Brussels, 04/06/2008 (Agence Europe) - After an in-depth investigation opened in 2005 (see EUROPE 9067), the European Commission has requested that Hungary end long-term electricity purchase agreements with electricity generators before the end of 2008. Hungary has also to recover from the generators concerned aid paid since it joined the EU in May 2004.
Competition Commissioner Neelie Kroes said, in a press release, that this “is a crucial step in the liberalisation of the electricity market in Hungary”, before going on to point out that electricity prices had already fallen in Poland after very similar agreements were terminated on 1 April. According to Kroes' spokesman, the agreements at issue commit the state (through the state-owned Magyar Villamos Mûvek company) to purchase a pre-determined amount of electricity at an agreed price over a set period. Such agreements, while they may have the praiseworthy aim of encouraging investment in energy infrastructure, protect energy generators from any commercial risk and make it difficult for new entrants to gain access to the market. Thus, the agreements (which involve around two thirds of the electricity generated in Hungary) are incompatible with European state aid rules and must be terminated. Budapest is also required to recover a sum equivalent to the benefits that generators have enjoyed since Hungary joined the EU. Spokesman Jonathan Todd added that the Commission did not have the necessary information to be able to put an exact figure on this sum. “It's the responsibility of the Hungarian authorities to carry out a calculation based on a simulation of market conditions”, which will then be approved (or rejected) by the Commission, he said. The requirement to recover illegal state aid applies even when there is no exact sum. This was the case with the airline Olympic, when the Court of Justice ruled that Greece had to recover the aid at issue even though the Commission had not stated the exact sum to be recovered (see EUROPE 9602). (C.D.)