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24.11.2011 Official
Journal
of
the
European
Union
L
309/1
II
(Non-legislative acts)
DECISIONS
COMMISSION DECISION
of 23 February 2011
on State aid granted by Italy to Portovesme Srl, ILA SpA, Eurallumina SpA and Syndial SpA (State
aid measures C 38/B/04 (ex NN 58/04) and C 13/06 (ex N 587/05)
(notified under document C(2011) 956)
(Only the Italian text is authentic)
(Text with EEA relevance)
(2011/746/EU)
THE EUROPEAN COMMISSION,
(3) By
letters
dated
22
January
2004
and
19
March
2004,
the Commission requested further information on these
measures. The Italian authorities replied by letters dated
Having regard to the Treaty on the Functioning of the European
9 February 2004 and 9 June 2004. By letter of
Union, and in particular the first subparagraph of Article 108(2)
20 September 2004, Italy submitted further information.
thereof,
Having regard to the Agreement on the European Economic
(4) By
letter
dated
16
November
2004,
the
Commission
Area, and in particular Article 62(1)(a) thereof,
informed Italy that it had decided to initiate the
procedure laid down in Article 108(2) of the Treaty on
the Functioning of the European Union (TFEU) in respect
Having called on interested parties to submit their comments
of the measure.
pursuant to the provisions cited above ( 1 ), and having regard to
their comments,
(5) The
Commission’s
decision
to
initiate
the
procedure
was
published in the Official Journal of the European Union ( 2 ).
Whereas:
The Commission invited interested parties to submit their
comments on the measures.
1. PROCEDURE
1.1. Case C 38/B/04
(6) Italy
submitted
observations
by
letters
dated
4
February
2005 and 11 February 2005.
(1) By
letter
dated
4
December
2003,
a
law
firm
repre
senting a complainant brought to the Commission’s
attention a series of articles published in the Italian
press concerning the Italian Government’s intention to
(7) The
Commission
also
received
observations
from
other
introduce preferential electricity tariffs for certain under
interested parties, including three of the undertakings
takings located in Sardinia.
benefiting under the measures and a competitor of

Portovesme. By letter dated 22 March 2005 the
Commission forwarded those observations to Italy,
which was given the opportunity to comment. Italy’s
(2) The
tariffs
were
introduced
by
Article
1
of
the
Prime
Ministerial Decree of 6 February 2004 (‘the 2004
comments were received by letter dated 20 September
Decree’). The Decree had two distinct effects: a) it
2005.
introduced new preferential electricity tariffs for the
companies Portovesme Srl, ILA SpA and Eurallumina
SpA, and b) it prolonged an existing preferential tariff
(8) On
29
October
2008
the
case
C
38/04
was
split
into
in favour of Alcoa Trasformazioni, a producer of primary
part A, concerning Alcoa, and part B, concerning
aluminium (‘Alcoa’).
Portovesme, ILA and Eurallumina.
( 1 ) OJ C 30, 5.2.2005, p. 7, and OJ C 145, 21.6.2006, p. 8.
( 2 ) OJ C 30, 5.2.2005, p. 7.

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L 309/2
EN
Official Journal of the European Union
24.11.2011
(9) On
19
November
2009
the
Commission
adopted
a
final (18) The
Commission
received
observations
from
interested
negative decision with respect to Alcoa, ordering
parties, including the beneficiaries, the two competitors
recovery of the aid ( 3 ).
of Portovesme and Syndial, and a producer of renewable
energy. By letter dated 5 October 2006 the Commission
forwarded those observations to Italy, which was given
the opportunity to comment. Italy’s comments were
1.2. Case C 13/06
received by letter dated 1 December 2006.
(10) By Article 11(12) of Decree-Law No 35 of 14 March
2005, converted into statute by Law No 80/2005 of
14 May 2005 laying down urgent provisions under the
Action Plan for Economic, Social and Territorial Devel
(19) Italy provided additional information by letters of
opment (‘Law No
80/9005’), the Italian authorities
16 April 2007, 10 May 2007, 14 May 2007 and
prolonged until 2010 the preferential electricity tariff
22 June 2010.
for Portovesme, ILA and Eurallumina, and extended the
benefit of the tariff to Syndial SpA, a chlorine producer
also based in Sardinia.
1.3. Scope of the present Decision
(20) The
present
decision
covers
both
the
tariffs
introduced
by
(11) The Commission received a complaint from a company
Article 1 of the 2004 Decree for beneficiaries other than
competing with Syndial by letter dated 22 July 2005,
Alcoa (‘the 2004 tariffs’) and those introduced by
followed by further submissions from the same
Article 11(12) of Law No 80/2005 and subsequently
company dated 7 October 2005 and 7 December 2005.
spelt out in decisions taken by the Electricity and Gas
Authority (Autorità per l’Energia Elettrica e il Gas — ‘AEEG’)
(‘the 2005 tariffs’).
(12) Italy
notified
the
measure
to
the
Commission
by
letter
dated 23 November 2005. By letter dated 28 November
2005, Italy provided additional information.
2. DETAILED DESCRIPTION OF THE MEASURE
2.1. The disputed 2004 tariffs
(13) By
letter
dated
22
December
2005
the
Commission
(21) Article 1 of the 2004 Decree extended ‘the [tariff]
asked for further information, which Italy provided by
treatment laid down in Article 2 of the Decree of the
letter dated 3 March 2006.
Ministry for Industry, Trade and Crafts of 19 December
1995 (“the Alcoa Decree”] to energy supplies for the
production and processing of aluminium, lead, silver
(14) In
the
meantime,
by
letter
dated
20
January
2006,
the
and zinc, but only in respect of plants already in
same competitor of Portovesme which had submitted
existence at the date of entry into force of the present
observations in case C 38/B/04 complained about the
Decree and located on islands with insufficient or no
new measure.
interconnection to the national electricity and gas grids’.
(15) By
letter
dated
26
April
2006,
the
Commission
informed
(22) This tariff treatment was to be transitory: it was to end
Italy that it had decided to initiate the procedure laid
‘upon the completion or upgrade of the connections with
down in Article 108(2) TFEU in respect of the changes
the national electricity and gas grids’ and no later than
and the extension of the special tariff scheme introduced
30 June 2007.
by Law No 80/2005.
(23) In
practice,
the
2004
Decree
extended
the
preferential
(16) The
Commission
asked
Italy
for
further
clarification
by
tariff already enjoyed by aluminium producer Alcoa to
letter dated 22 August 2006; Italy replied by letter dated
three energy-intensive companies located in Sardinia:
28 September 2006.
Portovesme, a producer of zinc, silver and lead ( 5 ); ILA,
a producer of processed aluminium products; and Eural
lumina, a producer of alumina ( 6 ).
(17) The
Commission’s
decision
to
initiate
the
procedure
was
published in the Official Journal of the European Union ( 4 ).
The Commission invited interested parties to submit their
comments on the measures.
(24) At the regulatory level, the tariff was implemented
through decisions (delibere) of the AEEG.
( 3 ) Commission Decision 2010/460/EU of 19 November 2009 on State
aid measures C 38/A/04 (ex NN 58/04) and C 36/B/06 (ex NN
( 5 ) For its plants in Portoscuso and San Gavino.
38/06) implemented by Italy for Alcoa Trasformazioni (OJ L 227,
( 6 ) Alumina is an intermediate raw material, obtained from bauxite,
28.8.2010, p. 62).
which is used for aluminium smelting. A large part of Eurallumina’s
( 4 ) OJ C 145, 21.6.2006, p. 8.
output serves Alcoa’s nearby smelting facilities.

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EN
24.11.2011 Official
Journal
of
the
European
Union
L
309/3
(25) AEEG
decision
No
110/04
stipulated
that
the
preferential
imposed on all Italian electricity consumers via
tariffs would be applied only if the notification procedure
component A4 of the standard electricity tariff ( 10 ).
had a positive outcome. However, following instructions
from the Prime Minister’s Office specifying that the 2004
Decree had not been formally notified under the State aid
rules but only ‘presented’ to the Commission in the
(29) The
scheme
was
to
have
ended
on 30 June
2007.
framework of a ‘preliminary inquiry’ (indagine conoscitiva
However, its implementation was discontinued on
preliminare), the AEEG implemented the 2004 Decree
instructions from the AEEG soon after the Commission
through decision No 148/04 (
opened the formal investigation in November 2004 ( 11 ).

7 ).
(30) The
data
provided
by
Italy
shows
that
Portovesme
and
(26) The system allowed the beneficiaries to be given
Eurallumina received subsidies for electricity consumed
compensatory payments on the terms laid down in the
between April and October 2004, and ILA received
Alcoa Decree. For a given plant covered by the scheme,
subsidies for electricity consumed between April and
the compensatory payment was equal to the difference
September 2004. The total payments made by the Equal
between the price paid to the company supplying the
isation Fund to these three undertakings under the
plant with electricity and a preferential price set by the
scheme are set out below (in euro).
State, multiplied by the electricity consumption of the
plant. The method used to calculate the preferential
price (or ‘preferential tariff’) was laid down in decision
CIP No 15/1993. The price was subject to an indexation
Portovesme Srl 12
845
892,82
mechanism based on the variation of Italian power
generation costs (the ‘Ct component’). In 2004 the pref
Eurallumina SpA 5
208
152,05
erential price applied to the Sardinian beneficiaries
ranged between EUR 26 and EUR 35 per MWh.
ILA SpA 291
120,27
(27) The administrative management of the scheme was
entrusted to the Electricity Industry Equalisation Fund
2.2. The disputed 2005 tariffs
(Cassa Conguaglio per il Settore Elettrico) (


8 ). In practice,
the tariff system worked as follows. The beneficiaries
(31) By Article 11(12) of Law No
80/2005, the Italian
sent the Equalisation Fund detailed monthly data on
authorities extended ‘the tariff treatment laid down in
the quantities of electricity they had consumed and the
the Decree of the Ministry for Industry, Trade and
prices they had paid to their power suppliers. They then
Crafts of 19 December 1995 to energy supplies for the
received from the Equalisation Fund cash payments
production and processing of aluminium, lead, silver and
calculated as indicated above ( 9 ).
zinc and for the chlorine-soda cycle, by reference to
prices applied to similar supplies on the European
markets, but only in respect of plants already in
existence at the date of entry into force of the present
(28) The
resources required to finance the compensatory
Decree, located in Sardinia and connected to the high-
payments were raised through a parafiscal charge
voltage network. This tariff treatment shall be subject to
long-term commitments to be agreed between the bene
( 7 ) The tariff mechanism is described in Article 73 of the consolidated
ficiaries, the Sardinian local authorities and the
rules for the provision of the services of transmission, distribution,
responsible Ministries.’
measurement and sale of electricity for the regulatory period
2004–2007 (Testo integrato delle disposizioni per l’erogazione dei servizi
di trasmissione, distribuzione, misura e vendita dell’energia elettrica per il
periodo di regolazione 2004-2007). This document is drawn up and
(32) Thus
Law
No
80/2005
in
substance
reintroduced
the
regularly updated by the AEEG.
tariff scheme implemented in 2004, which extended
( 8 ) The Equalisation Fund is a public body established by Legislative
the Alcoa treatment to other energy-intensive bene
Decree No 98 of 26 January 1948; it acts on instruction from the
AEEG, and among other things handles the financial flows related to
ficiaries based in Sardinia. In practice, the Law applied
preferential electricity tariffs (collection of levies and payment to
only to Portovesme, ILA and Eurallumina, and to Syndial,
final recipients).
a chlorine-soda producer which had not benefited from
( 9 ) The beneficiaries could also terminate their existing supply contracts
preferential prices before.
and turn directly to the Single Buyer (Acquirente unico), a State-owned
body responsible for pooling demand from consumers who wish to
be supplied by it and procuring electricity on their behalf on the
( 10 ) The standard Italian electricity tariff, which reflects the mechanism
wholesale electricity market at the best possible price. If a beneficiary
for imputing electricity costs to end-users, is divided into tariff
of the compensatory payments had decided to opt for this system,
components. Each component is designed to finance specific
the State would have taken the Single Buyer price as the reference
costs. Component A2, for example, finances the costs of
for the calculation of the compensatory payments. This arrangement
dismantling old nuclear plants, while component A3 finances
was designed to minimise the costs of the scheme to the general
renewable energy installations. Component A4 financed preferential
public, as it discouraged beneficiaries from concluding unfavourable
electricity tariff schemes. All end-users’ bills share this structure.
supply contracts with their own power suppliers (which would have
( 11 ) Letter from the AEEG to the Ministry for Production Activities
resulted in higher compensatory payments). However, it was
dated 17 December 2004. According to the information available,
optional: the beneficiaries were not required to address themselves
however, the 2004 Decree has not been formally repealed by the
to the Single Buyer in order to receive the compensatory payments.
Italian authorities.

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L 309/4
EN
Official Journal of the European Union
24.11.2011
(33) It should be noted that from 2005 onwards the prefer
2005 tariffs was subject to the authorisation of the
ential price was no longer pegged to the historical tariff
scheme by the Commission. The 2005 tariffs have
originally laid down in the 1995 Alcoa Decree, but was
consequently not been implemented.
now to be set independently by the AEEG so as to match
the average electricity prices paid by the beneficiaries’
competitors on the European market ( 12 ). The price was
subject to annual updates: according to Article 11(13) of
the Law, ‘the tariff terms referred to in Articles 11 ( 13 )
2.3. Proceedings before national courts
and 12 shall apply from 1 January 2005 and shall be
updated by the AEEG, which shall each year increase the
(38) Solvay Chimica Italia and Solvay Chimica Bussi SpA,
nominal values of the tariffs by 4 %, or, if this latter value
which operate in the chlorine-soda cycle and are
be higher, by the percentage increase in the average
located outside Sardinia, brought legal proceedings
wholesale price of electrical energy recorded on the
before the Regional Administrative Court of
main European electrical energy exchanges, principally
Lombardy ( 14 ) challenging the decisions taken by the
Frankfurt and Amsterdam.’ In decision No 217/05, the
AEEG in implementation of Article 11(12) of Law
AEEG gave an interpretation of this update mechanism
No 80/2005, on the grounds that they involved the
which was more favourable to the beneficiaries, as it laid
granting of unlawful State aid and that they breached
down that the annual increase in the tariff could not
other provisions of Italian law ( 15 ). On 27 November
exceed 4 %.
2006 the Court stayed the proceedings before it,
pending the conclusion of the State aid investigation
initiated by the Commission in Case C 13/06.
(34) In the same decision, the AEEG set the preferential prices
applicable to the various industries for the year 2005 as
follows:
2.4. Combination with previous incompatible aid —
Deggendorf
(39) After
the
opening
of
proceedings,
Italy
indicated
that
Industries qualifying for preferential tariffs
Preferential price
EUR/MWh
Eurallumina had not reimbursed the incompatible aid
which had been the subject of Case C 80/01 (aid for
Aluminium processing 50
alumina production) ( 16 ), but that, according to the
company, the Sardinian regional authorities had issued
Lead and zinc 23
a recovery order in respect of this measure on 8 May
2006.
Aluminium production 27
Chlorine cycle 27
3. DECISION TO INITIATE PROCEEDINGS UNDER
ARTICLE 108(2) TFEU
(40) The
Commission
decided
to
initiate
the
formal
investi
(35) Like the 2004 tariffs, the 2005 tariffs were to be
gation on the following grounds.
financed by means of a parafiscal levy charged to all
electricity end-users via component A4 of the standard
electricity tariff. The management of the financial flows
of the system was again entrusted to the Equalisation
Fund.
3.1. Case C 38/B/04
(41) In
its
decision
to
open
the
formal
investigation
( 17 ), the
Commission considered whether it might be that the
(36) Entitlement to the tariff was conditional upon a
2004 tariffs for Portovesme, ILA and Eurallumina did
commitment by which the beneficiaries undertook to
not constitute State aid, on the ground that they were
carry out productive investment in Sardinia on the
similar to the preferential tariff granted to Alcoa in 1996,
basis of industrial plans to be submitted to the regional
which the Commission had held not to constitute State
authorities. For example, Portovesme undertook to invest
aid in its decision of 4 December 1996 (‘the Alumix
in the self-generation of electricity or to participate in the
decision’) ( 18 ).
construction of new power plants.
( 14 ) Case reference R.G. n. 2317/2005.
( 15 ) In particular Legislative Decree No 79/1999, which implemented
Directive 96/92/EC of the European Parliament and of the
(37) Italy
notified Article 11(12) of Law No
80/2005 in
Council of 19 December 1996 concerning common rules for the
accordance with Article 108(3) TFEU. Payment of the
internal market in electricity (OJ L 27, 30.1.1997, p. 20).
( 16 ) Commission Decisions C/2005/4436/06 of 7 December 2005 and
C/2007/286/3 of 7 February 2007.
( 12 ) This term is in all likelihood be understood as referring to the
( 17 ) Commission Decision C(2004) 4329 of 16 November 2004
EU/EEA market.
(OJ C 30, 5.2.2005, p. 7).
( 13 ) This Article extended the Alcoa and Terni tariffs to 2010.
( 18 ) OJ C 288, 1.10.1996, p. 4.

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EN
24.11.2011 Official
Journal
of
the
European
Union
L
309/5
(42) The
Commission
observed
that
the
new
tariff
seemed
shown that prices were significantly higher in Sardinia,
different from the Alumix tariff, as the Alumix tariff
either on average or specifically for energy-intensive
was granted directly by ENEL, the Italian monopolist
users ( 21 ). The Commission pointed out that the over
electricity operator, while the new tariff involved the
capacity that existed in electricity generation in Sardinia
selective intervention of the State to compensate the
could only have the effect of encouraging power
difference between the market price agreed by the bene
generators to sell electricity at the lowest possible price,
ficiaries with their power suppliers and the preferential
until such time as the completion of the interconnection
price fixed in 1996. The Commission concluded that the
projects, which was scheduled for 2010, enabled them to
2004 Decree did not merely extend to new beneficiaries
export power from Sardinia.
the scope of an existing measure that did not constitute
State aid, but rather introduced a new scheme for the
benefit of the three undertakings concerned, with a
financial mechanism that was very different from the
Alumix tariff.
(48) Besides,
Italy
had
not
explained
why
higher
prices
should
be regarded as a regional handicap, or how the tariff
would contribute to regional development. The
Commission accordingly doubted whether the aid was
necessary.
(43) The
opening
decision
classified
the
tariffs
introduced
by
the 2004 Decree as operating aid, and assessed whether
that aid could be authorised on the basis of the
Guidelines on National Regional Aid (‘the Regional Aid
Guidelines’) ( 19 ), since Sardinia was an assisted region
(49) The
Commission
also
doubted
whether
ad
hoc
aid
of
this
within the scope of Article 107(3)(a) until the end of
kind was proportional to the regional disadvantages, in
2006. The Commission doubted whether the aid could
particular in view of the method used to calculate the
be authorised on that basis, since ad hoc aid of that kind,
preferential price, which bore no relation to the prices
granted to a limited number of undertakings, did not
charged in the rest of Italy but was based on the average
seem to promote regional development.
prices charged in Europe to energy-intensive users.
(44) The Commission also expressed concern that the
measure might have the effect of reducing the level of
(50) The Commission noted that the duration of the measure
taxation applicable to electricity. Any such reduction
exceeded five years, which was usually the maximum
would have to have a legal basis in Council Directive
period for which regional operating aid would be auth
2003/96/EC of 27 October 2003 restructuring the
orised, and that the aid was not degressive in real terms,
Community framework for the taxation of energy
in view of the 4 % cap imposed on increases in the tariff.
products and electricity ( 20 ).
(51) As regards the period covered by the Guidelines on
3.2. Case C 13/06
National Regional Aid 2007–2013 ( 22 ), the Commission
noted that Sardinia would cease to qualify for aid under
(45) In
its
decision
of
27
April
2006
opening
the
formal
Article 107(3)(a) TFEU, and in particular for operating
investigation, the Commission classified the 2005 tariff
aid. The Guidelines would allow a two-year transitional
scheme as new operating aid.
period for the linear phasing-out of existing operating aid
schemes, but it did not seem appropriate to allow new
operating aid to be introduced for a few months and
then phased out, especially given the doubts expressed
and the distortive nature of the aid.
(46) The
Commission considered whether the preferential
tariff could be authorised as regional operating aid on
the basis of the Regional Aid Guidelines, since Sardinia
was to be an assisted region within the scope of
Article 107(3)(a) TFEU until the end of 2006.
(52) In
conclusion,
the
Commission
doubted
whether
the
preferential tariff for Portovesme, ILA, Eurallumina and
Syndial could be authorised either as regional aid or on
any other grounds, which Italy had in any event failed to
identify.
(47) Despite
Italy’s
insistence
that
high
electricity
prices
in
Sardinia handicapped the development of the island,
the Commission took the view that Italy had not
( 21 ) In particular, the Italian authorities argued that prices for energy-
intensive users were negotiated bilaterally and were therefore not in
the public domain. This meant that they were unable to quote
( 19 ) OJ C 74, 10.3.1998, p. 9, points 4.15 to 4.17, as amended
electricity prices paid by the beneficiaries and by their competitors
(OJ C 258, 9.9.2000, p. 5).
in other Italian regions.
( 20 ) OJ L 283, 31.10.2003, p. 51.
( 22 ) OJ C 54, 4.3.2006, p. 13.

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L 309/6
EN
Official Journal of the European Union
24.11.2011
(53) As
regards
Eurallumina,
the
Commission
observed
that
paid equivalent prices, and the measure merely offset the
the company had not yet reimbursed unlawful and
competitive disadvantage suffered by the company as a
incompatible State aid it had received ( 23 ), and that
result of Sardinia’s structural problems (which included
under the rule in Deggendorf ( 24 ) it consequently could
the absence of natural gas).
not receive aid under any new measure.
(58) Metals
like
zinc,
aluminium
and
lead
were
commodities
4. OBSERVATIONS SUBMITTED BY INTERESTED
for which there was one world price, arrived at on the
PARTIES
London Metal Exchange. Variations in local production
costs did not translate into differences in world prices. In
4.1. Case C 38/B/04
particular, Portovesme’s zinc production was so small (at
less than 1 % of world production) that it could not
(54) In
response
to
the
Commission’s
invitation
to
submit
affect the world price.
comments on the 2004 decision to open the in-depth
investigation, observations were received from the
original complainant, several of the beneficiaries
(Portovesme, Eurallumina and Alcoa), and other
interested parties. Only the observations relevant to the
(59) Without
the
tariff
Portovesme
would
have
to
close
its
preferential tariff for Portovesme, ILA and Eurallumina
plant, but the closure would not benefit other EU zinc
are summarised here. The observations made by Alcoa
producers, who would not be in a position to increase
are not included, as they are comprehensively addressed
output, and the gap would be filled by imports from
in the final decision specifically concerning that
third countries. Portovesme concluded that the prefer
company ( 25 ).
ential tariff did not affect competition or trade in the EU.
4.1.1. Observations submitted by Portovesme
(60) Moreover,
according
to
Portovesme,
the
compensatory
payments from the Equalisation Fund did not involve
(55) Portovesme argued that the preferential tariff addressed a
State resources, since the Equalisation Fund merely redis
market failure, namely the failure of the recently
tributed private funds which came from electricity end-
liberalised Sardinian electricity market to deliver
users.
competitive prices owing to the market power of the
incumbent operators. Portovesme claimed that ENEL
and Endesa (whose power generation assets in Sardinia
were subsequently sold to E.ON) formed a duopoly, and
artificially kept electricity prices in Sardinia in line with
(61) Portovesme noted that power off-take by energy-
average Italian prices, whereas in fact Sardinian prices
intensive industries was important to ensure security
should be much lower, especially for large electricity
and continuity of supply in Sardinia, and to avoid inef
consumers, given the overcapacity in electricity
ficiencies in power generation which would lead to
generation, which ought to encourage generators to sell
higher electricity costs for end-users.
at competitive prices.
(62) Finally,
the
company
points
out
that,
if
it
was
obliged
to
close down its plant, the consequences for Sardinia’s
(56) Portovesme
contended
that
the
preferential
price
enjoyed
production base would be very serious, as 790 direct
corresponded to the price the company would have
jobs and 500 indirect jobs would be lost.
obtained under normal market conditions, i.e. if the elec
tricity market functioned correctly.
4.1.2. Observations submitted by Eurallumina
(57) According
to
Portovesme,
the
compensatory
payments
(63) Eurallumina
argued
that
alumina
production
costs
in
received from the Equalisation Fund (amounting to
Europe were higher than in other regions of the world,
EUR 37 per MWh) brought the price paid by Portovesme
owing mainly to higher electricity and fuel prices and to
into line with power prices paid by its competitors, and
the cost of transporting bauxite ( 26 ). The higher costs
did not distort competition, since all EU zinc producers
could not be passed on in the form of higher prices,
since the price of alumina was set on the London
( 23 ) Case C 80/01 (alumina case, Commission Decision 2006/323/EC).
Metal Exchange and individual producers had no
The case concerned exemptions from excise duties on heavy oil
influence over it. European alumina production
used for the production of alumina in Sardinia, in Gardanne
therefore suffered from a competitive disadvantage
(France), and in Shannon (Ireland).
compared with the rest of the world.
( 24 ) Judgment of the Court of Justice in Case C-355/95 Textilwerke
Deggendorf v Commission [1997] ECR I-2549.
( 25 ) See recital 9 of the present Decision.
( 26 ) Aluminium ore, the raw material for the production of alumina.

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EN
24.11.2011 Official
Journal
of
the
European
Union
L
309/7
(64) In
addition
to
the
general
problems
affecting
European
(69) Solvay Chimica Italia and Solvay Chimica Bussi, who
alumina refineries, Eurallumina also pointed to specific
operate in the chlorine-soda industry, sent observations
Sardinian problems that prevented local industries from
on the 2004 tariffs in July 2005, after the expiry of the
reaping the benefits of electricity market liberalisation,
one-month deadline for submitting comments in
notably the market power of incumbent electricity
response to the decision to open the formal investigation.
operators (see Portovesme’s observations in recital 55
Despite the delay, these companies asked to be
above). Eurallumina also contended that the absence of
considered interested parties. In their observations they
natural gas was a specific handicap for the production of
submitted that both the 2004 and the 2005 tariffs
alumina in Sardinia, as the large quantities of steam
constituted unlawful and incompatible State aid.
required for the process had to be obtained using more
expensive heavy oil.
4.1.4. Observations submitted by Italy
T h e t a r i f f a d d r e s s e s a m a r k e t f a i l u r e
(65) According
to
Eurallumina,
after
liberalisation
the
market
power of electricity generators in Sardinia led to an
(70) Italy argued that that the electricity market in the EU was
increase in electricity prices: without the tariff, Eural
not yet fully competitive, as the Commission had itself
lumina would have had to pay EUR 65,95 per MWh
acknowledged in its fourth Annual Report on the Imple
for its electricity supplies, as against the EUR 44 per
mentation of the Gas and Electricity Internal Market ( 28 ).
MWh it used to pay before liberalisation. The 2004
Undertakings, in particular energy-intensive ones, were
tariff brought the price down to EUR 35 per MWh.
unable to choose their suppliers freely and to procure
electricity on comparable terms in the various Member
States. These difficulties were not related to the under
takings’ own entrepreneurship, but were the result of the
structural deficiencies of energy markets. The current
(66) Like
Portovesme,
Eurallumina
contended
that,
if
it
was
situation in the EU energy market had negative effects
forced to go out of business, other EU alumina producers
on free competition in the product markets of energy-
would not be able to step in, as they already worked at
intensive users.
maximum capacity, and the gap would be filled by
imports from third countries. Closure would lead to
the loss of 400 direct jobs and 250 indirect jobs ( 27 ).
Given that it was the sole supplier of alumina for
Alcoa’s smelter, Eurallumina considered that the closure
(71) In Italy, despite the liberalisation of the sector, there were
of its alumina plant might also jeopardise Alcoa’s
particular structural deficiencies, such as insufficient
viability in Sardinia.
interconnection between the different parts of the

national grids and a concentrated market structure. In
these circumstances, liberalisation had not translated
into better prices for energy-intensive users. The
problems were particularly acute in Sardinia, where inter
(67) Eurallumina
concluded
that
the
tariff
introduced
by
the
connection was limited.
2004 Decree was necessary pending the development of
the new infrastructure that would remove the main
factors of competitive disadvantage affecting Sardinian
industry.
(72) Italy submitted, therefore, that a special tariff system
reflecting demand profiles should be considered justified,
as a regulatory measure that simulated the mechanisms
that would be at play in a fully competitive market. The
measure restored the level playing field between energy-
4.1.3. Observations submitted by other interested parties
intensive undertakings operating in different Member
States, eliminating the geographical disadvantages which
(68) A
competitor
of
Portovesme
—
the
same
company
that
affect undertakings located in Sardinia. The scheme
had originally brought the case to the Commission’s
anticipated the expected effects of the liberalisation
attention — wrote to the Commission again after the
process. According to Italy, similar measures were imple
opening of the formal investigation. It submitted an
mented in other Member States, where energy-intensive
analysis of the 2004 preferential tariff in which it
users benefited as a result of regulated electricity tariffs.
concluded that the tariff constituted unlawful State aid.
The disputed tariff scheme was fundamentally different
from the Alumix tariff granted to Alcoa: it was impossible
to take the view that it did not constitute State aid. The
aid must be held incompatible with the common market,
(73) According
to
Italy,
the
2004
decree
pursued
two
further
as it could not be approved either as regional operating
objectives: to support employment in Sardinia, which
aid or as restructuring aid.
was concentrated in the metals sector, and to maintain
a sufficient level of demand for power generation in
Sardinia, which suffered from overcapacity.
( 27 ) At the time of the drafting of this decision, Eurallumina has been
out of production for more than a year, with workers receiving
cassa integrazione layoff benefit.
( 28 ) Document COM(2004) 863 final.

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L 309/8
EN
Official Journal of the European Union
24.11.2011
T h e t a r i f f i s n o t S t a t e a i d
(78) According to Italy, the imperfections of the Sardinian
electricity market (market concentration, poor intercon
(74) Italy contended that the new tariff scheme was
nection, and overcapacity in electricity generation) and
equivalent, de facto, to the Alumix tariff, which the
the lack of access to gas infrastructure constituted a
Commission had found did not constitute State aid.
regional handicap, and the tariff sought to alleviate that
The differences between the old and the new scheme
handicap.
were due solely to the new ‘tariff structure’ required by
the launch of the liberalised energy market.
(79) Electricity
prices
in
Italy
were
38
%
higher
than
the
EU
average for energy-intensive users. This created a
(75) Italy
submitted
that
the
tariff
scheme
did
not
constitute
competitiveness problem which was exacerbated, in
State aid. As regards the use of State resources, the tariff
Sardinia, by the shortcomings of the local electricity
system was comparable to the arrangement in the Preus
market and the absence of access to the natural gas grid.
senElektra case, which the Court of Justice had held did
not involve State resources ( 29 ). The Equalisation Fund
was a technical body that kept the accounts of the
system, and could not dispose freely of the financial
(80) Italy
contended
that
the
measure
contributed
to
regional
resources it handled. The fact that the AEEG and the
development because the metals industry made a major
Ministry of Finance exercised a measure of control over
contribution to the economy and to employment in
the Equalisation Fund’s activities did not mean that the
Sardinia: the metals industry accounted for 12 % of the
State could freely dispose of those resources. According
employed workforce and for 12,2 % of regional GNP in
to Italy, therefore, the resources used to finance the tariff
manufacturing. The tariff had positive repercussions on
mechanism were entirely private.
employment and the maintenance of the social and
economic fabric of the island.
(76) Italy
further
submitted
that
the
tariff
did
not
have
an
impact on trade within the Union, and could not
(81) According to Italy, the tariff was proportional to the
distort competition, for reasons linked to the existence
disadvantages faced by the beneficiaries, because it
of a world price for the products, which were
merely aligned the electricity prices paid by Sardinian
commodities (see observations submitted by Portovesme,
producers on the average prices paid by their EU
recital 55 above). Moreover, both EU and Italian
competitors.
production had failed to keep pace with rising demand
for the metals concerned. In 2005 domestic production
covered only 12 % of Italian demand for aluminium,
(82) The
tariff
was
also
short-term
and
transitional,
since
it
55 % of Italian demand for zinc, and 80 % of Italian
was expected to end upon the completion of infra
demand for lead. There was a worsening production
structure projects aimed at improving interconnection
deficit for these metals in the EU and in Italy, and
with the electricity and gas grids (the new SAPEI inter
demand was increasingly being met by imports from
connection cable and the GALSI gas pipeline) (
third countries. If the metals industry in Italy disap

30 ).
peared, no new EU entrant would replace the capacity
shut down in Italy, as EU plants were already working at
full capacity, and no existing producer or new entrant
(83) According
to
Italy,
the
measure
was
also
degressive,
would have an incentive to increase capacity, since the
because the preferential price was indexed on the basis
long-term prospects for the availability of affordable
of variations in fuel prices, and could only increase or
power were uncertain. The maintenance in Italy of
remain unchanged.
these production capabilities consequently could not
damage competitors. Since the preferential tariff was
not lower than the electricity prices paid on average by
the companies’ competitors, it did not encourage exports
4.2. Case C 13/06
from Sardinia towards other Member States.
4.2.1. Observations submitted by Portovesme
(84) Portovesme
considered
that
the
2005
tariffs
did
not
I f t h e t a r i f f d i d c o n s t i t u t e a i d , i t w o u l d
distort competition, that they were necessary to ensure
b e r e g i o n a l o p e r a t i n g a i d a n d w o u l d b e
the survival of the industries concerned, and that they
c o m p a t i b l e
could be considered compatible as regional aid. The

company’s arguments are similar to those put forward
(77) Italy
argued that, even if the Commission were to
by Italy, to which reference may be made (see recitals 87
conclude that the measure was indeed State aid, the
to 104).
tariff could be considered compatible with the internal
market on the ground that it was regional operating aid,
( 30 ) Italy had estimated that these infrastructures would be completed in
which was admissible in Sardinia on the basis of the
2007. In the context of Cases C 13/2006 and C 36b/2006 Italy put
exemption in Article 107(3)(a) TFEU.
back the expected date to 2010. At the time of the adoption of this
decision, the GALSI pipeline has not been built (it is expected to be
commissioned in 2014), and the SAPEI cable is only partly oper
( 29 ) Case C-379/98 [2001] ECR I-2099.
ational.

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EN
24.11.2011 Official
Journal
of
the
European
Union
L
309/9
4.2.2. Observations submitted by Eurallumina
(90) Italy took the view that the tariffs should be seen as a
policy instrument aimed at safeguarding sectors
(85) Eurallumina
likewise
considered
that
the
2005
tariffs
did
threatened by high energy prices, which would
not distort competition, were necessary to ensure the
otherwise relocate outside Italy and Europe, owing to
survival of the industries concerned, and could be
aggressive competition from non-EU companies with
considered compatible as regional aid. The company’s
lower production costs. The tariffs were to be applied
arguments are similar to those put forward by Italy, to
until the completion of the planned infrastructure and
which reference may be made.
the achievement of a competitive internal market for
energy. The measure was in line with the spirit of
regional aid, because it promoted economic growth and
4.2.3. Observations submitted by other interested parties
employment on an island where energy-intensive
production suffered from a competitive disadvantage
(86) The
two
competitors
of
Portovesme
and
Syndial
that
had
owing not only to the imperfect state of liberalisation
submitted observations in Case C 38/B/04 submitted
of the electricity market but also to exceptional infra
observations in this case too. Both of them contended
structural deficiencies in Sardinia as regards intercon
that the disputed measure constituted operating aid
nection to the national electricity and gas grids.
which should be considered incompatible with the
internal market.
(91) In
support
of
this
integrated
approach,
Italy
cited
the
First Report of the High Level Group on Competitiveness,
4.2.4. Observations submitted by Italy
Energy and Environment ( 31 ), which found that the
liberalisation process in the energy sector had not
T h e t a r i f f s a r e p a r t o f a r e g i o n a l s u p p o r t
produced satisfactory results, that better interconnection
s t r a t e g y
was necessary, and that long-term supply contracts with
predictable prices or partnerships between customers and
(87) Italy
contended
that
the
2005
tariffs
were
very
different
energy suppliers were desirable. Italy argued that the
from the tariffs implemented in 2004, since they were
measures planned for Sardinia moved in this direction,
now in line with the requirements of the Regional Aid
but that short-term measures such as the tariffs were also
Guidelines.
needed in order to safeguard the competitiveness of
Sardinian industry and ensure its survival until the
planned investments were carried out and the structural
(88) According to Italy, the tariffs might, on the basis of a
problems were resolved.
superficial assessment, be classified as operating aid, but
in reality they were part of an array of measures designed
to favour regional development in Sardinia. Italy drew
T h e a i d o f f s e t s a r e g i o n a l d i s a d v a n t a g e
attention, in particular, to the close link between the
(92) Italy
contended
that
it
was
not
possible
to
compare
tariffs and the commitment to carry out long-term
power prices paid by the Sardinian beneficiaries and
investments that beneficiaries were requested to give.
average power prices paid by comparable undertakings
The suspensive clause making the implementation of
on the Italian mainland, since energy-intensive under
the measure subject to authorisation by the Commission
takings purchased electricity via bilateral contracts
testified, according to Italy, to its regional aid character.
which were not in the public domain. According to
Italy, the Commission erred in carrying out a comparison
based on prices recorded on power exchanges, since only
(89) The
memorandum
of
understanding
(protocollo d’intesa)
a marginal part of these undertakings’ energy supplies
signed by the Region and the beneficiaries was the
was procured on exchanges.
lynchpin of this strategy. It comprised the following:
(93) According to Italy, prices negotiated via bilateral
(a) the productive investments described in the industrial
contracts would be favourable to consumers only if the
plans submitted by the beneficiaries;
consumers could freely choose their suppliers and source
electricity which was produced using competitive tech
nologies. This was not possible in Sardinia, where power
generation plants could not produce cheap electricity
(b) the speedy authorisation of energy interconnection
since they had no access to natural gas. Besides, new
infrastructure enabling the beneficiaries to source
investments in modern power generation were
energy at competitive prices (the GALSI gas
discouraged by the limited electrical interconnection
pipeline and the SAPEI interconnection cable);
which made it impossible to export electricity. Another
factor was market concentration and the role played by
incumbent operators.
(c) the award of an integrated concession for the exploi
tation of the Sulcis coalmine and the construction/
( 31 ) First Report of the High Level Group on Competitiveness, Energy
operation of a new coal-fuelled power plant intended
and the Environment, ‘Contributing to an integrated approach on
to supply power to the beneficiaries; and
competitiveness, energy and environment policies’, http://ec.europa.
eu/enterprise/policies/sustainable-business/policy-integration/high-
level-group/reference-material/index_en.htm. The High Level Group
was a forum in which representatives of the Commission and
(d) the preferential tariffs.
business leaders took part.

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L 309/10
EN
Official Journal of the European Union
24.11.2011
(94) In
these
circumstances,
according
to
Italy,
there
was
recorded on exchanges, as such users paid prices agreed
justification for applying tariffs which stabilised electricity
through bilateral contracts, or set by the State where
prices until more effective competition was achieved on
there were regulated tariffs, and these prices were less
the electricity market. Italy once again argued that the
prone to variation.
preferential tariffs simulated the mechanism of a fully
competitive market.
(101) Italy concluded that that the annual 4 % increase applied
(95) As
regards the overcapacity in electricity generation
to the Sardinian tariffs was in line with the increases in
which led the Commission to doubt that power prices
energy prices applied to their direct EU competitors.
in Sardinia were higher than on mainland Italy (since
overcapacity should rather encourage generators to sell
at competitive prices to large consumers — see recital
(102) Italy drew attention to the existence in the EU of
47), Italy put forward the following arguments. Sardinian
measures which had effects equivalent to the disputed
overcapacity in electricity generation could not lead to
preferential tariffs, and argued that all of them should
lower prices for consumers, because in this specific case
be assessed in the same way, regardless of their form,
overcapacity was the result of limited interconnection,
since their common objective was to ensure the survival
which made it necessary to establish a very high power
of energy-intensive industries in the EU and prevent their
reserve in order to safeguard the continuity of electricity
relocation outside the national territory.
supplies on the island ( 32 ). Since this reserve was in any
event remunerated via charges imposed on all electricity
end-users, power suppliers had no interest in selling the
electricity produced using this idle capacity at more
E l i g i b i l i t y o f S a r d i n i a f o r r e g i o n a l a i d
competitive prices.
a f t e r 2 0 0 7
(103) Although from 2007 onwards Sardinia could no longer
T h e a i d i s p r o p o r t i o n a l
benefit from regional operating aid, Italy argued that the
Regional Aid Guidelines mad provision for a phasing-out
(96) According
to
Italy
the
measure
was
proportional,
because
of schemes which were ongoing at the time a region
the price fixed by the AEEG for 2005 (see recital 34
ceased to be eligible for the exemption in
above) corresponded to the average price paid in the
Article 107(3)(a) TFEU. Thus the Commission was still
EU by the beneficiaries’ competitors, which was
in a position to authorise the measure under the 2007
calculated objectively by the regulator. Italy also
Regional Aid. Guidelines. In any event, Italy contended
pointed out that in Member States with regulated tariffs
that the disputed measure should not be viewed as
large industrial consumers paid prices as low as EUR 25
ordinary operating aid.
per MWh for their electricity supplies in 2005.
(97) Italy
therefore contested the data submitted by the
N o i m p a c t o n t r a d e w i t h i n t h e U n i o n
complainants, which in its view were methodologically
flawed, in that they overestimated the average electricity
(104) Italy contended once again that the tariffs did not affect
prices paid by the beneficiaries’ competitors in the EU.
trade between Member States, on the basis of the
arguments already set out with respect to aluminium,
zinc and lead in recital 76. The same reasoning, Italy
T h e a i d i s t e m p o r a r y a n d d e g r e s s i v e
maintained, applied to the chemical industry. Italy

pointed out that in 2003 imports of chemical products
(98) According
to
Italy,
the
duration
of
the
scheme,
at
six
into Italy had exceeded exports, and that EU and Italian
years rather than five, was justified by the need to wait
production had slumped since 2001. With specific
for the completion of the energy infrastructure.
reference to the production of PVC, which was the
main application of chlorine, Italy pointed to a
production deficit in the country: in 2002, only
(99) Italy
also
contended
that
the
degressivity
requirement
470 000 tonnes of PVC had been produced in Italy,
was met: the tariffs were degressive because they were
while consumption had been 970 000 tonnes.
adjusted on the basis of the weighted average of
variations on the Amsterdam and Frankfurt power
exchanges and could only increase but not decrease.
5. ASSESSMENT OF THE MEASURE
5.1. Existence of State aid pursuant to Article 107(1)
(100) The tariffs were pegged to price variations on the power
TFEU
exchanges because, according to Italy, this was an
objective benchmark which was broadly representative
(105) A measure constitutes State aid within the meaning of
of trends in energy prices. However, Italy maintained
Article 107(1) TFEU if the following conditions are all
that actual price increases for EU energy-intensive users
fulfilled: the measure (a) confers an economic advantage
were generally considerably lower than the increases
on the beneficiary; (b) is granted by the State or through
State resources; (c) is selective; and (d) affects trade
( 32 ) This high reserve level (80 % of maximum power absorbed by the
between Member States and is liable to distort
network) was fixed by Ministerial Decree of 7 August 2000.
competition within the EU.

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EN
24.11.2011 Official
Journal
of
the
European
Union L
309/11
5.1.1. Existence of an advantage
where a Member State seeks to approximate conditions
of competition to those that would prevail in a fully
(106) Under the 2004 and 2005 tariff arrangements, the State
competitive market.
intervened to subsidise the electricity price negotiated by
the beneficiaries with their suppliers. In 2004, for
example, on the basis of the bilateral supply contracts
in force at the time and in the absence of the compen
(111) Further, if this submission were to be accepted, there
satory payments, Portovesme would have paid EUR 63
would be no State aid where a Member State granted a
per MWh ( 33 ) and Eurallumina EUR 65,95. These figures
subsidy to bridge the gap between a price freely
were provided by Italy and the beneficiaries themselves,
negotiated between two market operators and the theor
and are therefore not in dispute.
etical price at which agreement might have been arrived
at in conditions of full competition. This would defeat
the fundamental purpose of State aid control.
(107) In 2005, according to the data provided by Italy, the
electricity price negotiated by Syndial with its supplier
exceeded EUR 60 per MWh, whereas the tariff would
(112) Italy contends that these tariffs are identical to the Alumix
bring it down to EUR 27 per MWh. The rationale of
tariff, which the Commission considered not to
the two measures was that the State would reimburse
constitute aid (see recital 74 above), and should
to the beneficiaries the extra costs they had sustained
likewise be considered free of aid.
in order to purchase electricity in Sardinia compared to
average prices paid by their EU competitors.
(113) The Commission points out that the situation on which
the Commission took a position in the Alumix case was
(108) Portovesme contends that the preferential price
very different. In Alumix, the tariff was granted by ENEL,
corresponds to the price which would prevail in a fully
which at the time was a public body supplying electricity
competitive market, and therefore does not provide an
on a monopoly basis in an electricity market which had
advantage. The Commission has already rejected this line
yet to be liberalised
( 36 ). In that situation, the
of reasoning in the Alcoa case, which concerned virtually
Commission had to ascertain whether ENEL was selling
identical tariffs. When assessing the presence of an
at an artificially low price or behaving like a rational
advantage, neither the Union lawcourts nor the
market economy operator. Given the monopoly over
Commission have ever taken into account the conditions
electricity generation and supply held by ENEL, there
that would prevail in a hypothetical market that func
was no competitive market price to which the
tioned better. The framework of reference has always
Commission could refer to assess the existence of an
been the conditions prevailing on the actual markets
advantage. Therefore, the Commission devised a
concerned ( 34 ).
method to identify the lowest theoretical market price
at which a rational supplier would be prepared to sell
to its ‘best customer’.
(109) This argument also supposes that where a market was
not functioning properly a Member State would be
justified in setting prices that simulated conditions of
(114) However, this method cannot be applied in a situation
effective competition (see Italy’s comment in recital 72
where prices are negotiated by end-users with power
above).
suppliers on a liberalised market and are subsidised by
compensatory payments ex post. Thus the analysis in the
Alumix decision, and the Commission’s findings in that
case, are manifestly devoid of relevance here. This was
(110) This reasoning cannot be accepted, as it runs counter to
borne out by the judgment of the Court of First Instance
the settled principle of EU case-law according to which
which upheld the decision to open the formal investi
‘the fact that a Member State seeks to approximate, by
gation in Alcoa ( 37 ) (paragraph 132 of the judgment).
unilateral measures, conditions of competition in a
particular sector of the economy to those prevailing in
other Member States cannot deprive the measures in
question of their character as aid’ ( 35 ). The Commission
(115) In the present case, the market operator principle does
considers that the same principle applies to situations
not apply. The position would have to be assessed in the
light of the market operator test if the State sold elec
tricity to the companies concerned, either directly or
( 33 ) This figure was obtained by adding to the preferential price of
through a State-owned company, as it did in Alumix.
approximately EUR 26 per MWh a compensatory payment of
EUR 37 per MWh.
But here the electricity is supplied by private companies.
( 34 ) See, for example, the Dutch glasshouse growers case, Commission
There is therefore no need, as there was in Alumix, to
Decision 85/215/EEC of 13 February 1985 on the preferential tariff
examine whether the State’s behaviour has been
charged to glasshouse growers for natural gas in the Netherlands
comparable to that of a rational market operator.
(OJ L 97, 4.4.1985, p. 49). In order to assess the presence of an
advantage in certain gas prices in that case, the Commission
considered actual market conditions and applied the market
( 36 ) The first liberalisation directive, Directive 96/92/EC, was imple
economy operator test.
mented in Italy by Decree No 79/1999 (see footnote 15).
( 35 ) See, for example, the judgment of the Court of Justice in Case
( 37 ) Case T-332/06 Alcoa Trasformazioni [2009] ECR II-29 (appeal
C-372/97 Italy v Commission [2004] ECR I-3679, paragraph 67.
pending).

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L 309/12
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Official Journal of the European Union
24.11.2011
(116) It must be concluded that the 2004 and 2005 compen
the beneficiaries, the Equalisation Fund cannot exercise
satory payment systems mitigate the charges payable
any control over the funds, and is merely an accounting
under the supply contracts concluded by the bene
intermediary.
ficiaries, which would normally have to be included in
the companies’ budgets. In line with well-established
case-law, therefore, the disputed measures confer an
economic advantage on the recipients ( 38 ).
(122) In the PreussenElektra case, the Court held that an obli
gation imposed on private electricity supply undertakings
to purchase electricity produced from renewable energy
5.1.2. Selectivity
sources at minimum prices higher than the real

economic value of that type of electricity did not
(117) Since the preferential electricity tariffs in Italy are granted
constitute State aid, because the measure did not
exclusively to undertakings operating existing facilities
involve any direct or indirect transfer of State resources.
located in Sardinia and belonging to a closed list of
industries identified in the legislative and regulatory
instruments that form the legal basis of the measures,
the advantage they confer is a selective one.
(123) The Commission points out that in PreussenElektra the
resources required to finance the measure were
provided by the electricity suppliers directly to the
producers of renewable energies, without transiting
5.1.3. State resources and imputability to the State
through any public body. In that system, the sums to
be transferred could never be at the disposal of the
(118) It is settled case-law that an advantage constitutes State
aid within the scope of Article 87(1) TFEU only if it is
Member State’s authorities. In the case at hand,
granted directly or indirectly through State resources (
however, the monies transit through a public body, the

39 )
and is imputable to the State (
Equalisation Fund, before being channelled to the final

40 ).
beneficiary. Thus PreussenElektra addresses different factual
circumstances, and is not relevant to the present case.
(119) As explained in recital 28, the compensatory payments at
issue here are financed by means of a parafiscal charge
collected by the Equalisation Fund via the A4 component
(124) The judgment in Pearle ( 43 ) cannot assist Italy or the
of the electricity tariff. This charge is obligatory, being
beneficiaries either. In Pearle, the Court found that,
imposed by means of decisions of the AEEG that
under certain specific conditions, the yield of a levy
implement national legislation. The Equalisation Fund is
which transited through a public body did not constitute
a public body established by law which carries out its
State resources. In Pearle, the measures were financed
functions on the basis of precise instructions laid down
entirely by a particular trade at the sole initiative of the
in the decisions of the AEEG.
trade itself. The monies were collected via a parafiscal
levy transiting through a public body which could not
at any time dispose of the funds freely. In addition, there
(120) It is also settled case-law that the yield of a levy which is
was a correspondence between the entities which paid
obligatory under national law and is paid to a body
the levy and those which received the benefits of the
established by law constitutes a State resource within
measure.
the meaning of Article 87(1) of the Treaty when it is
earmarked for the funding of a measure which fulfils the
other criteria of that Article ( 41 ).
(125) Italy contends that the Equalisation Fund does not have
any discretion in the disbursement of the funds, which
are earmarked for the financing of the tariffs and never
(121) Italy relies on the judgment of the Court of Justice in
come within ‘the perimeter of public finance’. Thus the
PreussenElektra ( 42 ) to substantiate the thesis that the
State cannot freely dispose of the funds, and
measure at hand is not financed through State resources.
consequently the funds do not constitute State resources.
Italy argues that the funds required to finance the tariff
are transferred by private parties (electricity consumers)
to private parties (the beneficiaries); the role of the State
is confined to the enactment of a law requiring payment
(126) As a preliminary remark, it should be pointed out that,
of the required sums, with no discretion to dispose of the
while some of the Pearle criteria may subjectively be
funds other than in the implementation of the statutory
viewed as more central than others, there is no such
scheme. In particular, according to Italy and several of
thing as a ‘key criterion’ in Pearle. The tests enumerated
in the judgment are cumulative. This is also the inter
( 38 ) Judgment of the Court of Justice in Case C-241/94 France v
pretation given by the Court of First Instance in Earl
Commission [1996] ECR I-4551, paragraph 34.
Salvat, where it examined a parafiscal levy challenged in
( 39 ) See for example PreussenElektra, cited above, paragraph 58.
that case in the light of each and every one of the Pearle
( 40 ) See for example the judgment of the Court of Justice in Case
criteria ( 44 ).
C-482/99 France v Commission (Stardust Marine) [2002] ECR
I-4397, paragraph 24.
( 41 ) See the judgments of the Court of Justice in Case 78/76 Steinike &
( 43 ) Judgment of the Court of Justice in Case C-345/02 Pearle and Others
Weinlig [1977] ECR 595 and Case 47/69 French textiles [1970] ECR
[2004] ECR I-7139.
487.
( 44 ) Judgment of the Court of First Instance in Case T-136/05 Earl Salvat
( 42 ) See footnote 29.
v Commission [2007] ECR II-4063, paragraphs 137–165.

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(127) Before considering the role played by the Equalisation
from the charge for purposes other than those provided
Fund, the Commission has ascertained whether any of
by the law, so that the monies remained under public
the other tests enumerated in Pearle are satisfied. It is
control and were thus available to the national
clear that here, by contrast with the Pearle case, the
authorities. The Court considered that this was sufficient
disputed tariffs were established at the initiative of the
for such monies to be characterised as State resources.
State, not at the initiative of an economic sector. In
Pearle, moreover, the beneficiaries of the measure were
also the sole contributors of the resources used, so that
the intervention of the public body did not tend to create
(131) The similarities with the case at hand are evident. The
an advantage which would constitute an additional
surcharge on the electricity price used to finance the
burden on the State. In the case at hand, the beneficiaries
tariffs at issue here is imposed, as in Essent, by law.
do not bear the financial burden of the levy, which rests
The Equalisation Fund plays the same role as SEP, as it
solely on electricity consumers. Thus the Pearle judgment
centralises and manages the proceeds of the parafiscal
cannot validly be relied upon irrespective of whether
charge, and is subject to the same constraints, as it
merit can be found in the argument that the Equalisation
cannot use the proceeds from the charge for purposes
Fund is a mere accounting intermediary.
other than those provided by law (the financing of pref
erential tariffs). The State is in a position to control and
orient the use of the resources: the Equalisation Fund
discharges its accounting functions on precise
(128) Turning now to the Equalisation Fund itself, the
instructions from the AEEG, which acts within its
Commission points out that, according to settled case-
statutory regulatory powers and/or in implementation
law, no distinction should be made between cases where
of national legislation. Thus the resources handled by
the aid is granted directly by the State and cases where it
the Equalisation Fund remain under public control at
is granted by a public or private body designated or
all times.
established by the State ( 45 ). Thus the public or private
status of the Equalisation Fund is not a determining
factor for the purpose of applying the State aid rules.
The fact that the Equalisation Fund is a public body
(132) This analysis is consistent with the Commission’s
does not automatically mean that Article 107 TFEU is
decision in the Italian stranded costs case, in which it
applicable ( 46 ); similarly, the intervention of a private
classified as State resources the monies administered by
body would not in itself preclude application of that
the Equalisation Fund in the A6 account ( 48 ).
Article.
(129) However, the analysis cannot be limited to the powers of
(133) The classification as State resources of the monies admin
the Equalisation Fund in its capacity as a public body.
istered by the Equalisation Fund was borne out in the
What has to be ascertained, rather, is the more general
judgment of the Court of First Instance in the Iride
question whether the State, either directly or through any
case ( 49 ).
other body designated by it, can exercise control over the
funds used to finance the tariff. The same test would
have to be applied if the Equalisation Fund were a
private body.
(134) Italy’s Supreme Court of Cassation had already ruled that
the legal personality of the Equalisation Fund was not
separate from that of the Italian State, and that the
monies transferred to the Equalisation Fund should be
(130) The recent judgment of the Court of Justice in the
considered State property, even if they derived from
Essent ( 47 ) case provides definitive guidance on this
private entities and were intended for private under
point. In Essent, the Netherlands had introduced by law
takings (judgment No 11632/03 of 3 April 2003). In
a surcharge on electricity prices. The surcharge was paid
the Iride case, the applicants, Iride SpA and Iride
by electricity consumers to network operators, which in
Energia SpA, brought an action in the Court of First
turn transferred the monies to a designated company,
Instance challenging a decision whereby the Commission
SEP. SEP had no discretion in the management of the
had categorised as State resources the sums administered
funds and operated under close control by the
by the Equalisation Fund in the A6 account. The
authorities. The Court came to the conclusion that the
arguments put forward by the applicants were very
proceeds of the surcharge constituted State resources,
similar. They disputed the substance of the Court of
because the surcharge on the price of electricity was
Cassation’s ruling, contending that the role of the Equal
imposed by national law, and therefore constituted a
isation Fund was merely that of an accounting inter
charge, and SEP was not entitled to use the proceeds
mediary between private citizens subject to a financial
obligation and the beneficiaries of the sums concerned,
( 45 ) Judgment of the Court of Justice in Case 57/86 Greece v Commission
a role which did not allow the Equalisation Fund to make
[1988] ECR 2855, paragraph 12; PreussenElektra, cited above;
use of the monies deposited even for a short period of
judgment of the Court of Justice in Case C-126/01 Gemo [2003]
time. The applicants also claimed that the case-law
ECR I-13769, paragraph 23.
developed in PreussenElektra was applicable.
( 46 ) Judgments in Stardust Marine, cited above; Pearle, cited above; and
Earl Salvat, cited above.
( 47 ) Judgment of the Court of Justice in Case C-206/06 Essent Netwerk
( 48 ) Commission Decision C(2004) 4333 of 1 December 2004, Case
Noord v Aluminium Delfzijl [2008] ECR I-5497, paragraphs 69
No N 490/2000 Italy — stranded costs of the electricity sector.
and 70.
( 49 ) Judgment in Case T-25/07 Iride [2009] ECR II-245, paragraph 39.

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(135) The Court of First Instance, after pointing out that it had
have no effect on trade and do not distort competition
no jurisdiction to review the interpretation of Italian
because there are no actual trade flows between Member
legislation by the Court of Cassation, confirmed that
States; no such trade flows are likely to develop, and in
the monies held in the Equalisation Fund’s A6 account
view of the particular features of the industry the tariffs
were to be classified as State resources, because, in
do not damage the beneficiaries’ competitors in the
addition to being State property, they were under
Union.
constant State control ( 50 ).
(136) That conclusion concerned the Equalisation Fund’s A6
(140) In the Commission’s decisions and the judgments of the
account, used to finance the stranded costs of Italy’s
Court of Justice it has never been accepted that an
electricity sector. It can, however, logically be extended
absence of actual trade flows shows that an aid
to the A4 component, which finances the disputed tariffs.
measure has no effect on intra-Union trade. The Court
The judgment of the Court of Cassation was based on an
has in fact consistently ruled that aid to an undertaking
analysis of the legal personality of the Equalisation Fund,
may be such as to affect trade between the Member
and its finding with respect to State property therefore
States and distort competition even if the beneficiary
applies to all of the monies deposited with the Equal
undertaking does not participate in intra-Union trade
isation Fund. The same is true of the finding by the
itself. Where a Member State grants aid to an under
Court of First Instance that the State can control the
taking, domestic production may for that reason be
resources administered by the Equalisation Fund. There
maintained or increased, with the result that undertakings
is no difference between the A6 account and the A4
established in other Member States have less chance of
component other than the purpose to which the
exporting their products to the market in that Member
resources are put (covering stranded costs in the case
State ( 52 ).
of the A6 account, and financing preferential tariffs in
the case of the A4 component). The sums transferred to
the Sardinian beneficiaries from the A4 component must
therefore also be categorised as State resources.
(141) Moreover, the pattern of decreasing EU production,
increasing imports from non-Union countries, and
limited or no trade flows between Member States is
not unusual: indeed it is typical of industries which are
(137) In addition to being financed by State resources, the
experiencing structural difficulties or which are subject to
disputed tariffs are imputable to the State, since the
high competitive pressure. Such industries are particularly
legal basis for the measures is laid down in national
sensitive to measures taken by Member States to improve
legislation and decrees and in the decisions taken by
the competitive position of their domestic industries.
the AEEG, which is a public body, in the exercise of its
public authority functions ( 51 ).
(142) The fact that production of zinc, lead and silver in Italy is
5.1.4. Effect on trade and distortion of competition
too modest to affect the reference price is irrelevant. The
fact that there is a reference price for these metals which
(138) As regards the effect of the measures on trade between
is not easily influenced by conditions of production in a
Member States and the ensuing distortion of
single Member State does not mean that there cannot be
competition, it is undisputed that the markets
competition between undertakings based in the EEA and
concerned (lead, zinc, silver, aluminium and
selling on the worldwide metal markets. It is conceivable
chlorine/soda) are fully open to competition. This by
that aid to the Sardinian beneficiaries will not enable
itself is enough to establish that the tariffs have an
them to reduce the world price for their products and
effect on intra-Union trade.
squeeze competitors out of the market, and that other
European producers may remain in business as long as
they can sell profitably at the world price. But the profits
obtained in Italy thanks to the subsidised electricity tariffs
strengthen the companies’ competitive position in a
(139) Nevertheless, the Commission has considered the
general sense. For example, accumulated capital reserves
argument advanced by the beneficiaries and by Italy
can be used to take over competitors and to increase
that in the metals industry (the argument has not been
market share. This reasoning is all the more relevant
put forward expressly in respect of chlorine) the tariffs
considering that some of the beneficiaries belong to
multinational companies ( 53 ).
( 50 ) Iride, cited above, paragraph 28.
( 51 ) See the judgments of the Court of Justice in Case 303/88 Italy v
( 52 ) Judgments of the Court of Justice in Case 102/87 France v
Commission [1988] ECR 1433 and Case 47/69 France v Commission
Commission [1988] ECR 4067, paragraph 19, and Case C-305/89
[1970] ECR 4393; see also the judgment of the Court of First
Italy v Commission [1991] ECR I-1603, paragraph 26.
Instance in Case T-351/02 Deutsche Bahn v Commission [2006]
( 53 ) Portovesme is owned by the multinational Glencore. Eurallumina is
ECR II-1047.
owned by the Russian company Rusal.

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(143) Contrary to what the beneficiaries claim, the fact that the
5.1.5. Conclusions on the presence of aid
price paid in Italy in the sectors concerned is comparable
to the average electricity price paid in Europe by
(147) The Commission concludes that the disputed 2004 and
competing producers cannot be taken as evidence that
2005 tariffs constitute State aid within the meaning of
the interests of other European producers are not
Article 87(1) TFEU and can be authorised only if they
threatened by the Italian tariff. It was clearly established
qualify for one of the exemptions provided for in the
in Case C-372/97 Italy v Commission that unilateral
Treaty. This conclusion is consistent with that arrived at
measures aimed at approximating conditions of
in the Alcoa case, which concerned virtually identical
competition in a Member State to those prevailing in
tariffs.
other Member States do affect trade (and therefore
cannot escape classification as aid). Moreover, some of
the power supply agreements in place in other Member
States may involve State aid, and the Commission has
opened in-depth investigations into several measures of
this kind (
5.2. New aid or existing aid

54 ). Even though this defence has not been put
forward expressly by Italy or Alcoa, the Commission
considers it useful to draw attention to the well-estab
(148) The situations in which a measure constitutes existing aid
lished principle that the existence of unlawful aid in
are exhaustively enumerated in Article 1 of Council
some Member States cannot justify the adoption of
Regulation (EC) No 659/1999 of 22 March 1999
similar measures by another Member State.
laying down detailed rules for the application of

Article 93 of the EC Treaty ( 57 ).
(144) In any event, the complaints received from the benefici
aries’ competitors provide an indication that the disputed
tariffs do raise competition problems and affect trade
(149) It is undisputed that the measures at issue were not put
within the Union.
into effect before Italy’s accession to the Union
(Article 1(b)(i) of the Regulation), are not deemed to
have been authorised owing to the Commission’s
failure to take a decision within the prescribed procedural
deadlines (Article 1(b)(iii)), and cannot be deemed to be
(145) Moreover, Italy did not notify the 2004 tariffs. According
existing aid owing to the expiry of the limitation period
to settled case-law, where aid has not been notified, the
(Article 1(b)(iv)). They did not become aid as a result of
Commission is not obliged to demonstrate the actual
the evolution of the common market and without having
consequences of the measure on competition and trade
been altered by the Member State (first sentence of
between Member States: ‘If the Commission were
Article 1(b)(v)).
required in its decision to demonstrate the real effect
of aid which had already been granted, that would
immediately favour those Member States which grant
aid in breach of the duty to notify laid down in
Article 93(3) of the [EC] Treaty, to the detriment of
those which do notify aid at the planning stage’ ( 55 ).
(150) In the light of the above, the Commission considers that
the disputed tariffs constitute new aid.
(146) The conclusion must be drawn that the disputed prefer
ential electricity tariffs are liable to improve their bene
ficiaries’ competitive position vis-à-vis competing under
takings in the EU. It is settled case-law that in such
5.3. Lawfulness of the aid
circumstances it must be held that trade between
Member States is affected and competition distorted (
(151) Pursuant to Article 108(3) TFEU, Member States must

56 ).
notify any plans to grant or alter aid, and may not put
the proposed measures into effect until the notification
( 54 ) See, for example, the Commission decisions to open proceedings in
procedure has resulted in a final decision.
respect of regulated electricity tariffs in France (Case C 17/07,
Commission decision C/2007/2392 of 13 June 2007, OJ C 164,
18.7.2007, p. 9) and in Spain (Case C 3/07, Commission decision
C/2007/123/3 of 24 January 2007, OJ C 43, 27.2.2007, p. 9).
( 55 ) Judgment of the Court of Justice in Case C-301/87 France v
Commission [1990] ECR I-307, paragraphs 32 and 33; judgments
of the Court of First Instance in Case T-214/95 Vlaams Gewest v
(152) Since Italy failed to notify Article 1 of the 2004 Decree,
Commission [1998] ECR II-717, paragraph 67; and Joined Cases
the 2004 tariffs constitute unlawful aid.
T-298/97, T-312/97, T-313/97, T-315/97, T-600/97 to 607/97,
T-1/98, T-3/98 to T-6/98 and T-23/98 Alzetta and Others v
Commission [2000] ECR II-2319, paragraph 79.
( 57 ) OJ L 83, 27.3.1999, p. 1. The second sentence of Article 1(b)(v) of
( 56 ) See, for example, the judgments of the Court of Justice in Case
the Regulation reads: ‘Where certain measures become aid following
730/79 Philip Morris v Commission [1980] ECR 2671, paragraph
the liberalisation of an activity by Community law, such measures
11, and in Joined Cases C-393/04 and C-41/05 Air Liquide Industries
shall not be considered as existing aid after the date fixed for
v Ville de Seraing and Province de Liège [2006] ECR I-5293.
liberalisation’.

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(153) But Italy did notify Article 11(12) of Law No 80/2005,
may be granted for environmental purposes on the basis
and refrained from implementing that measure. It has
of the Community guidelines on State aid for environ
therefore complied with its obligations under
mental protection ( 59 ). In assisted areas operating aid can
Article 108(3) TFEU.
also be authorised on an exceptional basis as regional aid.
The Commission has assessed whether the disputed
tariffs might fall into one of these categories.
6. COMPATIBILITY OF THE AID
(154) In derogation from the general prohibition on State aid
laid down in Article 107(1) TFEU, aid may be declared
(159) The Commission observes that the tariffs do not pursue
compatible if it qualifies for one of the exceptions
any environmental purpose, and consequently cannot be
enumerated in the Treaty.
authorised as environmental aid.
(155) The 2004 and 2005 tariffs constitute operating aid.
6.1. Compatibility with the 1998 Regional Aid
Italy’s claim that the 2005 tariffs should not be
Guidelines
considered operating aid because they are part of a
regional support strategy and are conditional upon
(160) Exceptionally, operating aid may be granted in assisted
productive investment should be dismissed. Even
areas eligible for aid under the exemption in
though the memorandum of understanding provides
Article 107(3)(a) TFEU. The Region of Sardinia was
that the beneficiaries must carry out certain investments,
eligible for such aid until the end of 2006. The
the aid component in the 2005 preferential tariffs is not
Commission has therefore examined whether, during
a proportion of the eligible expenditure, and is not
that period, the 2004 and the 2005 tariffs could be
subject to a maximum aid intensity. There are no indi
authorised under the 1998 Regional Aid Guidelines.
cations that the measure complies with the criteria for
investment aid, or that the aid is proportional. Instead,
the measure is clearly pegged to electricity consumption
and aimed at mitigating electricity procurement costs,
(161) According to point 4.15 of the Guidelines, operating aid
which are operating costs incurred by the companies
can be granted exceptionally, provided that (i) it is
concerned. Thus it cannot be construed as investment
justified in terms of its contribution to regional devel
aid.
opment and its nature and (ii) its level is proportional to
the handicaps it seeks to alleviate. It is for the Member
State to demonstrate the existence of any handicaps and
gauge their importance. Under point 4.17 of the
(156) Operating aid is, in principle, incompatible with the
Guidelines, operating aid must be both limited in time
internal market. In Case C-86/89 Italy v Commission, the
and progressively reduced.
Court of Justice found ‘that the aid in question, which
was granted without any specific conditions and solely
according to the quantities used, should be regarded as
an operating aid to the undertakings concerned and that,
(162) According to point 2 of the Guidelines, ‘An individual ad
as such, it affected trading conditions to an extent
hoc payment made to a single firm, or aid confined to
contrary to the common interest’ ( 58 ).
one area of activity, may have a major impact on
competition in the relevant market, and its effects on
regional development are likely to be too limited …
Consequently, the derogations in question [from the
(157) In Case T-459/93 Siemens v Commission the Court of First
Instance recalled the principle that ‘operating aid, that is
general prohibition of aid] will normally be granted
to say, aid intended to relieve an undertaking of the
only for multisectoral aid schemes open, in a given
expenses which it would itself normally have had to
region, to all firms in the sectors concerned’. An elec
bear in its day-to-day management or its usual activities,
tricity tariff which is granted selectively to a few indi
does not in principle fall within the scope of
vidual undertakings in certain sectors is clearly not in line
Article 92(3) aforesaid [now Article 107(3) TFEU] …
with the spirit of regional aid, which expected to be
According to the relevant case-law, the effect of such
multisectoral. However, since there is no absolute
aid is in principle to distort competition in the sectors
prohibition of ad hoc regional aid, the Commission has
in which it is granted, whilst nevertheless being
considered whether there are any exceptional circum
incapable, by its very nature, of achieving any of the
stances that would warrant the granting of the tariff.
objectives of the aforesaid exceptions’.
(163) The Commission has considered, in particular, the defi
(158) Nevertheless, there are clearly defined situations in which
ciencies of the Sardinian electricity market, as docu
operating aid may be granted. In particular, operating aid
mented by Italy and the beneficiaries, to assess whether
they might constitute a regional handicap.
( 58 ) [1990] ECR I-3891; see also Case C-301/87 France v Commission
[1990] ECR I-307, paragraph 50.
( 59 ) OJ C 37, 3.2.2001, p. 3 and OJ C 82, 1.4.2008, p. 1.

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6.1.1. The Sardinian electricity market in the Italian context
(168) Wholesale electricity prices in Italy are among the highest
in Europe ( 65 ), and prices in Sardinia are among the
(164) The Italian electricity market is generally highly concen
highest in Italy. In 2007, the national average price
trated, although less so in the north of the country. The
(PUN) was EUR 70,99 per MWh, whereas the average
dominant operator in all zones is the former monopolist
Sardinian zonal price was EUR 75,00 per MWh, down
ENEL, except in Sardinia, where it holds a duopoly with
from EUR 80,00 per MWh in 2006 ( 66 ). In 2008 and
E.ON. ENEL has considerable market power and has been
2009, average regional prices in Sardinia continued on
found by the Italian competition authority to have
an upward trend. In the first half of 2009, prices in
abused this power in several instances. Electricity prices
Sardinia remained constantly above the national average
in Italy are generally high, owing to a generation mix
(with an average price of EUR 106,60 per MWh
based largely on fossil fuels (essentially gas), the absence
compared with a PUN of EUR 60,50 per MWh).
of nuclear capacity, and congestion on the intercon
nectors with the rest of Europe.
(169) Prices paid in Sardinia by the beneficiaries of the tariffs in
2004/2005, on the basis of bilateral contracts, ranged
(165) In Sardinia, which accounts for 4,1 % of net installed
from EUR 60 to EUR 65 per MWh. It has not been
power in Italy (
possible to compare these prices to those recorded on

60 ), electricity is produced mainly in
thermoelectric power plants using fossil fuels (coal, fuel
the Italian mainland, as the Commission does not possess
oil, and refinery tar). The island has no natural gas
the relevant data (which Italy has claimed it is unable to
distribution infrastructure.
provide — see recital 92 above). However, based on the
above analysis of general price trends, which may be
broadly representative of price trends in bilateral
contracts, it seems possible to presume that, in the
period under consideration, energy-intensive under
(166) Sardinia suffers from excess generation capacity,
takings in Sardinia paid a higher price than on the
especially in the high-cost segment (oil-fired plants),
Italian mainland.
owing to the Government’s plans to concentrate Italy’s
heavy industry on the island, which have never come to
fruition, and which led ENEL to overinvest in generation
plants. Apart from being structurally more expensive, the
(170) In conclusion, the electricity market in Sardinia exhibits a
plants are quickly becoming technically obsolete. During
combination of problems, including high prices, a high
the period under consideration, the export of Sardinian
degree of market concentration, dominant operators’
electricity to the Italian mainland was limited by the
market power, excess generation capacity in the high-
modest capacity of the interconnector, which was
cost segment, relative inefficiency of obsolete generating
prone to congestion ( 61 ).
plants, lack of access to natural gas infrastructure, and
insufficient interconnection. These problems are likely to
translate into higher electricity prices for end-users,
including the most energy-intensive ones.
(167) Two power companies, ENEL and E.ON, together hold a
95 % market share of electricity supply in Sardinia
(roughly 58 % E.ON and 42 % ENEL). According to the
6.1.2. Existence of a regional handicap
Energy Sector Inquiry ( 62 ), Sardinia can be classified in
competition terms as a duopoly with collective
(171) The first issue to be addressed is whether such problems
dominance. Market concentration is high, though not
constitute a regional handicap, i.e. whether they have a
the highest in Italy ( 63 ). Owing to their control of
severe impact on the economic development of Sardinia.
virtually all mid-merit to peak plants, E.ON and ENEL
In case C 34/02, the Commission did not accept that the
set the price at most times of the day. However, the
lack of energy interconnection constituted a
situation in Sardinia appears less critical than in the
handicap ( 67 ). While it is true that SMEs suffer less
south of Italy, where ENEL alone sets the price at all
from high electricity prices than do large, energy-
times of day ( 64 ).
intensive industries, nevertheless the welfare of an indi
vidual industry cannot be automatically equated to the
( 60 ) Source: Indagine conoscitiva sullo stato della liberalizzazione dei settori
welfare of a region. The Commission considers that Italy
dell’energia elettrica e del gas naturale, May 2005.
has not sufficiently substantiated the alleged regional
( 61 ) Sardinia was connected to mainland Italy via an obsolete 270 MWh
handicap arising from the state of the Sardinian elec
interconnector known as SACOI. In 2009 the first section of a new
tricity market.
interconnection cable, SAPEI, became operational.
( 62 ) Communication from the Commission — Inquiry pursuant to
Article 17 of Regulation (EC) No 1/2003 into the European gas
( 65 ) For example, in 2007 the average wholesale price in Italy (for
and electricity sectors (Final Report), SEC(2006) 1724,
baseload power on the day-ahead market) on IPEX (Italy’s electricity
COM(2006) 851 final.
exchange) was EUR 70,99 per MWh, compared with EUR 37,97 on
( 63 ) The HHI index in Sardinia varies between 3 000 and 3 500. In the
Germany’s EEX exchange and EUR 40,78 on France’s Powernext
South zone, however, the HHI is higher.
exchange.
( 64 ) In Sardinia, E.ON can set the price for 67 % of the hours, and ENEL
( 66 ) 2008 Report of the AEEG, based on data from the exchange
for 29 % of the hours. If adjacent zones are also considered, ENEL
manager, GME.
is price-setting in the macrozone Macrosud-Sardegna for 63 % of
( 67 ) Commission Decision C(2002) 3715 of 16 October 2002, Region of
the hours. In the MacroSud region, ENEL is price-setting for 100 %
Sardinia: measures to reduce the energy costs of small and medium-sized
of the hours.
enterprises (OJ C 132, 4.6.2002, p. 6).

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(172) But even if one were to suppose that there was indeed a
6.1.4. Proportionality
regional handicap, the criteria laid down by the Regional
Aid Guidelines would still have to be fulfilled. The
(176) The subsidy granted to the beneficiaries of the tariffs is
Commission has accordingly assessed whether these
not calculated in such a way as to offset the regional
tests are satisfied.
disparity (i.e. the differential between electricity prices
in mainland Italy and prices in Sardinia for the same
category of customer), but rather aims to align
Sardinian prices on those paid by the beneficiaries’
competitors in the EU. The prices set for the Sardinian
6.1.3. Contribution to regional development
beneficiaries are particularly low, and certainly below

prices on mainland Italy, which are among the highest
(173) Aid must sustainably contribute to regional development
in the EU. Therefore, the tariffs are not proportional to
and be proportional to the handicaps it seeks to alleviate.
the regional handicap they allegedly seek to alleviate.
Operating aid in an assisted region cannot be authorised
by reason of difficulties experienced by one industry, but
must be shown to make a lasting contribution to
regional development. In the case at hand, this is
(177) The very method chosen to calculate the amount of the
unlikely. Even if one were to accept that the maintenance
subsidy suggests that the measure pursues an industrial
on the island of some industrial production facilities
policy objective rather than a regional objective. Indeed,
would contribute to employment and to the maintenance
the industrial policy dimension of the tariffs has been
of a manufacturing base on the island, the effects would
underlined repeatedly by Italy in its submissions.
not be lasting. If high electricity prices are a structural
problem in Sardinia, as Italy claims, the difficulties
experienced by energy-intensive industries will resurface
as soon as the tariffs are removed.
6.1.5. Degressivity
(178) Regional operating aid must be progressively reduced
(point 4.17 of the Regional Aid Guidelines). Since the
updating mechanisms for the 2004 and the 2005
(174) The Italian authorities present the tariffs as a temporary
tariffs are different, they have been assessed separately.
measure, designed to last only until the completion, in
2010, of the infrastructure projects currently under way
in connection with energy generation and intercon
nection (the GALSI pipeline and the SAPEI marine
(179) The 2004 tariffs are indexed on the basis of variations in
cable) (
fuel prices and can only increase or remain unchanged.

68 ). Italy’s argument is that better interconnection
will bring the prices charged to these companies down.
According to Italy, this ensures that the aid is
The Commission considers that, while the new infra
progressively reduced. The Commission considers that
structure may reduce or level out price disparities
the requirement of degressivity can be considered
between Sardinia and the mainland, it seems highly
fulfilled only if the compensatory payments — which
unlikely that such projects could halve electricity prices,
are equal to the effective amount of the aid — are guar
so as to bring them to the levels allegedly required to
anteed to decrease over time. It is not sufficient that the
make these industrial activities profitable in the long
tariff should increase over time, since a higher tariff may
term.
nevertheless represent a higher volume of aid if, in the
meantime, the prices charged to end users in the market
concerned have increased faster than the tariff. The
Italian method does not provide any guarantee in this
respect ( 69 ).
(175) The Commission also points out that the existence of a
State subsidy aimed at reducing electricity costs for large
users does not encourage electricity suppliers to bring
prices down in order to avoid losing their largest
(180) As regards the 2005 tariffs, The Commission has
customers, nor does it prevent a worsening of their
assessed the indexation mechanism introduced by
cost structures. Instead, the subsidy tends to heighten
Article 11(13) of Law No 80/2005, as interpreted by
the incentive for suppliers to exploit their market
the AEEG in decision 217/05 (see recital 33).
power. Therefore, even if were true, given the situation
According to the implementing rules laid down by the
of overcapacity, that energy-intensive companies would
AEEG, the tariff is to be increased yearly by a percentage
normally be able to obtain a competitive price were it
reflecting trends in electricity prices in the EU, but the
not for the market power of the electricity suppliers
increase cannot exceed 4 %. According to Italy, this
(who, according to Italy and the beneficiaries, have an
mechanism ensures progressive reduction.
interest in keeping prices high), the Commission
considers that the preferential tariff is not the appropriate
( 69 ) It should be noted that variations in market prices are not
instrument to curtail such market power.
correlated only with variations in fuel prices. Other factors are
liable to push up market prices: in the specific context of
Sardinia, these may include the market power of incumbent
( 68 ) At the time of writing (December 2010), the SAPEI cable is partly
operators, imbalances between supply and demand, or intercon
operational, whereas the GALSI pipeline is not expected to come on
nection problems. The Italian method does not ensure that over
stream before 2014.
time the actual amount of aid will decrease, or even remain stable.

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EN
24.11.2011 Official
Journal
of
the
European
Union L
309/19
(181) The Commission takes the view, however, that the fact
the 1998 Regional Aid Guidelines. Since Sardinia ceased
that the nominal tariff is subject to a rather limited
to be assisted pursuant to Article 107(3)(a) after
annual increase does not mean that the net amount of
December 2006, it is not necessary to examine the
aid — as measured by the compensatory payments —
compatibility of the aid in the light of the Regional
will decrease over time.
Aid Guidelines for 2007–2013.
(182) If it is accepted that price trends on power exchanges can
be considered broadly representative of changes in
bilateral contract prices, as Italy has suggested, the
(187) The Commission took a similar negative position in
2005 tariffs would be degressive only in the event of a
2005 in respect of a measure designed to reduce Eural
drop in average EU prices (since the tariffs cannot
lumina’s energy costs in Sardinia. The Commission
decrease, but only increase). In all other cases the
considered that the disputed measure, which took the
tariffs would confer a growing advantage ( 70 ). Since,
form of an exemption from excise duties on heavy oils,
from 2004 until at least 2007, EU average electricity
could not be authorised on the basis of the Regional Aid
prices were on a sharp upward trend (rising faster than
Guidelines ( 71 ).
4 % a year) the element of aid contained in the 2005
tariffs would have increased over time.
(183) Italy further contends that, in reality, bilateral contracts
6.2. Other considerations relevant to compatibility
are less prone to price increases than prices on power
(188) It has been submitted by Italy and the undertakings
exchanges, and that therefore the 2005 tariffs are de
concerned that the schemes serve the purpose of
facto degressive. The Commission points out that the
remedying the shortcomings of the electricity markets,
indexation method submitted for assessment is based
which have not yet delivered competitive prices. They
on variations in prices on power exchanges, and that
argue that energy prices are threatening the competi
Italy has not submitted data on the evolution of
tiveness of energy-intensive industries. The aid has an
bilateral contract prices. Thus Italy’s statement is not
incentive effect, they contend, since without it the
sufficiently substantiated.
companies would close down.
(184) In fact, the limited information at the Commission’s
disposal suggests the opposite, i.e. that bilateral
contract prices increased sharply in Sardinia (see, for
(189) The Commission does not consider it possible to accept
example, Eurallumina’s statement that in 2005/2006 it
that operating aid for a few industrial companies is an
paid a price of EUR 80 per MWh on the free market, up
appropriate response to the lack of competition on the
from EUR 65 per MWh in 2004). In these circumstances,
local electricity market, which affects all electricity users.
had the tariffs been implemented, the compensatory
payments would have increased over time.
(185) Thus neither the 2004 tariffs nor the 2005 tariffs fulfil
(190) It is also questionable whether the aid is an appropriate
the degressivity requirement.
and proportional means of preventing relocation outside
the EU. There is no precedent in the Commission’s
decisions or in the judgments of the Union’s lawcourts
for accepting this argument as a justification for the
6.1.6. Conclusions on the compatibility of the measure as
granting of State aid. Decisions to relocate production,
regional aid
in whole or in part, are part of a company’s business

strategy, and the Commission has never held that they
(186) The Commission concludes that the tariffs at issue
constitute a market failure. In the Terni ( 72 ) and Alcoa ( 73 )
cannot be considered compatible as regional aid under
cases the Commission expressed doubts about similar
arguments linking aid measures to the goal of preventing
the relocation of industry outside the EU.
( 70 ) In particular, even in the event of an increase in average EU prices
smaller than 4 %, the tariff advantage would still increase in
absolute terms. For example, if the preferential price was EUR 30
( 71 ) The Alumina case, Decision 2006/323/CE of 7 December 2005.
per MWh and the average electricity price in Europe was EUR 60
( 72 ) Commission Decision of 20 November 2007 on the State aid C
per MWh (compensatory payment: EUR 30), a 3 % increase in the
36/A/06 implemented by Italy in favour of ThyssenKrupp,
average EU price (bringing it to EUR 61,8) would lead to an
Cementir and Nuova Terni Industrie Chimiche, paragraphs 144
updated tariff of EUR 30,90. The new compensatory payment per
and 145. That decision was upheld by the General Court in
MWh would be EUR 61,80 – EUR 30,90 = EUR 30,90, which is a
Cases T-53/08, 62/08, 63/08 and 64/08; an appeal is pending.
higher amount of aid.
( 73 ) Decision referenced in footnote 3, at paragraph 244.

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L 309/20
EN
Official Journal of the European Union
24.11.2011
(191) It should also be pointed out that the conclusions of
7. RECOVERY
specialised bodies such as the High Level Group on
Competitiveness, Energy and the Environment
( 74 ),
(195) Article 14(1) of Regulation (EC) No 659/1999 states that
which have been cited in the course of the proceedings,
in cases of unlawful aid which is not compatible with the
do not suggest that special State aid should be granted to
internal market effective competition must be restored,
address the competitiveness issues raised by high energy
unless recovery would be contrary to a general principle
prices, but instead defend the need for full compliance
of Community law.
with the applicable State aid rules ( 75 ).
(196) In the present case, only the 2004 tariffs (Case C
(192) In the light of the above, the Commission considers that
38/A/04) are subject to recovery, since the 2005 tariffs
the disputed 2004 and 2005 tariffs do not qualify for
(Case C 13/06) have not been implemented.
any of the exemptions in Article 107 TFEU. The
exemptions in Article 107(2) TFEU are not applicable,
since the aid is not of a social character, is not
designed to make good the damage caused by natural
disasters or exceptional occurrences, and was not
7.1. Legitimate expectations and other general prin
granted to compensate for the economic disadvantages
ciples of Community law which might prevent
caused by the division of Germany. The exemptions in
recovery
Article 107(3)(b) and (d) TFEU are also inapplicable, since
the measure is not aimed at promoting the execution of
(197) According to settled case-law, when aid has been granted
an important project of common European interest, or
without prior notification under Article 108(3) TFEU the
remedying a serious disturbance in the economy of a
recipient of the aid cannot have a legitimate expectation
Member State, or promoting culture and heritage conser
that its grant is lawful ( 76 ). A diligent undertaking should
vation. Turning to the exemption in Article 107(3)(a)
be able to establish whether the notification procedure
TFEU, the analysis carried out above in recitals 160 to
has been followed and whether the aid is lawful.
187 demonstrates that the tariff cannot be approved as
aid aimed at promoting the economic development of an
area where the standard of living is abnormally low or
where there is serious unemployment. With respect to
Article 107(3)(c) TFEU, operating aid does not qualify for
(198) However, a recipient of illegally granted aid is not
this exemption in principle, as indicated in recitals 155
precluded from relying on exceptional circumstances on
to 158, and the Commission has not been able to
the basis of which it had legitimately assumed the aid to
identify any specific circumstances which might justify
be lawful, and thus declining to refund that aid ( 77 ).
the granting of such aid in this case.
(193) The Commission therefore considers that both the 2004
(199) The beneficiaries of the 2004 tariffs have not made any
and the 2005 tariffs are incompatible with the internal
submissions in this respect, nor has the Commission
market.
identified any exceptional circumstances which might
have led the beneficiaries to entertain any legitimate
expectation. In particular, no expectation that the tariffs
would not constitute State aid could have arisen as a
result of the 1996 Alumix decision. As indicated in the
(194) Having drawn this conclusion, the Commission does not
2004 opening decision (see recital 37) the tariff that
need to examine the possible cumulative effect of the
served as a blueprint for the disputed 2004 tariffs was
new aid and the old incompatible aid referred to in
not the original Alumix arrangement, which the
recital 31 in the light of the Deggendorf judgment.
Commission found did not constitute aid in 1996, but
an entirely new measure, which had been substantially
( 74 ) See footnote 31.
modified (in particular as regards its financing
( 75 ) For example, in its Third Report, in February 2007, the High Level
mechanism) ( 78 ) and extended in time by the Italian
Group states ‘Against this background, the use of incentives,
authorities. In this situation, a prudent recipient should
including general purpose subsidies and state aids can be justified
have verified that the new measure was lawful.
as a policy instrument. They may promote responsible social and
environmental behaviour, regional cohesion, sustainable devel
opment and cultural diversity. However, they should only be used
( 76 ) Judgments of the Court of Justice in Case C-24/95 Alcan
where there is a clear market failure, where subsidies prove to be
Deutschland [1997] ECR I-1591, paragraphs 25, 30 and 31, and
the appropriate instrument for meeting a well defined common
in Joined Cases C-183/02 P and C-187/02 Demesa and Territorio
interest objective, and when they do not distort competition or
Histórico de lava v Commission [2004] ECR I-10609, paragraph 45.
harm the environment … Action is justified when such subsidies
( 77 ) Judgment of the Court of Justice in Case C-5/89 Germany v
undermine other policy objectives such as fighting climate change,
Commission [1990] ECR I-3437, paragraph 16.
the Lisbon Strategy for Jobs and Growth, proper functioning of
( 78 ) Whereas the original Alumix tariff was granted directly by State-
energy markets, or access to raw materials, without meeting their
owned power supplier ENEL, which was held to be acting as a
initial objective’ (http://ec.europa.eu/enterprise/policies/sustainable-
rational market operator in selling electricity at the Alumix price,
business/policy-integration/high-level-group/reference-material/
the 2004 tariff was subsidised by the State from the proceeds of a
index_en.htm).
parafiscal levy.

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EN
24.11.2011 Official
Journal
of
the
European
Union L
309/21
(200) The Commission further considers that recovery would
Article 11(12) of Decree-Law No 35 of 14 March 2005,
not breach any other general principle of Community
converted into statute by Law No 80/2005 of 14 May 2005,
law.
is incompatible with the internal market.
7.2. Quantification of the amounts to be recovered
2. The
aid
may
accordingly
not
be
granted.
(201) All incompatible aid received by Portovesme, ILA and
Eurallumina under Article 1 of the 2004 Decree must
Article 2
be recovered, with interest, in accordance with Chapter V
of Commission Regulation (EC) No
794/2004 of
The State aid unlawfully granted by Italy in breach of
21 April 2004 implementing Council Regulation (EC)
Article 108(3) TFEU, on the basis of Article 1 of the Prime
No 659/1999 laying down detailed rules for the appli
Ministerial Decree of 6 February 2004, amounting to
cation of Article 93 of the EC Treaty ( 79 ).
EUR 12 845 892,82 for Portovesme Srl, EUR 5 208 152,05
for Eurallumina SpA, and EUR 291 120,27 for ILA SpA, is
incompatible with the internal market.
(202) The purpose of recovery is to restore the recipients to the
competitive position they occupied before the grant of
the incompatible aid by eliminating the undue advantage
Article 3
conferred by it. In the case at hand, the advantage
conferred is equal to the difference between the prefer
1. Italy
shall
recover
the
aid
referred
to
in
Article
2
from
the
ential tariff and the electricity price the beneficiaries
beneficiaries.
would have paid on the market in the absence of the
disputed tariffs.
2. The sums to be recovered shall bear interest from the date
on which they were put at the disposal of the beneficiary until
their actual recovery.
(203) All the companies concerned were purchasing electricity
on the basis of bilateral contracts at the time the tariffs
were introduced. The State intervened to subsidise the
contractually agreed price by making compensatory
3. The
interest
shall
be
calculated
on
a
compound
basis
in
payments. The amounts to be recovered are therefore
accordance with Chapter V of Regulation (EC) No 794/2004.
equal to the compensatory payments received by the
recipients over the period concerned (see recital 30).
4. Italy
shall
cancel
all
future
payments
of
the
aid
referred
to
in Article 2 with effect from the date of adoption of this
8.
Decision.
CONCLUSION
The Commission finds that both the 2004 and the 2005 tariffs
constitute operating aid which is not eligible for any exemption
Article 4
from the general prohibition of State aid under the EC Treaty,
and is therefore incompatible with the internal market.
1. Recovery
of
the
aid
referred
to
in
Article
2
shall
be
immediate and effective.
In the case of the 2004 tariffs, which were unlawfully imple
mented in breach of Article 108(3) TFEU, all payments of
2. Italy
shall
ensure
that
this
Decision
is
implemented
within
outstanding aid must be cancelled, while the aid already paid
4 months following the date of notification of this Decision.
must be recovered. The amount to be recovered corresponds to
the sum of all compensatory payments made by the Equal
isation Fund to Portovesme, ILA and Eurallumina.
Article 5
1. Within two months following notification of this
Decision, Italy shall submit the following information to the
The 2005 tariffs, which were duly notified by Italy as required
Commission:
by Article 108(3) TFEU, must not be applied,
(a) the total amount (principal and recovery interest) to be
HAS ADOPTED THIS DECISION:
recovered from the beneficiary;
Article 1
(b) a detailed description of the measures already taken and
planned to comply with this Decision;
1. The
State
aid
which
Italy
plans
to
grant
to
Portovesme
Srl,
Eurallumina SpA, ILA SpA and Syndial SpA under
(c) documents demonstrating that the beneficiary has been
( 79 ) OJ L 140, 30.4.2004, p. 1.
ordered to repay the aid.

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L 309/22
EN
Official Journal of the European Union
24.11.2011
2. Italy shall keep the Commission informed of the progress of the national measures taken to
implement this Decision until recovery of the aid referred to in Article 2 has been completed. At the
Commission’s request, it shall immediately submit information on the measures already taken and planned
to comply with this Decision. It shall also provide detailed information concerning the amounts of aid and
recovery interest already recovered from the beneficiary.
Article 6
This Decision is addressed to the Italian Republic.
Done at Brussels, 23 February 2011.
For the Commission
Joaquín ALMUNIA
Vice-President

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