Following an investigation, the European Commission has requested that Poland terminates long term electricity purchase agreements that, in its view, constitute unlawful State aid. Around half the electricity generated in Poland is sold under these long term agreements that also foreclose a significant part of the market to new entrants. At the same time, the Commission has authorised the Polish compensation system designed to cover stranded costs. These are the costs arising from the cancellation of long term agreements that cannot be recouped by the generator. The Commission concluded that such compensation will not exceed what is necessary to recoup the shortfall in investment costs repayable over the assets’ lifetime, including, where necessary, a reasonable profit margin.