Brussels, 03/02/2004 (Agence Europe) - The European Commission has opened a formal investigation procedure into an aid project which Poland hoped to adopt to compensate electricity producers hit by the effects of the liberalisation of this market ("stranded costs"). This is the first procedure of its kind against one of the ten future Member States.
As part of the liberalisation of the electricity sector in the EU, Poland recently adopted a bill putting an end to long-term electricity procurement contracts concluded in the 1990s between the Polish State and electricity producers, for a term of around twenty years. These contracts guarantee high prices are maintained, independently of market price variations. In order to compensate producers affected by the permanent cessation of these contracts, the Polish authorities intend to pay them subsidies in the form of a single payment. According to the Commission's initial analysis, this project does not comply with the methodology for compensation for stranded costs. The planned subsidies apparently do not calculate the exact real costs suffered by producers once the contracts had been broken. Nor does the project provide for any mechanism to adapt to future price fluctuations in electricity prices. The Commission thinks that there is a risk that producers will receive excessive compensation given the actual level of loss.