WRITTEN QUESTION No. 167/99 by Ludivina GARCÍA ARIAS Lawfulness of the medium- and long-term fixing of charges for electricity for SMEs and domestic consumers
3. 12. 1999 EN Official Journal of the European Communities C 348/29 Joint answer to Written Questions E-0164/99, E-0165/99 and E-0166/99 given by Mr Papoutsis on behalf of the Commission (12 April 1999) It is correct that the Commission has prepared a discussion document titled ‘Indicative guidelines for transitional regimes Article 24 of Directive 96/92/EC’ which was discussed with the Member States at the meeting of the follow-up group on the implementation of the electricity Directive 96/92/EC on 13 May 1998. It was prepared by the Directorate general for energy (DGXVII) in close cooperation with the Directorate general for competition (DGIV) and the Legal service and did not commit the Commission with regard to any decisions according to Article 24 of the Directive or Article 92 of the EC Treaty. With this understanding, the document can be made available to the Members of the Parliament. The approach of Article 24 of the Directive is to address ‘stranded costs’ or ‘costs for the transition to competition’, in the perspective of commitments or guarantees of operation given before the entry into force of the Directive, which may not be honoured on account of the provisions of this Directive, by providing for derogations from Chapters IV, VI and VII of the Directive. However, Member States may choose not to apply derogations, that is, delaying market opening but to fully apply the Directive and to compensate electricity companies with transfer payments. The Commission considers that such measures, not representing derogations from the Directive but payments to electricity companies, these should also be examined according to the state aids rules. (1999/C 348/036) WRITTEN QUESTION E-0167/99 by Ludivina García Arias (PSE) to the Commission (11 February 1999) Subject: Lawfulness of the medium- and long-term fixing of charges for electricity for SMEs and domestic consumers Does the Commission agree with the interpretation according to which an electricity undertaking may assess the reduction in income in the medium and long term resulting from the arrival of free competition and, consequently, that it may fix its prices or charges for consumers without taking account of the potential effects on costs in the coming years of fluctuations such as trends in the prices of energy products, developments in water management systems, exchange rates and interest rates and the expansion or contraction of supply and demand? Is that interpretation consistent with the free market principles laid down in the Treaties? Answer given by Mr Van Miert on behalf of the Commission (8 April 1999) The question put by the Honourable Member concerns the mechanism whereby an electricity utility determines its selling prices. Generally speaking, in a free and competitive market an enterprise sets its selling prices in the light of its production costs, which normally constitute the lower limit, and the prices charged by its competitors, which normally constitute the upper limit. In many cases, production costs are made up in part of provisions to cater for future events that have already been identified but have not yet been quantified exactly or are not certain. The admissibility tests for such provisions are not standard in all Member States, although hypothetical events or events that are simply probable but cannot be quantified may not, as a rule, be taken into account. Establishment of such provisions in accordance with the general concept of prudence is required by Community legislation, viz. Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the EC Treaty on the annual accounts of certain types of companies (1), by national laws on annual accounts and by international accounting principles, while the corresponding financial estimates are a matter for the directors and/or managers of the enterprise