Judgments nº T-179/09 of The General Court, April 30, 2014

• Resolution Date: April 30, 2014
• Issuing Organization: The General Court
• Decision Number: T-179/09

(State aid — Aid awarded by the Hungarian authorities to certain electricity generators — Power purchase agreements concluded between a public undertaking and certain electricity generators — Decision declaring the State aid incompatible with the common market and ordering its recovery — Concept of State aid — Advantage — New aid — Operating aid — Legitimate expectations — Legal certainty)

In Case T‑179/09,

Dunamenti Erőmű Zrt., established in Százhalombatta (Hungary), represented initially by J. Lever QC, A. Nourry, R. Griffith and S. Spence, Solicitors, and subsequently by J. Philippe and F.-H. Boret, lawyers,

applicant,

v

European Commission, represented by L. Flynn and K. Talabér-Ritz, acting as Agents,

defendant,

APPLICATION for, in essence, the annulment of Commission Decision 2009/609/EC of 4 June 2008 on the State aid C 41/05 awarded by Hungary through Power Purchase Agreements (OJ 2009 L 225, p. 53) and, in the alternative, the annulment of Articles 2 and 5 of that decision,

THE GENERAL COURT (Sixth Chamber),

composed of H. Kanninen, President, G. Berardis (Rapporteur) and C. Wetter, Judges,

Registrar: S. Spyropoulos, Administrator,

having regard to the written procedure and further to the hearing on 15 May 2013,

gives the following

Judgment

Background to the dispute

Information concerning the applicant

1 The applicant, Dunamenti Erőmű Zrt., is an electricity generator on the Hungarian electricity market which operates a power plant located approximately 30 km south of Budapest (Hungary). It is a former public undertaking which was privatised during the mid-1990s. It is approximately 75% owned by Electrabel SA, which itself forms part of the group headed by GDF Suez SA. The applicant is also approximately 25% owned by Magyar Villamos Művek Zrt. (‘MVM’), a public undertaking whose activities comprise power generation as well as wholesale, transmission and retail activities on the Hungarian electricity market.

2 On 10 October 1995, just before its privatisation, the applicant entered into a power purchase agreement with MVM in respect of the ‘F blocks’ and ‘G2 block’ of its power plant (‘the PPA at issue’ or ‘the PPA in question’). That agreement, which entered into force in 1996, was to continue until 2010, so far as concerns the gas-fired ‘F blocks’, and until 2015, so far as concerns the ‘G2 block’, a Combined Cycle Gas Turbine (CCGT) unit.

Power purchase agreements

3 Like the applicant, other electricity generators on the Hungarian market entered into long-term power purchase agreements with MVM (‘the PPAs’).

4 The PPAs are characterised, above all, by two elements. First, they reserve for MVM all or a substantial part of the generation capacities of the power plants covered by the agreement.

5 Secondly, the PPAs require MVM to purchase a specific minimum quantity of electricity from each power plant under PPA. There is therefore a certain minimum off-take under the PPAs for each power plant which MVM is required to purchase each year.

6 The prices were fixed in the PPAs as follows:

– a first and second price regulation cycle, as from 1 January 1997 and 1 January 2001 respectively, were initially established;

– as from 1 January 2004, the regulation provided for:

– a capacity fee for the reserved capacities in order to pay for the making available of that capacity; that fee covers fixed costs and the cost of capital, and is paid by MVM;

– an electricity fee to pay for the guaranteed minimum off-take and which covers variable costs; however, if MVM does not purchase the fixed minimum quantity, it then has to pay for the fuel costs incurred.

7 The PPAs concluded between 1995 and 1996, which constitute seven of the 10 PPAs assessed by the Commission, including the PPA at issue, formed an integral part of the privatisation of the power plants. They were partially amended by the parties after privatisation.

Hungarian electricity market

8 The Hungarian electricity market has been made subject to three consecutive regimes.

9 The first regime, in force from 31 December 1991 until 31 December 2002, was structured around a single buyer, MVM. Electricity generators could supply energy directly only to MVM, and MVM was the only company authorised to supply electricity to the regional distribution companies. In accordance with Hungarian Law XLVIII of 1994 on the generation, transport and supply of electricity (‘the First Law on electric energy’), MVM was required to ensure the security of energy supply in Hungary at the lowest possible cost.

10 The second regime, in force from 1 January 2003 until 31 December 2007, was established by the Law of 2001 on electricity. Under this regime, a public utility sector, representing approximately 70% of power generation, coexisted with a competitive sector, representing approximately 30% of power generation. In the public utility sector, MVM was the only wholesaler whereas, in the competitive sector, other traders also operated, with MVM’s activities in that sector intended only to release the surplus quantities purchased under the PPAs and not needed by the public utility sector.

11 The third regime, in force as from 1 January 2008, was established by the Law of 2007 and abolished, inter alia, the public utility sector.

Accession of Hungary to the European Union

12 The Treaty between the Kingdom of Belgium, the Kingdom of Denmark, the Federal Republic of Germany, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Grand Duchy of Luxembourg, the Kingdom of the Netherlands, the Republic of Austria, the Portuguese Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland (Member States of the European Union) and the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia, the Slovak Republic, concerning the accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic to the European Union (OJ 2003 L 236, p. 17) was signed by Hungary on 16 April 2003 and entered into force on 1 May 2004 (‘the Accession Treaty’).

The proceedings before the Commission

13 By letter of 31 March 2004, the Hungarian authorities notified the Commission of the European Communities of Government Decree No 183/2002 (VIII.23.) on the detailed rules for the definition and management of ‘stranded costs’ under the procedure (‘the interim procedure’) referred to in paragraph 1(c) of Chapter 3 of Annex IV to the Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded (OJ 2003 L 236, p. 797) (‘the Act of Accession’). The notified Government Decree provides for a system of compensation for the costs borne by MVM as an electricity wholesaler. The Commission registered that notification under case number HU 1/2004.

14 A number of official letters were subsequently exchanged between the Hungarian authorities and the Commission concerning the notified measure. The Commission also received comments from third parties.

15 By letter of 13 April 2005, the Hungarian authorities withdrew the notification of Government Decree No 183/2002 (VIII.23.). On 4 May 2005, in accordance with Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for the application of Article [88 EC] (OJ 1999 L 83, p. 1), the Commission registered, of its own motion, a State aid file concerning the PPAs under number NN 49/05.

16 By letter of 24 May 2005, the Commission requested additional information from the Hungarian authorities. Having received a reply from Hungary and having obtained additional information, the Commission, by letter of 9 November 2005, informed Hungary that it had decided to open the procedure laid down in Article 88(2) EC in respect of the State aid C 41/05.

17 That letter informing Hungary of the decision to initiate the procedure on the basis of the Commission’s doubts as to the compatibility of the PPA at issue with the common market, together with a summary of that decision calling on interested parties to submit their comments, was published in the Official Journal of the European Union on 21 December 2005 (OJ 2005 C 324, p. 12). Following that publication, the Commission received comments, inter alia, from the Hungarian authorities and the Hungarian electricity generators, including the applicant. The applicant submitted its comments by letter of 13 February 2006.

The contested decision

18 On 4 June 2008, the Commission adopted Decision 2009/609/EC on the State aid C 41/05 awarded by Hungary through Power Purchase Agreements (OJ 2009 L 225, p. 53) (‘the contested decision’).

19 In that decision, having set out the administrative procedure before it, the Commission described the PPAs and then stated the grounds for initiating the procedure on State aid (recitals 1 to 87 of the contested decision). The Commission then recalled the various comments submitted to it, in particular by Hungary and by the applicant (recitals 88 to 150 of the contested decision).

20 In addition, the Commission assessed the PPAs. In the first place, it stated that the Hungarian authorities had not notified to it, in accordance with the State aid procedural rules, the elements of aid contained in the PPAs and that that aid thus constituted unlawful aid (recital 151 of the contested decision).

21 In the second place, the Commission addressed the...