+32 2 295 45 30)


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