Summary
Parties
Grounds
Decision on costs
Operative part
Keywords

1. Preliminary rulings Jurisdiction of the Court Limits Obviously irrelevant questions and hypothetical questions in a context which precludes any useful answer Questions not related to the purpose of the main proceedings

(EC Treaty, Art. 177 (now Art. 234 EC))

2. State aid Meaning Advantage granted to producers of electricity from renewable energy sources, resulting from the statutory obligation imposed on private electricity supply undertakings to buy their production at a minimum price higher than its value Advantage granted without transfer of public resources Excluded

(EC Treaty, Art. 92(1) (now, after amendment, Art. 87(1) EC))

3. State aid Treaty provisions Scope Relationship between Article 92 of the Treaty (now, after amendment, Article 87 EC) and the second paragraph of Article 5 of the Treaty (now the second paragraph of Article 10 EC)

(EC Treaty, Art. 92 (now, after amendment, Art. 87 EC) and Article 5, second para. (now Art. 10, second para., EC))

4. Free movement of goods Quantitative restrictions Measures having equivalent effect Price systems Legislation requiring private electricity supply undertakings to purchase, at a minimum price higher than its value, electricity produced in their supply area from renewable energy sources Whether permissible

(EC Treaty, Art. 30 (now, after amendment, Art. 28 EC))

Summary

1. In the context of the cooperation between the Court of Justice and the national courts provided for by Article 177 of the Treaty (now Article 234 EC), it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling.

Nevertheless, the Court may in exceptional circumstances examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction. The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it.

( see paras 38-39 )

2. Only advantages granted directly or indirectly through State resources are to be considered aid within the meaning of Article 92(1) of the Treaty (now, after amendment, Article 87(1) EC). The distinction made in that provision between aid granted by a Member State and aid granted through State resources does not signify that all advantages granted by a State, whether financed through State resources or not, constitute aid but is intended merely to bring within that definition both advantages which are granted directly by the State and those granted by a public or private body designated or established by that State.

Therefore, statutory provisions of a Member State which, first, require private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices higher than the real economic value of that type of electricity, and, second, distribute the financial burden resulting from that obligation between those electricity supply undertakings and upstream private electricity network operators do not constitute State aid within the meaning of Article 92(1) of the EC Treaty.

( see para. 58 and operative part 1 )

3. Article 92 of the Treaty (now, after amendment, Article 87 EC) is in itself sufficient to prohibit the conduct by States referred to therein and Article 5 of the Treaty (now Article 10 EC), the second paragraph of which provides that Member States are to abstain from any measure which could jeopardise the attainment of the objectives of the Treaty, cannot be used to extend the scope of Article 92 to conduct by States that does not fall within it, such as support measures decided upon by the State but financed by private undertakings.

( see paras 63, 65 )

4. In the current state of Community law concerning the electricity market, statutory provisions of a Member State which, first, require private electricity supply undertakings to purchase electricity produced in their area of supply from renewable energy sources at minimum prices higher than the real economic value of that type of electricity, and, second, distribute the financial burden resulting from that obligation between those electricity supply undertakings and upstream private electricity network operators are not incompatible with Article 30 of the EC Treaty (now, after amendment, Article 28 EC), such provisions being useful for protecting the environment in so far as the use of renewable energy sources which they are intended to promote contributes to the reduction in emissions of greenhouse gases which are amongst the main causes of climate change which the European Community and its Member States have pledged to combat.

( see paras 73, 81 and operative part, 1-2 )

Parties

In Case C-379/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Landgericht Kiel (Germany) for a preliminary ruling in the proceedings pending before that court between

PreussenElektra AG

and

Schleswag AG,

in the presence of

Windpark Reußenköge III GmbH

and

Land Schleswig-Holstein,

on the interpretation of Article 30 of the EC Treaty (now, after amendment, Article 28 EC), Article 92 of the EC Treaty (now, after amendment, Article 87 EC) and Article 93(3) of the EC Treaty (now Article 88(3) EC),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann, M. Wathelet and V. Skouris (Presidents of Chambers), D.A.O. Edward, J.-P. Puissochet, P. Jann, L. Sevón and R. Schintgen (Rapporteur), Judges,

Advocate General: F.G. Jacobs,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

PreussenElektra AG, by D. Sellner, Rechtsanwalt,

Schleswag AG, by M. Nebendahl, Rechtsanwalt,

Windpark Reußenköge III GmbH and Land Schleswig-Holstein, by W. Ewer, Rechtsanwalt,

the German Government, by W.-D. Plessing and C.-D. Quassowski, acting as Agents,

the Finnish Government, by H. Rotkirch and T. Pynnä, acting as Agents,

the Commission of the European Communities, by V. Kreuschitz and P.F. Nemitz, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of PreussenElektra AG, Schleswag AG, Windpark Reußenköge III GmbH, Land Schleswig-Holstein, the German Government and the Commission at the hearing on 27 June 2000,

after hearing the Opinion of the Advocate General at the sitting on 26 October 2000,

gives the following

Judgment

Grounds

1 By order of 13 October 1998, received at the Court on 23 October 1998, the Landgericht Kiel (Regional Court, Kiel) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) three questions on the interpretation of Article 30 of the EC Treaty (now, after amendment, Article 28 EC), Article 92 of the EC Treaty (now, after amendment, Article 87 EC) and Article 93(3) of the EC Treaty (now Article 88(3) EC).

2 The questions were raised in proceedings between PreussenElektra AG (PreussenElektra) and Schleswag AG (Schleswag) concerning the repayment of sums paid by the former to the latter pursuant to Paragraph 4(1) of the Gesetz über die Einspeisung von Strom aus erneuerbaren Energien in das öffentliche Netz (Law on feeding electricity from renewable energy sources into the public grid) of 7 December 1990 (BGBl. 1990 I, p. 2633, the Stromeinspeisungsgesetz), as amended by Paragraph 3(2) of the Gesetz zur Neuregelung des Energiewirtschaftsrechts (New law for the energy industry) of 24 April 1998 (BGBl. 1998 I, p. 730, the 1998 Law).

Legislative background

3 The Stromeinspeisungsgesetz came into force on 1 January 1991. According to Paragraph 1, headed Scope of Application, it governed, in its initial version, the purchase by public electricity supply undertakings of electricity generated exclusively from hydraulic energy, wind energy, solar energy, gas from waste dumps and sewage treatment plants, or products or residues and biological waste from agriculture and forestry work, as well as the compensation payable for such electricity.

4 It is common ground that the term public electricity supply undertaking covers both private undertakings and undertakings belonging partially or wholly to the public sector.

5 The Gesetz zur Sicherung des Einsatzes von Steinkohle in der Verstromung und zur Änderung des Atomgesetzes und des Stromeinspeisungsgesetzes (Law ensuring the supply of coal to power stations and amending the Law on Nuclear Energy and the Stromeinspeisungsgesetz) of 19 July 1994 (BGBl. 1994 I, p. 1618, the 1994 Law) extended the scope of the Stromeinspeisungsgesetz, as defined in Paragraph 1 thereof, to electricity from the wood industry. The 1998 Law replaced the reference to products or residues and biological waste from agriculture and forestry and to the wood industry by the expression biomass and stated that the Stromeinspeisungsgesetz was to apply to electricity produced from the listed sources of renewable energy within the area of validity of this Law.

6 Paragraph 2 of the Stromeinspeisungsgesetz, headed Obligation to Purchase, provides that electricity supply undertakings are obliged to purchase the electricity produced in their area of supply from renewable energy sources and to pay for it in accordance with the provisions of Paragraph 3. As amended by the Law of 1998, which added a second and a third sentence, that article is worded as follows:

Electricity supply undertakings which operate a general supply network shall be obliged to purchase the electricity produced in their area of supply from renewable sources of energy and to pay compensation for those inputs of electricity in accordance with Paragraph 3. For production installations which are not situated within the area of supply of a grid operator, that obligation shall apply to the undertaking whose network suitable for the feeding in of the electricity is closest to the installation. For accounting purposes, the extra costs resulting from the application of Paragraphs 2 and 4 may be imputed to distribution or transmission and taken into account when determining compensation for transit.

7 Paragraph 3 of the Stromeinspeisungsgesetz, as amended by the 1998 Law, headed Amount of the compensation, provides:

1. In respect of electricity produced from hydraulic energy, from gas from waste dumps and sewage treatment plants and from biomass, the compensation shall amount to at least 80% of the average sales price per kilowatt hour of electricity supplied to all final customers by electricity supply undertakings. In the case of hydro-electric power stations or installations for the treatment of gas arising from waste dumps or sewage treatment plants the capacity of which exceeds 500 kilowatts, that rule shall apply only to that part of the total amount of electricity fed in during a given accounting year which corresponds to 500 divided by the capacity of the installation in kilowatts, the capacity is defined by the annual average of the maximum effective capacity measured for each month. The price of the surplus electricity shall amount to at least 65% of the average sales price within the meaning of the first sentence.

2. In respect of electricity produced from solar or wind energy, the compensation shall amount to at least 90% of the average sales price within the meaning of the first sentence of subparagraph 1.

3. The average sales price to be taken into account for the purposes of subparagraphs 1 and 2 shall be the value published each year by the Federal Statistics Office for the last calendar year but one, expressed net of turnover tax in pfennigs per kilowatt hour. In calculating the compensation pursuant to subparagraphs 1 and 2, figures are to be rounded to two decimal places.

8 Whereas, following the amendment made to the Stromeinspeisungsgesetz by the 1994 Law, the compensation fixed for the electricity referred to in Paragraph 3(1) rose from 75% to 80% of the average sales price per kilowatt hour of electricity supplied to all final customers, that fixed for electricity from solar and wind energy, referred to in Paragraph 3(2), has not varied since the entry into force of the Stromeinspeisungsgesetz.

9 In its initial version, Paragraph 4 of the Stromeinspeisungsgesetz, headed Hardship Clause, was worded as follows:

1. The obligations under Paragraphs 2 and 3 shall not apply where compliance with them would cause undue hardship, or would make it impossible for the electricity supply undertaking to comply with its obligations arising from the Bundestarifordnung Elektrizität of 18 December 1989 (BGBl. 1989 I, p. 2255). In such a case, the obligations are transferred to the upstream electricity supply undertaking.

2. There is undue hardship in particular where the electricity supply undertaking would be obliged to raise its prices to a level significantly higher than those of similar or upstream supply undertakings.

10 The 1998 Law made several amendments to Paragraph 4 of the Stromeinspeisungsgesetz. First, it added two new subparagraphs, which have become subparagraphs 1 and 4. It also made certain amendments to the former subparagraph 1, which became the new subparagraph 2. The former subparagraph 2, which remained unchanged, became the new subparagraph 3. Thus, as amended by the 1998 Law, Paragraph 4 of the Stromeinspeisungsgesetz is worded as follows:

1. In so far as the kilowatt hours to be compensated for exceed 5% of the total kilowatt hours supplied by the electricity supply undertaking through its network during a calendar year, the upstream network operator shall be obliged to reimburse the electricity supply undertaking in respect of the supplementary costs resulting from the kilowatt hours exceeding that share. In the case of upstream network operators, the burden constituted by the right to reimbursement within the meaning of the first sentence also forms part of those supplementary costs. If there is no such operator, the obligation laid down in the first sentence of Paragraph 2 ceases, as regards electricity supply undertakings in the circumstances referred to in the first and second sentences, at the beginning of the first calendar year after those circumstances arose, in the case of installations not yet essentially completed at that time. In the case of wind turbines, the relevant time is the installation of the mast and the rotor.

2. The obligations laid down in Paragraphs 2 and 3 shall not exist where, even if the reimbursement clause in subparagraph 1 is applied, compliance with them would cause undue hardship. In such a case, the obligations are transferred to the upstream network operator.

3. There is undue hardship in particular where the electricity supply undertaking would be obliged to raise its prices to a level significantly higher than those of similar or upstream supply undertakings.

4. The Federal Minster for the Economy shall make a report to the Bundestag as to the effects of the hardship clause not later than 1999, and in any event in time for another compensatory provision to be adopted before the consequences referred to in the third sentence of subparagraph 1 arise.

11 The order for reference and the written observations submitted to the Court show that, by letter of 14 August 1990, the German Government notified to the Commission as a State aid the draft law which, after adoption, became the Stromeinspeisungsgesetz, in accordance with Article 93(3) of the Treaty. By letter of 19 December 1990, the Commission authorised the notified draft on the basis, first, that it was in accordance with the energy policy aims of the European Communities, and secondly that renewable sources of energy constituted only a small part of the energy sector and that the additional revenues and the repercussions on electricity prices were minor. The Commission nevertheless requested the German Government to send it information on the application of the Stromeinspeisungsgesetz, the latter having to be re-examined two years after its entry into force, and emphasised that any amendment or extension of that law should be subject to prior notification.

12 The order for reference and the written observations submitted to the Court also show that, following numerous complaints from electricity supply undertakings, the Commission informed the Federal Minister for the Economy in a letter of 25 October 1996 of its doubts as to whether, in view of the increase in the production of electricity derived from wind energy, the Stromeinspeisungsgesetz was still compatible with the aid provisions of the Treaty. In that letter, the Commission made several proposals for amendment in relation to the provisions on wind energy and stated that, if the Bundestag were not prepared to amend the Stromeinspeisungsgesetz in that respect, the Commission might find itself obliged to propose appropriate measures to the Federal Republic of Germany within the meaning of Article 93(1) of the Treaty, in order to make the Law compatible with Community rules on aid.

13 It is also apparent from the written observations of Windpark Reußenköge III GmbH (Windpark) and of Land Schleswig-Holstein, who intervened in the main proceedings, and from those of the Commission, that, at the request of the latter, the German Government informed the Commission of the progress of the work on the draft new law for the energy industry. In a letter of 29 July 1998, after the entry into force of the 1998 Law, the Commission informed the Federal Minister of the Economy that, having regard to current developments at Community level, concerning in particular possible proposals for harmonising the rules on the feeding in of electricity from renewable energy sources, it did not expect to take a formal decision concerning the Stromeinspeisungsgesetz, as amended by the 1998 Law, before the ministerial report on the effects of the hardship clause, provided for in Paragraph 4(4) thereof, was drawn up, even though the German legislature, at the time of the adoption of the 1998 Law, had not taken account of the proposals formulated in its letter of 25 October 1996.

14 Finally, a footnote published with the 1998 Law states that the latter, Paragraph 1 of which is headed Gesetz über die Elektrizitäts- und Gasversorgung (Law on the supply of electricity and gas), transposed into national law Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (OJ 1997 L 27, p. 20).

15 The third recital in the preamble to that directive confirms that it in no way affects the application of the Treaty, in particular the provisions concerning the internal market and competition, and Article 8(3) and (4) in Chapter IV, Transmission system operation, provides as follows:

3. A Member State may require the system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power.

4. A Member State may, for reasons of security of supply, direct that priority be given to the dispatch of generating installations using indigenous primary energy fuel sources, to an extent not exceeding in any calendar year 15% of the overall primary energy necessary to produce the electricity consumed in the Member State concerned.

16 In addition, Article 11(3) in Chapter V, Distribution system operation, provides:

A Member state may require the distribution system operator, when dispatching generating installations, to give priority to generating installations using renewable energy sources or waste or producing combined heat and power.

The main proceedings and the questions referred

17 PreussenElektra operates more than 20 conventional and nuclear power stations in Germany as well as a maximum-voltage and high-voltage electricity distribution network, through which it feeds electricity to regional electricity suppliers, medium-scale local undertakings and industry.

18 Schleswag is a regional electricity supplier which buys electricity to supply to its customers in Schleswig-Holstein almost exclusively from PreussenElektra.

19 PreussenElektra owns 65.3% of Schleswag's shares. The remaining 34.7% are held by various municipal authorities in Schleswig-Holstein.

20 By virtue of Paragraph 2 of the Stromeinspeisungsgesetz, Schleswag is obliged to purchase electricity from renewable sources produced within its area of supply, including wind-generated electricity. The order for reference shows that the proportion of wind-generated electricity in Schleswag's total turnover in electricity sales, which was 0.77% in 1991, has increased continuously to an estimated 15% in 1998. In consequence, the additional costs accruing to Schleswag on account of the obligation to purchase at the minimum price laid d