Hydroelectric power concessions: Commission calls on 8 Member States to comply with EU law

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The Commission decided today to send letters of formal notice to seven Member States (Austria, France, Germany, Poland, Portugal, Sweden and United Kingdom) and a second complementary letter of formal notice to Italyto ensure that public contracts in the hydroelectric power sector are awarded and renewed in conformity with EU law.

Hydropower is the largest sector of renewable electricity in the EU and already contributes to 40% of all renewable electricity generation in Europe. It can contribute to achieving the aims of the Energy Union, in particular to provide 20% of final energy consumption from renewable energy by 2020 and at least 27% by 2030.

Elżbieta Bieńkowska, Commissioner for the Internal Market, Industry, Entrepreneurship and SMEs said: "We are building an Energy Union to ensure secure, affordable and sustainable energy for all. A well-functioning hydroelectric power sector plays a strategic role in increasing the share of renewables in our energy mix. That is why we need to ensure a level playing field in the Single Market and guarantee that companies can provide hydroelectric power across the EU."

The Commission considers that the legal frameworks and practices in Member States addressed by these infringement procedures do not fully comply with the Services Directive(Directive 2006/123/EC), EU rules on public procurement (Directive 2014/23/EU on the award of concession contracts) or the freedom of establishment and the freedom to provide services (Articles 49 and 56 of TFEU).

The infringement procedures concern:

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  Austria, Germany, Poland, Sweden and the United Kingdom: The Commission is sending letters of formal notice to these Member States for awarding new authorisations for the construction and operation of hydropower installations without transparent and impartial selection procedures.
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  Italy: The Commission is sending a complementary letter of formal notice to Italy as it considers that the Italian authorities have failed to organise transparent and impartial selection procedures for the attribution of hydropower authorisations that have expired.
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  France and Portugal: The Commission is sending these two Member States letters of formal notice as it considers that both the legislation and the practice of French and Portuguese authorities is contrary to EU law. French and Portuguese legislation allows some hydropower concessions to be renewed or extended without the of use tender procedures.

The 8 Member States concerned now have two months to respond to the arguments raised by the Commission; otherwise the Commission may decide to send them reasoned opinions.

Background

The provision of hydropower is typically organised under two frameworks: authorisations falling under the Services Directive (Directive 2006/123/EC) and concessions covered by public procurement rules (Directive 2014/23/EU).

In the case of authorisations, public authorities establish the conditions for the activity and the authorisation is then generally granted at the request of the economic operator and not on the initiative of the contracting authority. Furthermore, the economic operator remains free to withdraw from the provision of works or services. In particular, the Services Directive covers situations where the number of authorisations available for a given activity is limited because of the scarcity of natural resources or technical capacity (e.g. scarcity of water resources, beaches). In such cases, the authorisations must be subject to a transparent and impartial selection procedure providing full guarantees of transparency and impartiality.

In contrast, concession contracts provide for mutually binding obligations where the execution of works and services are subject to specific requirements defined by the contracting authority and are legally enforceable. Such contracts need to comply with EU rules on public procurement and concessions, which help obtain better value for taxpayer money by ensuring that public contracts areawarded through competitive, open, transparent and well-regulated tender procedures.

The assessment of compliance with these rules and with the freedom of establishment (Article 49 TFEU) and the freedom to provide services (Article 56 TFEU) is without prejudice to the potential application of competition rules (State Aid, abuse of dominant position).

For More Information:

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  On the key decisions in the March 2019 infringements package, see full MEMO/19/1472.
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  On the general infringements procedure, see MEMO/12/12.
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  On the EU infringements procedure.

IP/19/1477