On 6 March 2013, the European Commission ('the Commission') decided to investigate in-depth the German exemption of large electricity consumers from network charges, as it was concerned that the exemption may involve State aid.

In Germany, network charges are established by network operators and they require authorisation by the regulator, i.e., the Bundesnetzagentur ('BNetzA'). Since 1 January 2011, large electricity consumers are by law (Section 19(2) of the German Network Charges Ordinance - Stromnetzentgeltverordnung) exempted from paying network charges (the 'Exemption'). The Exemption relates to both transmission system operators ('TSOs') and distribution system operators ('DSOs'). In 2012, the estimated financial losses to TSOs and DSOs resulting from the Exemption corresponded to approximately EUR 300 million.

The Commission has received several complaints from consumer associations, energy companies and citizens alleging that the Exemption constitutes unlawful State aid incompatible with the internal market.

On 14 December 2011, the BNetzA adopted a decision in which it obliged DSOs to collect from end-users a surcharge aimed at compensating TSOs and DSOs for the loss of revenues incurred as a result of the Exemption (the 'Section 19 surcharge').

In its opening decision, the Commission expressed its preliminary view that the Section 19 Surcharge constitutes State resources and that the Exemption provides the beneficiaries with a selective advantage compared to their competitors in other Member States, which distorts competition in the internal market. The Commission also expressed doubts whether the Exemption can be declared compatible, as it would, in the Commission's preliminary view, constitute operating aid, which is in principle not compatible with the internal market. The Commission will also examine whether the Exemption was financed from State resources in 2011, when the Section 19 Surcharge had not been introduced yet.

Germany, on the other hand, argues that the Exemption does not constitute State aid as it does not involve State resources.

The Commission has already dealt with several State aid cases related to subsidies that reduced electricity-related costs for certain undertakings. In connection with network-related costs, the Commission has dealt with compensation by TSOs for interruptability services, finding that such payments did not constitute State aid. However, this is the first case dealing with an exemption from network charges. It is, consequently, an important case that may have spill over effects for similar measures in other Member States, as its outcome will further define the boundaries of the concept of State aid as defined in the European Court's PreussenElektra-jurisprudence (Case C-379/98 PreussenElektra [2001] ECR I-2099).

Once the Commission's opening decision is published in the EU's Official Journal (which was not yet the case when this briefing was released), interested third parties have one month to submit comments on the German measure within one month after publication.