[1] A German law known as the Stromeinspeisungsgesetz (Law on feeding electricity from renewable resources into the public grid) requires producers of electricity to purchase (at a fixed, minimum price) and pass along to electricity distributors energy produced from renewable resources in the producer's area of service. (Bundesgesetzblatt (BGBl. [Register of German Federal Law] 1990 I, p. 2633). As required by Article 88 of the Consolidated EC Treaty, the German government notified the Commission of the European Communities of the law's state aid provisions in 1990, and received authorization for those provisions from the Commission. The Commission concluded that the law was consistent with the energy policy aims of the European Communities and that its impact on the industry would be slight.
[2] The Stromeinspeisungsgesetz was amended in 1998 to impose a system for sharing the burden created by the required purchase (at a fixed, minimum price) of electricity produced from renewable resources. The burden-sharing rules required upstream network operators [distributors] . . . to reimburse the electricity supply undertaking [producers] in respect of the supplementary costs resulting from the kilowatt hours exceeding [5% of the total kilowatt hours supplied by the producer during a calendar year]. (Bundesgesetzblatt (BGBl. [Register of German Federal Law] 1998 I, p. 730). Under the 1998 amendments, the producers were to bear the burden of the additional costs created by the required purchase of energy from renewable resources, up to the first 5% of their total production of kilowatt hours of electricity. Upstream distributors of electricity were to bear the burden of the additional costs created by the required purchase of energy from renewable resources, above 5% of the producers' total production of kilowatt hours of electricity.
[3] While the 1998 amendment of the Stromeinspeisungsgesetz appeared to be a response to repeated expressions of concern from the Commission regarding the law's continued compatibility with the Communities' rules regarding state aid, the German government did not submit the amended law to the Commission for review.
[4] In the present action, the producer Schleswag applied to PreussenElektra, an upstream distributor of electricity, to recover those costs that could be attributed to its required purchase of energy from renewable resources that exceeded 5% of Schleswag's total production of kilowatt hours of electricity. PreussenElektra brought an action in the Landgericht Kiel (Regional Court of the city Kiel) seeking to recover that payment, claiming that the amended Stromeinspeisungsgesetz constitutes a violation of Community law as an amended system of state aid that had not been notified to the commission. Pursuant to Article 234 of the Consolidated EC Treaty,(1) the Landgericht Kiel referred the matter to the Court of Justice for the European Communities for the resolution of, inter alia, the following question:
Do the rules on payment and compensation for supplies of electricity, laid down in Paragraph 2 or 3 or 4 or in Paragraphs 2 to 4 of the [Stromeinspeisungsgesetz], as amended [in 1998] constitute State aid for the purposes of [former] Article 92 of the EC Treaty [Article 87 of the Consolidated EC Treaty]?(2) [5] The Court of Justice began its analysis by affirming that minimum-pricing schemes like that at issue in the Stromeinspeisungsgesetz deliver clear, competitive advantages to certain sectors. The Court explained, however, that it had previously interpreted Article 87 of the Consolidated EC Treaty to prohibit only "direct" or "indirect" state aid that generates such advantages. In light of this precedent, the Court explained, the benefit under the Stromeinspeisungsgesetz that accures to the energy producers that make use of renewable resources runs afoul of Article 87's state aid prohibition only if the benefit can be traced directly or indirectly to state resources. The Court concluded that a legislative or regulatory scheme that requires the transfer of resources from private undertakings to benefit a targeted sector do not constitute prohibited direct or indirect state aid. The Court held that:
. . . the fact that the purchase obligation is imposed by statute and confers an undeniable advantage on certain undertakings is not capable of conferring upon it the character of State aid within the meaning of Article 92(1) of the Treaty.
That conclusion cannot be undermined by the fact, pointed out by the referring court, that the financial burden arising from the obligation to purchase at minimum prices is likely to have negative repercussions on the economic results of the undertakings subject to that obligation and therefore entail a diminution in tax receipts for the State. That consequence is an inherent feature of such a legislative provision and cannot be regarded as constituting a means of granting to producers of electricity from renewable energy sources a particular advantage at the expense of the State (see, to that effect, Sloman Neptun, paragraph 21, and Ecotrade, paragraph 36).
(PreussenElektra AG and Schleswag AG Case [European Court of Justice C-379/98, 13 March 2001, paras. 61-62
[6] With its decision in the PreussenElektra Case, the Court merely extended, to the specific circumstances of the private energy market, the well established rule of Community jurisprudence that holds that prohibited state aid consists only of advantages "granted directly or indirectly through resources or constituting an additional charge for the State . . ." (Piaggio Case [European Court of Justice C-295/97, 17 June 1999, para. 35