(4) of the Cooperation Agreement thus reinforces the restrictive effect of Article 21.
(27) In the course of the administrative proceedings SEP emphasized that Article 21 does not prevent anyone who is not a distributor from importing or exporting. After investigation, however, the Commission has reached the conclusion that within the structure of electricity supply in the Netherlands the way in which SEP applies Article 21 in practice enables it to exercise total control of imports and exports.
(28) In this connection it must be pointed out first of all that in their general terms and conditions distributors impose an exclusive purchasing obligation on their customers (usually local energy undertakings), and that those customers do the same to their own customers (large consumers); imports are thus made impossible. The distributors who impose this exclusive purchasing obligation are themselves bound by an exclusive purchasing obligation towards the generators grouped in SEP. Thus the purchasing obligation which the generators impose works its way down the distribution chain, with the result that large consumers who purchase from the public grid cannot also import. This is also clear from the inclusion of the same purchasing obligations in the 1984 General Terms and Conditions for the Supply of Electricity to Large Consumers, which were drawn up by VEEN and are generally applied by the distributors. The succession of exclusive purchasing obligations forms a coherent system in conjunction with Article 21 of the Cooperation Agreement as it is applied by SEP and the generators, so that these provisions of the General Terms and Conditions together with Article 21 form a whole, operating both among generators and ultimately between them and their industrial consumers.
(29) Secondly, SEP operates and/or owns the international interconnections through which all imports and exports must be channelled, whether for public or private supply. Lines privately owned by consumers are not a real alternative.
SEP itself imports substantial quantities of electricity, from other Member States and elsewhere (see recitals 10 et seq.). In principle it is technically possible to make power lines available to private importers at reasonable prices, provided SEP has sufficient capacity available, as is now provided in the Electricity Law 1989. But SEP has not been prepared to do this. The ESD case (see recitals 14 to 16 above) is an illustration: it was not ESD but SEP which ultimately imported from Germany. From the correspondence between SEP and the Ministry of Economic Affairs already referred to it is clear that SEP was opposed to direct imports by ESD, and indeed regarded importation for ESD by SEP itself as a temporary measure. From ESD's letter to SEP dated 30 December 1987 it is clear that SEP was keeping ESD from having contact with the German supplier. In any event it is plain that SEP wished to reserve importation, even as a temporary arrangement, to itself, and wishes to continue doing so in future too. As a last resort SEP was prepared to apply a special tariff which was so attractive that ESD decided not to import, and agreed to be supplied by EGD.
SEP has thus been applying Article 21 of the Cooperation Agreement in such a way that it in practice prevents private industrial consumers from themselves importing electricity. SEP is claiming what in fact amounts to an import monopoly. It may be mentioned, too, that SEP's complete refusal to make power lines available to others can be considered an agreement or concerted practice between the generators participating in SEP, which could constitute a separate infringement of Article 85.
(30) In the third place, SEP itself has argued that power imported for the importers' own use cannot be considered separately from power intended for public supply. In its planning function SEP must take account of imports. In practice, in any case, a final consumer who proposes to import himself will have to announce his intention in good time beforehand to the supplier with whom he has a supply contract. SEP will be informed, because its cooperation is indispensable for transmission over the international interconnections and the high-tension grid. Consumers cannot feed surpluses of imported power back into the public grid.
(31) The Commission concludes that Article 21 of the Cooperation Agreement enables SEP to control the import and export of power in the interest of its shareholders. The consumers' theoretical entitlement to import themselves is thereby rendered inoperative in practice, and they are consequently deprived of access to other sources of supply.
3. Effect on trade between Member States
(32) The import and export ban in Article 21 is liable appreciably to affect trade between Member States. This is the more so as the Cooperation Agreement is to apply for a period of 25 years, and covers the entire territory of the Netherlands. In addition, as has already been pointed out, imports by industrial consumers are rendered difficult in a way which conflicts with the achievement of a single market in energy.
B. The operation of the Cooperation Agreement under the Electricity Law 1989
(33) According to SEP Article 21 of the Cooperation Agreement continues to apply even after the entry into force of the Electricity Law 1989, and particularly Article 34 of this Law. SEP evidently considers that the new Law changes nothing in Article 21 of the Cooperation Agreement. The Commission would make the following observations in this respect.
1. Imports
(34) Article 34 of the Electricity Law 1989 prohibits anyone other than SEP from importing power with a view to public supply. On the other hand, imports for purposes other than public supply are no longer subject to prior authorization. Imports by final consumers, and essentially industrial consumers, are therefore unrestricted, provided they are intended for the importer's own consumption: imported power cannot be supplied to third parties (Article 37 (1) of the new Law), nor can it be fed into the public supply (Article 41 (2) (b)).
Under Article 47 (1) (c) SEP now has an obligation to transmit any power imported SEP must allow the importer access to its connections on reasonable terms, provided there is sufficient capacity available.
Under the new rules, therefore, an industrial consumer is indeed entitled to import, but for the technical facilities needed he remains dependent on SEP, which with its control of the high-tension grid is still in a position to place difficulties in the way of imports. This may occur particularly where the connections are fully loaded as a result of power imports by SEP itself.
(35) Contrary to SEP's claims, therefore, Article 21 has not simply been incorporated into the Law. If that had been done Article 21 would now no longer serve any purpose. The fact that SEP wishes to continue to apply Article 21 is an indication that the Article continues to have significance alongside the Law. All this confirms the Commission's view that Article 21 is being applied in a way which goes beyond the terms of the Law.
2. Exports
(36) The Electricity Law 1989 makes no rules regarding the export of power, except for the obligation of generators to supply electricity only to SEP (Article 11). In response to a questionnaire the Dutch Government informed the Commission that the export of power from the Netherlands is completely unrestricted. According to the Dutch Government not only SEP but also distributors and private consumers are free to export. This applies whether the power involved is taken from the public grid or autogenerated.
(37) Like importers, however, exporters continue to be dependent on SEP for transmission. The new Law does not impose an obligation to transmit power for export. A potential exporter must therefore reach agreement with SEP and with the owners of foreign grids. SEP thus retains a key role. The way in which it plays that role depends on the way in which it applies Article 21 of the Cooperation Agreement.
3. Conclusion
(38) It must be concluded that the application of Article 21 of the Cooperation Agreement continues to infringe Article 85 of the Treaty under the rules introduced by the new Law.
C. Article 90 (2) of the Treaty: non-public supply
(39) Article 90 (2) of the Treaty states that undertakings entrusted with the operations of services of general economic interest are to be subject to the rules contained in the Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks asigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.
SEP invokes the exception laid down in Article 90 (2). It argues that the electricity industry possesses special features: on the one hand, it is under an obligation to guarantee supply, and on the other, as a necessary consequence of that obligation, it must be able to exercise control of generation, imports and exports.
1. The undertakings are entrusted with the operation of services of general economic interest
(40) SEP's main task is to ensure the reliable and efficient operation of the national public electricity supply at costs which are as low as possible and in a socially responsible fashion (Article 2 of the Electricity Law 1989). This definition of SEP's tasks is complemented by the generators' obligation to supply to distributors (Article 12 (1) of the Law). The arrangement is clearly based on the terms of the concessions formerly granted by the Minister for Economic Affairs. The generators' obligation to supply was a central feature there too (cf. Ijsselcentrale's concession, recital 7).
In these circumstances it can be accepted that both SEP and the participating generators are engaged in 'the operation of services of general economic interest'.
(41) The operation of these services now has a basis in legislation, which it did not have before the entry into force of the new Law. But even before the new Law these tasks had been assigned to the generators by an act of public law, namely the grant of concessions by the Minister for Economic Affairs. It must be concluded that both before and after the entry into force of the Electricity Law 1989 SEP and the generators were 'entrusted' with the operation of these services.
(42) The first test of Article 90 (2) is therefore satisfied.
2. The application of the competition rules does not obstruct the performance of the tasks assigned
(43) In the Commission's view the application of the competition rules does not obstruct SEP in the proper performance of the tasks assigned to it, because the performance of those tasks does not require absolute control of imports and exports, including imports and exports by private consumers and particularly industrial consumers, which as we have seen is the consequence of Article 21 of the Cooperation Agreement.
(44) As far as imports are concerned this can be seen from the following considerations.
(a) In 1988 15,6 % of total power generated in the Netherlands was accounted for by what are known as autogenerators (see recital 10 above). These autogenerators feed their surpluses into the public grid. Autogeneration evidently does not interfere with the performance of SEP's tasks. There is no reason to suppose that importation should be any different.
SEP has argued in this respect that importation is a one-off operation, whereas autogeneration has a structured and therefore more long-term character. But the distinction SEP is suggesting does not, in fact, exist. Imports too have to be planned. Part of SEP's function is to adapt its own generation activities to the scale of imports and local generation. Imports too have to be notified to SEP in advance (see recital 30). Imports too are allowed for in the Electricity Plan. Thus there is no difference here between importation and autogeneration.
Furthermore, in the case of autogeneration as in the case of importation the distributors are released from their obligation to supply; a consumer who announces his intention of meeting his power requirements wholly or partly by means of importation or autogeneration cannot in an emergency simply fall back on the public supply. He may conclude a back-up contract with the distributor, under which a stated capacity is 'set aside' for him against payment. There is no obligation to conclude such a contract under the new Law.
(b) The Dutch authorities do not believe that absolute control of imports by SEP is necessary to the performance of the tasks assigned to it. It would be difficult to explain otherwise why the new Law expressly leaves imports for the importer's own consumption unrestricted. In the course of the Parliamentary debate on the new Law the Minister for Economic Affairs referred to the similiarities between autogeneration and importation which have just been discussed (Kammerstukken, Verslag van een schriftelijk overleg, No 15, pp. 8, 17 and 18). In both cases the 'absolute obligation to supply' does not apply. There is consequently no need for 'absolute control of generation and importation' either.
Thus the absolute control of imports given to SEP by Article 21 of the Cooperation Agreement is not considered by the Dutch authorities themselves to be indispensable to the performance of these tasks of general interest.
(c) Lastly, SEP's rights of ownership over the international interconnections do not justify total control over imports. Even before SEP's obligation to transmit was laid down in legislation (Article 47 (1) (c) of the new Law), the power lines could be made available on reasonable terms to other parties for the transmission of power they were importing themselves. The other requirements that SEP might lay down for transmission operations could be that nothing must be done to endanger the reliability of the grid; that the transaction must be an economically justifiable one with some measure of regularity (no spot transactions); that the operations must have a measure of continuity over a reasonable period; and that the prices must be reasonable and non-discriminatory. As a general rule these requirements will be met only by private consumers with significant power requirements, such as large consumers or groups of several industrial consumers. Thus there was and is no reason for absolute control as a consequence of SEP's operation of the power lines.
(45) With regard to exports of power by private industrial consumers there are in principle the same reasons for holding that control by SEP cannot be justified for the purposes of Article 90 (2) of the Treaty.
(a) As SEP has itself argued, when power is obtained from the public grid the Dutch electricity undertakings do not 'look behind the meter': they supply current to a customer, and are not concerned with what the customer does with it, whether he consumes it himself, exports it, or supplies it in his turn to someone else. There is no reason why autogenerated current should not be exported in the same way. It does not after all affect the public supply, indeed that is why the new Law leaves it unrestricted.
(b) Here again the new Dutch legislation leaves industrial consumers, including autogenerators, free to export.
(c) Rights of ownership over the interconnections cannot justify absolute control of exports either.
(46) It must be concluded that the second test of Article 90 (2) is not satisfied.
3. The development of trade
(47) In view of the foregoing there is no need to consider the last sentence of Article 90 (2). It is clear, however, that obstruction of imports and exports such as that deriving from Article 21 of the Cooperation Agreement does affect trade to an extent contrary to the interests of the Community. In the light of the Community's efforts to achieve a single internal market in energy such obstruction of imports and exports, which moreover is intended to continue for a period of 25 years, cannot be accepted.
(48) Thus this provision of Article 90 (2) is in any event not satisfied either.
D. Article 90 (2) of the Treaty: public supply
(49) To the extent that Article 21 is applied to imports with a view to public supply, and to exports by generators and distributors, the following observations are in order.
1. Imports
(50) The ban on imports by generators and distributors otherwise than through SEP in the context of public supply, is now laid down in Article 34 of the Electricity Law 1989. The present proceeding is a proceeding under Regulation No 17, and the Commission will not pass judgment here on the question whether such restriction of imports is justified for the purposes of Article 90 (2) of the Treaty. To do so would be to anticipate the question whether the new Law is itself compatible with the Treaty, and that is outside the scope of this proceeding.
2. Exports
(51) An export ban imposed on generators in the field of public supply can be deduced from the supply obligation imposed by Article 11 of the Electricity Law 1989 which obliges the generators to supply their electricity only to SEP and to supply exclusively to distributors the electricity supplied to them by SEP. Again, no judgment will be made on this export ban under the present proceedings.
The ban on exports, including those made outside the field of public supply, by distributors imposed by Article 21 of the Cooperation Agreement, conflicts with the scheme of the new Law in which these exports are left unrestricted. It appears doubtful to the Commission whether the parties to the Cooperation Agreement are entitled to impose an export ban that runs counter to the Law in this way, but to judge by what is said in SEP's letter to the Commission of 15 December 1989 SEP evidently considers that the possibility does exist.
Accepting therefore that the ban on exports by distributors laid down in Article 21 continues to apply, the Commission takes the view that it cannot be justified by Article 90 (2). There is no apparent reason why exports by these distributors should endanger the public supply. As long as distributors are in a position to meet their supply obligations domestically, there is no reason to prevent them from exploiting any surpluses by exporting them.
(52) It must be concluded that the ban on exports which continues to be imposed by Article 21 of the Cooperation Agreement on distributors even after the entry into force of Article 34 of the Electricity Law 1989 cannot be justified by reference to Article 90
(2).
E. Article 85 (3) of the Treaty
(53) The Cooperation Agreement was not notified to the Commission in accordance with Article 4 of Regulation No 17. Neither were earlier agreements between the participants in SEP ever so notified. Even if the Cooperation Agreement were to be notified, it would not qualify for exemption under Article 85 (3). It follows from the foregoing that the absolute effect which SEP has given to the import and export ban in Article 21 is not indispensible to the attainment of the objectives of the Cooperation Agreement. The third test of Article 85 (3) is thus in any event not satisfied.
F. Conclusion
(54) The Commission concludes that Article 21 of the Cooperation Agreement between SEP and the Dutch electricity generators, as applied in conjunction with the control and influence in fact exercised over international supplies of power, constitutes an infringement of Article 85 (1) of the Treaty in so far as it has as its object or effect:
(a) the restriction of imports by private industrial consumers, and
(b) the restriction of exports by distributors and industrial consumers, including autogenerators,
and that it does not satisfy the conditions for application of Article 90 (2) of the Treaty.
G. Article 3 of Regulation No 17
(55) Article 3 of Regulation No 17 allows the Commission to adopt a decision finding that an infringement has been committed in the past, in order to clarify the legal position, and to require the undertakings concerned to bring such infringement to an end, to the extent that it still continues.
SEP has stated that it will continue to apply Article 21 of the Cooperation Agreement, so that it cannot be said that SEP and the electricity generators participating in it have put an end to the infringement. They must therefore be required to do so. One way in which the infringement could be ended would be for SEP to inform the parties to the Cooperation Agreement, and purchasers, that the Agreement is to be interpreted and applied as meaning that exports of quantities of electric power not intended for public supply, and direct imports by private industrial consumers, are unrestricted, and will not, without good reason, be obstructed by virtue of the ownership or operation of the power grid by SEP and the parties to the Agreement; and that the Agreement will be applied accordingly.
The Commission will allow the parties three months from the date of notification of this Decision to make proposals for the ending of the infringement.
HAS ADOPTED THIS DECISION: Article 1
Article 21 of the Cooperation Agreement concluded on 22 May 1986 by the predecessors of the present four electricity generating companies on the one hand and by NV Samenwerkende Elektriciteitsproduktiebedrijven on the other, as applied in conjunction with the control and influence in fact exercised over the international supply of electricity, constitutes an infringement of Article 85 (1) of the Treaty in so far as it has as its object or effect the restriction of imports by private industrial consumers and of exports of production outside the field of public supply, by distributors and private industrial consumers, including autogenerators. Article 2
The companies referred to in Article 3 shall take all necessary steps to bring the infringement referred to in Article 1 to an end. Within three months of reception of this Decision they shall submit to the Commission proposals for the ending of the infringement. Article 3
This Decision is addressed to:
- NV Samenwerkende Elektriciteitsproduktiebedrijven,
Utrechtseweg 310,
6812 AR NL-Arnhem;
- NV Electriciteitsbedrijf Zuid-Holland,
Von Geusaustraat 193,
2274 RJ NL-Voorburg;
- NV Energieproduktiebedrijf UNA,
Keulsekade 189,
3534 AC NL-Utrecht;
- NV Elektriciteits-Produktiemaatschappij Zuid-Nederland EPZ,
Begijnenhof 1,
5611 EK NL-Eindhoven;
- NV Elektriciteits-Produktiemaatschappij Oost- en Noord-Nederland,
Dr Stolteweg 92,
8025 AZ NL-Zwolle. Done at Brussels, 16 January 1991. For the Commission
Leon BRITTAN
Vice-President (1) OJ No 13, 21. 2. 1962, p. 204/62. (2) OJ No 127, 20. 8. 1963, p. 2268/63. (3) Full title: Law of 16 November 1989 laying down rules on the generation, import, transmission and sale of electricity (Electricity Law 1989); published Staatsblad 535, 7 December 1989. (4)
I.e. the SEP. Designation was made by Ministerial Order of 20 March 1990 (Staatscourant 58, 22. 3. 1990). (5) As one of a number of stimuli to competition introduced by the Law, according to a summary of the Law drawn up by the Ministry of Economic Affairs. (6) As one of a number of stimuli to competition introduced by the Law, according to a summary of the Law drawn up by the Ministry of Economic Affairs. (7) On the obligation to transmit, the explanatory memorandum has the following to say: 'Where an application for transmission is made, the line operator must, if necessary, show that he is unable to satisfy the application for lack of transmission capacity. SEP, as the operator of the interconnections with foreign countries, may here refer to multiannual contracts it has already concluded regarding imports for purposes of public supply'. Reference: Lower House, 1987/88 session; 19591 (hereinafter referred to as 'Kamerstukken No 19591'), No 3, p. 56. The memorandum in response to the Final Report reads: 'This obligation applies in the case of cross-shopping by both distributors and especially large consumers. It also applies in the case of purchase of current abroad by final consumers, and, in particular, by especially large consumers. The obligation applies to imports only in so far as it can reasonably be said that capacity is sufficient. The owner or owners of the grid may not avoid their obligation to transmit by asking an unreasonably high price. The Bill therefore provides that transmission must be provided against payment of the costs reasonably attributable to such transmission itself, in proportion to consumption. To avoid any misunderstanding it should be pointed out that in practice, of course, this will almost always be fictitious transmission'. Kamerstukken No 19591, No 9, p. 8. (8)
Source: Elektriciteit in Nederland 1988. (9) Source: Elektriciteit in Nederland 1988. (10) Source: UCPTE brochure Elektrisch Europa, 1987. (11) On the question of rates for large consumers, SEP's annual report for 1987 says the following, on page 9: 'Every purchaser in this category is free to choose between a contract on the basis of the LBT (Landelijk Basis Tarief, i.e. the national basic tariff), importation, autogeneration, or the new tariff for large consumers; where the new tariff is chosen it must cover the total electricity requirement, and the choice may not be changed during the currency of the contract.'(12) [1984] ECR 2999. (13) [1988] ECR 2479.