December 02
2021
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Emilija Berzanskaite
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14th October 2021
Energy & Transport Internal Market

Court of Justice clarifies compatibility of the Spanish social welfare electricity measure with Internal Market in Electricity Directive

In Viesgo Infraestructuras Energéticas (C-683/19), the Court of Justice found that Member States can establish financing schemes of a public service obligation, consisting of supplying electricity at a reduced rate to vulnerable consumers, without a time limit and without compensatory measure, however, are precluded to impose such obligation only on some companies if it creates an unjustified difference in treatment.

The case originates in a dispute between Viesgo Infraestructuras Energéticas, SL, on the one hand, and the General State Administration and several Spanish companies that carry out their activity in the electricity sector, on the other, concerning the legality of the national financing regime of a public service obligation related to the discount enjoyed by certain vulnerable consumers in the price of electricity (‘social discount’). 

According to the scheme the cost of the social discount was assumed only by the parent companies of the companies or groups of companies that carry out activities of production, distribution and commercialization of electrical energy and that have the character of vertically integrated groups. This led to the situation where just four companies in the electricity market had to assume 96.6 % of the costs of the social discount, while the other 23 companies were allocated costs below 1%.

The Court of Justice was asked to rule whether, in light of Article 3(2) of Internal Market in Electricity Directive (2009/72/EC), such financing obligation was compatible with EU law.

The Court of Justice held that Article 3(2) of the Directive precludes a national law that imposes, without objective justification which clearly flows from the nature of the general economic interest pursued, a mandatory financial contribution solely on certain electricity undertakings for the purposes of financing the vulnerable consumers electricity system. In particular, it was held that the national law must not give rise to the difference in treatment between companies operating in that market that is not objectively justified.

Nonetheless, the Court held that Article 3 (2) of the Directive permits such a financing scheme to be established without a time limit and without compensatory measure. The Court considered that Member States are not obliged to grant financial compensation when they decide to impose public service obligations and even though the financing scheme for a public service obligation must respect the principle of proportionality, Member States are not obliged to periodically and frequently reexamine such financing regime.

Read the judgment here (not available in English at the time of publication).

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