Preferential taxes on large French electricity consumers may not comply with EU state aid rules, says European Commission

Out-Law News | 02 Apr 2014 | 12:54 pm | 1 min. read

Preferential taxes which the French government imposes on large energy consumers in France are to be investigated by the European Commission, amid concerns that they breach European Union state aid rules.

The investigation relates to three different categories of reductions in the Contribution au Service Public de l'Electricité (CSPE), a tax which the French government levies on all electricity consumer bills. The tax goes towards helping energy producers recover the additional costs of meeting their legal obligations to develop renewable energy sources, such as onshore wind electricity. 

The amount of CSPE charged to a consumer is usually proportionate to the number of kilowatts they use, however the law allows for three exceptions to this rule. Large customers currently pay a maximum of €550,000 per consumption site per year, with no surcharges applied on consumption above that. For industrial companies which consume at least 7 gigawatt hours per year, the CSPE is capped at 0.5% of their annual value added tax. In addition, consumers who use less than 240Gwh per year for personal use, do not pay CSPE. 

"These three reductions appear to give large electricity consumers a selective advantage that could distort competition in the single market," said a statement issued by the Commission. "The possibility of such reductions is not foreseen under the 2008 Guidelines on Environmental Aid which are currently applicable. The Commission therefore has doubts about their compatibility with EU state aid rules".

 "In parallel, the Commission is in the process of revising its guidelines and is considering including provisions allowing reductions for energy intensive users under certain conditions in order to preserve competitiveness," said the statement. "If adopted these new guidelines would apply to this case as well as to other ongoing cases." 

Stake-holders will have the opportunity to submit their views on the issue to the investigation, the Commission said.

The Commission also announced that French government financial support designed to assist the development of on-shore wind installations is compatible with the EU state aid rules as the measures meet the conditions of the current environmental aid guidelines. The ruling relates to €500 million a year worth of "feed-in tariffs" – tariffs above market price which the French government imposes on distributors who buy electricity produced in on-shore wind installations. 

The feed-in tariffs allow producers of renewable electricity to cover the additional production costs they face compared to those associated with traditional electricity generation. A statement from the Commission said that an investigation launched last year has shown that the feed-in tariffs "only compensate for these additional costs and allow for a reasonable rate of return in line with the 2008 Environmental Aid Guidelines."