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Compensatory Payments and State Resources

 |  December 1, 2021

By: Phedon Nicolaides (Lexxion State Aid Blog)

The Court of Justice has stressed repeatedly that any resource over which the state can exercise control becomes a state resource, regardless of whether it is managed by a public authority or a private entity.

Member States, however, keep inventing novel and complicated arrangements in which mandated payments by some undertakings to other undertakings are allegedly not under the control of the state and therefore do not fall within the scope of Article 107(1) TFEU.

On 6 October 2021, the General Court, in case T-196/19, AZ v European Commission, examined such an arrangement. In its judgment, the Court agreed with the Commission that found Germany to have granted incompatible aid to certain consumers of electricity who had been exempted from network charges. Consequently, the Court dismissed the appeal of AZ against Commission decision 2019/56.

In Germany, users of the electricity network pay network charges that correspond to the cost of the generation and transmission of electricity. The measure in question had three components:

  • A complete exemption from network charges for certain users – the so-called “baseload consumers” who are users with high annual consumption exceeding a certain level.
  • A compensation mechanism, by which the transmission system operators [TSO] were required to reimburse the distribution system operators [DSO] for the loss resulting from the exemption.
  • A surcharge levied by DSOs on end consumers, the revenue of which was transferred to the TSOs to compensate them for the loss of revenue. The amount was determined by BNetzA, the German energy regulator.