The Court of Justice of the EU (CJEU) considers that the financing regime of the electricity social bond, reported to late 2014 by then E.ON Spain, it is discriminatory. According to the European judges, the Community regulations oppose that the cost of financing this bond, which constitutes a public service obligation, is borne only by companies that simultaneously produce, distribute and market electric power since this requirement “leads to a difference in treatment between the different companies that operate in that market and is not objectively justified”.
The case responds to the appeal filed in December 2014 by E.ON Spain -currently Viesgo Energy Infrastructures– Against the Royal Decree that establishes the discount that certain vulnerable consumers in the price of electricity. The company argued during the procedure that the financing scheme for this bond was incompatible with the European directive on common rules for the internal electricity market. Two years later, in October 2016, the Supreme Court agreed with the electricity company and declared the financing scheme supported by 99% by the companies inapplicable. five big electrics.
The Government then decided to present a appeal before the Constitutional Court that in March 2019 annulled the judgment of the Supreme Court alleging a violation of the right to a trial with all guarantee, having ruled out the application of national regulations as incompatible with the directive on common rules for the internal electricity market, but without having previously sent a request for a request to the Court of Justice of the EU. preliminary ruling, of which he was not exonerated.
In response to this ruling, the Supreme Court decided to present a battery of questions to the highest European court to clarify, in the first place, if the financing system that falls on certain agents of the electricity system is compatible – the parent companies of the groups of companies or, where appropriate, companies that simultaneously develop the activities of production, distribution and marketing of electrical energy – when some of those obligated parties have very low specific gravity in the sector as a whole, while other entities or business groups that may be in a better position to assume this cost are exempted from this burden, either due to their turnover, due to their relative importance in any of the activity sectors or because they develop simultaneously and in an integrated way two of those activities. The Supreme Court also asked if a national regulation according to which the obligation to finance the social bond is indefinite and without return or any compensatory measure is compatible with the requirement of proportionality of the directive.
Public service obligations
In its judgment this Thursday, the court based in Luxembourg recalls that the European directive allows Member States to impose electricity companies public service obligations that can respond to various needs and that must meet various requirements. According to the ruling, state intervention in setting the price of electricity can be admitted if, among other things, the requirement that the established public service obligations be non-discriminatory is met. That is, if it affects electricity companies in general and not some specifically.
“The designation system of companies in charge of public service obligations cannot a priori exclude any of the companies that operate in the electricity sector,” says the court, which also advises that any possible difference in treatment it must be justified. In this sense, they point out that although the public service obligation related to the social bond has been imposed on all electricity companies that commercialize electricity in the Spanish market, “the financial burden of this obligation does not affect all those electric companiesTherefore, the Supreme Court will have to check whether the differentiation made between the companies that must bear the weight of said load and those that are exempt from it is objectively justified ”.
Eddie is an Australian news reporter with over 9 years in the industry and has published on Forbes and tech crunch.