ECJ: EDF and French government sailed too close to the wind on higher wind-energy Tariffs

In his recent Opinion, the Advocate General of the ECJ has confirmed his view that the higher tariffs payable by consumers to EDF for wind-energy constitute State Aid, for the purposes of S107(1) of TFEU.

In simple terms, where “State Resources” are applied (whether directly or indirectly) to transactions in a market which favour particular commercial undertakings and have the potential to distort competition in that market, then it will be considered – insofar as it may affect trade between Member States – (and in typically pompous and circumlocutory language) to be “incompatible with the internal market”. In English, that means it will constitute State Aid.

As we all know, State Aid is unlawful unless it can be shown (1) to fall within the scope either of the General Block Exemption Regulation; or (2) any one of the hundreds of bespoke exemptions which the EC has approved; or (3) has been the subject of a prior individual application submitted on its own merits and approved by the EC.

Clearly the Advocate General takes a dim view in this instance

For us, this is an excellent practical example on at least 2 levels. First, State Aid can take many guises and the application of State Resources does not by any means need to take the form of the provision of cash money: subsidies, tax breaks, artificially high pricing to the market (and the list goes on!) can all qualify. Second, if EDF and the French Government can get it wrong at such a colossal scale then the analysis of State Aid issues is complex enough for anyone to get it wrong.

A practical consideration for those of you who are building ERDF funding into your financial models for developments is that if you get it wrong, the ERDF inspectorate can, and will, clawback grant funding, leaving you with a potentially devastating viability gap to bridge….

http://tinyurl.com/lw3a76y

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