Brussels, 05/11/2001 (Agence Europe) - The Commission has approved the aid granted by the Irish government to the historical player, the Electricity Supply Board (ESB), in compensation for the fact that ESB is under the state imposed obligation to produce a certain quantity of electricity generated from peat.
ESB has examined a number of industrial options that could allow it to fulfil this obligation in the next years while meeting the Community and Irish safety and environment regulations. It was decided that the most economical option was to accelerate the closure of the six existing peat powered plants and replace them by two new and more efficient ones. Although the new plants will be more efficient, the cost of the electricity that they will generate will still be much above the average electricity market prices, resulting in losses for ESB. The aid notified by the Irish authorities to the Commission aims at providing compensation based on the difference between the generation cost for electricity out of peat and the mean electricity market price on the production market, financed through a levy on the connection to the electricity grid. The levy will vary depending on whether the holder of the connection is a domestic or a professional consumer. It was estimated by the Irish authorities that compensation should amount to a total of EUR 568 million for the 2001-2019 period, with an approximate mean value of EUR 30 million per year. The Commission decided that whilst it cannot rule out the possibility that this compensation scheme may include State aid within the meaning of the State aid rules of the Treaty, it cannot be determined with certainty whether this is the case. Nevertheless, even if that was to be the case, the system could be authorised as a compensation for a service of general economic interest, according to Article 86(2) of the EC Treaty and the Directive on common rules for the internal market for electricity that stipulates that "Member States may impose on undertakings operating in the electricity sector, in the general economic interest, public service obligations which may relate to security, including security of supply". The Directive also sets a 15% limit on the obligation that Member States can impose to use indigenous primary energy fuel sources; this ceiling is respected by the Irish scheme. Finally, the Treaty allows aid to compensate for a service of general economic interest as long as the beneficiary is entrusted by law with this service, the aid does not exceed what is necessary to carry out this service and that it has no effect on trade contrary to the interests of the Community.